Reconciliation with Standard Financial Calculations
The accuracy of financial calculations is obviously critical. To prove that the calculations in Investment Return are accurate, I show below a reconciliation of Investment Return with standard financial functions on a Hewlett-Packard 12c ® calculator and the Microsoft Excel ® spread sheet.
Inv Return – calculation of the annual return compounded daily
In Inv. Return
For Purchase Date input 1/1/2000
For Sale Date input 12/31/2007
For Purchase Price input 1
For Sale Price input 2 (doubled your money)
Hit Compute Return and the Annual Return, compounded Daily is: %8.6654
On Hewlett-Packard 12c ®:
Yellow Key f Clear Fin
Input 2922, press n (2922 days between 1/1/2000 and 12/31/2007, 2 leap yr days)
Input 1, press PV
Input -2, press FV
Press i (interest rate) for the Daily answer
Then input 365.25 and times (convert to annual return) to see 8.6654.
With Dividend – calculation of annual return compounded daily
Same as for Inv. Return, just make sure the Dividend input is 0.
Future Value calculation in Retirement Calculator
In Retirement Calculator
For “I Now Have” input a million dollars.
Leave the interest rate at 6%.
Set Yearly Contribution to 0.
Set the Retirement Date to 8 years in the future less one day. So if today was 8/4/2009 you would set the Retirement Date to 8/3/2017.
You will see $1,616,011 at the top of the screen as the retirement amount.
On Hewlett-Packard 12c ®:
Yellow Key f Clear Fin
Input 2922, press n
Enter 6, then 365.25 and divide
Press i (interest rate)
Input 1000000 (one million), press PV
Press FV to see -1,616,010.696
In Microsoft Excel ®:
Input the following formula to a cell
=FV((0.06/365.25),2922,0,1000000,0)
You will see:
1616010.7