Example 24 - ROI for "X" Days

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.

Calculating the return for X days.

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

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

1. On occasion an investment might be made for X days. The point of this example is to illustrate how to setup the calculation when the end date is unknown. In other words, if the term is expressed in days, then the calculation requires an extra step to calculate the ending date.
2. The objective is to find the future value of a $28,500.00 deposit invested on November 24, 2004 for ninety-two days with semi-annual compounding. Assume a nominal annual rate of 5.3%
3. 1) Open the C-Value! Setup Window. Press either [F6] or select {Settings}{Compute Setup} from the menu.
4. A) For the "Compute Method" select the "Normal" option.
5. B) Set the "Year Length" to 360.
6. C) Click on the [OK] button to close the Window.
7. 2) Set the compounding to "daily" and the interest rate to 5.3%
8. 3) Set the first row event to "Deposit"
9. A) Set the "Date" to 11/24/04
10. B) Set the "Amount" to $28,500.00
11. C) Set the "# Periods" to 92 and the "Frequency" to "Daily". We have to do this step to find the date 92 days from the start date. Note the "End date".It happens to be 2/23/05.
12. 4) Click on the second row and set the event to "Withdrawal". (We'll come back to this later.)
13. Now we can go back and set the frequency and compounding the way we want.
14. 5) Click on the first event row.
15. A) Set the "Frequency" to "Semiannually"
16. B) Set the # Periods to 1.
17. 6) Set the "Compounding" to "Semiannually".
18. 7) Click on the second row. Set the "Withdrawal" line the way you want it.
19. A) Set the date to 2/24/05 (Add one to the date from step 3C above. The money has to be invested for a full 92 days and is therefore available for use at the end of the 92nd day. Think of it this way, if the money was deposited at 4pm on November 24th, then it's available after 4pm on February 23rd, or for all practical purposes it's available on February 24th.).
20. B) Set the "Amount" to "Unknown".
21. 8) Calculate. Result = $28,886.02
22. NOTE: No doubt some individuals will compare this result with the result returned by SolveIT!'s "Compound/Simple Interest Calculator". At first, it might seem as if C-Value! is producing a different result than SolveIT!. It isn't. Even though the compounding is declared to be "Semiannual" in this example, the term is shorter than half a year and therefore, using C-Value! there is no compounding. With SolveIT!, if you select semiannual compounding the impact of compounding is prorated. If you set SolveIT! to "simple" the result matches C-Value! to the penny.
23. FURTHER NOTE: Those that are truly skeptical will then check the two calculators for one semiannual period. Assuming the above facts, one semiannual period ends on May 23rd and the funds are available for withdrawal on May 24th. Notice that SolveIT!'s calculator will have it's "End Date" set to May 23rd and C-Value!'s "Withdrawal" date will be May 24th. The result produced by both calculators is $29,255.25 with both set to semiannual compounding and a 360 day year.

Back to the online Time Value of Money Calculator.