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Thread: 401 (k) formula?

  1. #1

    401 (k) formula?

    I've been working on a formula for a 401k program for hours and it doesn't really make sense to me. http://www.bankrate.com/calculators/...alculator.aspx the closest thing that i came up with is FV=PV*(((1+i)^years)-1/i) or 6000*((((1+.08))^35)-1/.8 6000 is added for the first year idk how to get 1000 that was previously in there to be added in also. I need the equation to work as the variables change as i substitute them in is this possible?

  2. #2
    Elite Member
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    Please be clear.

    Is your problem like this:
    an initial deposit of $u is made;
    then annual deposits of $v are made;
    given interest rate and number of annual deposits, calculate future value.
    I'm just an imagination of your figment !

  3. #3
    yes that would be correct is there a formula for this?

  4. #4
    My assignment is to make a java program but I can't check to see if works correctly without putting the equation in there to have it calculate the inputted values

  5. #5
    Elite Member
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    a = u(1 + i)^n ; future value of initial deposit

    b = v[(1 + i)^n - 1] / i ; future value of annual deposits

    a + b is your target!

    Of course:
    u = initial deposit
    v = annual deposit
    n = number of years
    i = annual interest rate
    Last edited by Denis; 01-03-2012 at 04:25 PM.
    I'm just an imagination of your figment !

  6. #6
    wow that makes sense thank you is there anyway to factor in a percent of raise increase?

  7. #7
    well what it says is expected annual salary increase and it asks for a percentage. sorry for so many posts on this thread

  8. #8
    Elite Member
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    If you mean the annual deposit increases by a fixed percentage: yes.
    Here's what $800 increasing by 10%, for 4 years, 12% interest, looks like:
    Code:
    Y     DEPOSIT   INTEREST    BALANCE
    0                               .00
    1      800.00       .00      800.00
    2      880.00     96.00     1776.00
    3      968.00    213.12     2957.12
    4     1064.80    354.85     4376.77
    FORMULA: F = D[(1+i)^n - (1+j)^n] / (i - j)

    D = first deposit amount
    n = number of years
    i = interest rate
    j = deposit increase rate

    800(1.12^4 - 1.10^n) / (.12 - .10) = ~4376.77
    Last edited by Denis; 01-03-2012 at 10:18 PM.
    I'm just an imagination of your figment !

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