Achieving a Certain Future Value

2017-11-03 09:05:03

Problem

You want to put away a sum of money annually at a given interest rate in order to achieve a specific future value to cover a known upcoming expense. You need to know how much to put away each year.

Solution

Use the PMT function.

Discussion

By way of example, let's assume you need $150,000 in 15 years' time and you want to invest a sum of money annually to raise this money. You're confident you can get an annual interest rate on your investment of 7.6%. How much do you invest each year?

You can use the PMT function (see Recipe 14.5) to compute the annual amount to invest. The formula =PMT(0.076, 15, 0, 150000, 0) returns a payment value for this example of $5,698.76 per year.

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