Example 17 - Savings Plan to Achieve Goal

This example applies to our online demo Time Value of Money Calculator. The C-Value! program for Windows works in a similar way and has a few more features. Note, our online demo TVM calculator is limited to calculations using interest rates between 4.0% and 5.99%

Note:This topic has not been proofed and images need to be added. However, we believe that the steps are complete and accurate.

A simple savings plan to achieve a future goal. Answers the question "How much do I have to save each period to reach some single amount in the future."

2. Click the [New] button to clear any previous entries.
4. Set "Rounding" to "Ignore" by either:

• clicking on the "Rounding" button on the toolbar;
• clicking on the {Compute} menu choice and select {Rounding...};

1. This example assumes that "Rounding" is initially set to "Last Withdrawal".
2. 1) Open the C-Value! Setup Window. Press either [F6] or select {Settings}{Compute Setup} from the menu.
3. A) For the "Compute Method" select the "Normal" option.
4. B) Click on the [OK] button to close the Window.
5. 2) Set compounding to "Daily".
6. 3) Enter 4.500% for the "Nominal Annual Rate".
7. Let's try something novel. Assume we want to pay cash for our next car and that the price will be $32,600 and we anticipate needing the car four years from now.
8. 4) Create the first event as a "Deposit".
9. A) Set the "Date" to July 16, 2004.
10. B) For the "Amount", enter "Unknown".
11. C) Enter 48 for the "# Periods".
12. D) Select "Monthly" for the "Frequency"
13. E) The "End Date" is calculated and will be June 16, 2008.
14. 5) Create the 2nd event. It will be a "Withdrawal".
15. A) Enter the "Date" as July 16, 2008.
16. B) Enter the "Amount" as $32,600.
17. C) Calculate the "Unknown". The result is $617.89.
18. 6) If you want to see a detailed cash flow schedule showing just what the monthly deposits earn in interest, click on the "Amortization" tab above the input area or press [F4]. Notice that the amount of the deposits total $29,658.72 and that the savings earned $2,941.40 in interest.

Back to the online Time Value of Money Calculator.