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Saving Calculation Question

Posted on 2016-08-11
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Last Modified: 2016-08-30
I inherited a report with the following formula for savings.

=(a2)/(1-6.8%)-a2  where 6.8% is the savings rate

When I calculate savings I was doing a2*6.8%. Anyone know what they were trying to accomplish? You get slightly different numbers.
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Question by:kwarden13
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by:d-glitch
d-glitch earned 500 total points (awarded by participants)
ID: 41752315
If a2 is the amount you have now
(a2)/(1-6.8%) is the amount you had a year ago
and (a2)/(1-6.8%)-a2 is the amount of interest you received last year.

This assumes no monthly compounding and is probably not the right way to do the calculation.
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Alexandre Michel earned 1000 total points (awarded by participants)
ID: 41752321
Your formula  is used to calculate the discount on the original price
The formula above uses the discounted price and calculated what the discount was

e.g.
Original price = $100, discount = 100 * 0.068 = $6.80.
Then Discounted price is $100-$6.80= $93.20

Formula above starts with the discounted price

( 93.20 / (1-0.068) ) - 93.20 = ( 93.20 / 0.930 ) - 93.20 = 100 - 93.20 = 6.80
 
Hope this helped
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LVL 27

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by:d-glitch
ID: 41752323
>>  and (a2)/(1-6.8%)-a2 is the amount of interest you received last year.

That should be paid out not  received  since it will be negative.
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LVL 27

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by:aburr
aburr earned 500 total points (awarded by participants)
ID: 41752715
both equations are exactly the same.
Put them equal to each other and simplify
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LVL 27

Expert Comment

by:d-glitch
ID: 41776030
I was invited to help close this.  I believe it is resolved.
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