Compound Interest With Repeat Contributions (not confident of answers when I use certain CI calculators)

[Keith-K]

Hi.

The main issue is that when I use certain CI calculators,
I get answers that I am not sure are correct.

Answers ranging in the billions (which seems excessive to me).

So, I would like your help verifying
whether or not those calculator answers are
correct and why/why not.

I'll include 3 examples:
2 calculators that give an answer of billions for my calculation and a third calculator
that gives an answer in the modest millions -- the one that seems correct to me.

The same input values are used throughout.

1. Compounder App (billions):





2. thecalculatorsite.com (billions):




Here are the rest of the inputs that got cropped out:

Deposits made from: beginning
Compound interval: monthly

The owner of this calculator doesn't seem to think anything is wrong,
and I showed him the below Ramsey Solutions calculator:

3. ramseysolutions.com (millions)




He responded: "I've just put the figures ... and it returns the same result as the Ramsey Solutions one (7,271,843.85) ... I think the issue you may be seeing may be because of the 'compound interval' option (which appears next to the 'Calculate' button on my calculator."

The issue is, he and I are using the same compound interval of 12 months... So I don't see why there would be a difference.

Any and all help will be appreciated, thanks.

 

[Keith-K]

(I'm not a student. This is not homework).

Hi.

I've been having issues with a compound interest problem.

Particularly compound interest with repeat contributions.

The main issue is that when I use certain calculators, I get answers that I am not sure are correct.

So if possible, I would like your help verifying whether or not those calculator answers are
correct and why/why not.

For the sake of space, I will try to minimize screenshot sizes as much as I can. I only include them
because I don't want to mistranslate any input figures.

It's the same example calculation each time, and we are solving for A (final Amount) each time.

Calculator 1 - thecalculatorsite.com :





A = 135 519 611 370.04


Calculator 2 - Compounder app (final answer A is similarly in the billions):
[Screenshots omitted for brevity]

A= 53 198 206 018

By contrast we have the Ramsey Solutions calculator:

Calculator 3 - Ramsey Solutions (final answer A in the modest millions):
A = 7 271 844.85


Thank you.

 

[BigBeachBanana]

The ramseysolution is correct. Without seeing your math, can't comment on the discrepancy.

 

[blamocur]

I checked the second calculator (thecalculatorsite.com): you have to specify that 4% is the yearly, not monthly, interest rate -- a monthly 4% rate would translate to 60% yearly rate. But compound interval must probably stay Monthly

 

[Dr.Peterson]

On the first calculator, you entered a 4% monthly rate, with compounding yearly. Surely you meant to reverse those:

​

You made the same mistake on the second:

​

Do you understand the difference between a monthly interest rate and monthly compounding?

The last doesn't seem to give you a choice there, but assumes annual rates. So you weren't able to get it wrong.

 

[BigBeachBanana]

Excel is a common and reliable tool.

=FV(4%/12,30*12,10000,100000,0)
-------------------------------
Result: ($7,271,843.85)

[math]\text{Future Value} = \left[100,000+\underbrace{10,000\left(\dfrac{1-(1+0.04/12)^{-360}}{0.04/12}\right)}_{\text{present value of the monthly deposits}}\right]\times \underbrace{\left(1+\dfrac{0.04}{12}\right)^{360}}_{\text{accumulate 360 periods}}= 7,271,843.85[/math]