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JoDaddy asked: Can anyone give me the correct equation, or point me to an online calculator to compute the following. If I have investments totalling $X, returning an average of Y% per year, how many years will it last if I draw down $Z per month? Or, alternatively, how much can I draw each month if I want it to last for N years? Thanks to all you Fools for being here.

and uniquename answered You could put together a spreadsheet that has your formula ((X+(X*Y))-(12*Z))=A, then keep on repeating rows with the new total A replacing X.

But here's the "easy" way. If you have a computer, 8^), then you probably have a spreadsheet program such as Excell. All modern spreadsheet programs have financial functions built in. In Excell the one you want is called NPER. There is a function to solve for each variable given the values of the others. For example, PV gives you the necessary Present Value needed for a given payment, interest rate, and number of periods.

An example would be a 30 year mortgage valued at $100,000, an annual interest rate of 7.5%, with payments made at the end of the month. You would type in the function =PMT(7.7/12,30*12,100000) and get the answer: Monthly payments of $699.21.

I know, most people are afraid of spreadsheets and are barely able to cope with email. But spreadsheets are half the reason for the personal computer revolution and still account for most of the actual useful work that PCs do. As such, it's worthwhile to learn to use them.


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