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Geometric series vs. future value computation based on geometric series

  1. Nov 7, 2014 #1
    1. The problem statement, all variables and given/known data
    Hello!

    Revising geometric series, I have understood that I have the following issue - I have read again about these series and, please, take a look at what I have gotten as a result (picture attached).

    If I calculate a future cash flow, that is I take, for example, a = 0,5 (it can be 100, 5 or any other number), r = 0.5 (also can be any other number), n = 10 (same), I get completely different results if I use the sum of geometric series and the future value calculation. Why? In all these cases I compute the sum of a multiplied by r within an n period.

    I would be grateful for your help - I obviously miss some basic understanding.

    PS: I have tried to paste a picture within this text, the program did not allow that; so I have to upload it.

    2. Relevant equations


    3. The attempt at a solution
     

    Attached Files:

  2. jcsd
  3. Nov 7, 2014 #2

    Ray Vickson

    User Avatar
    Science Advisor
    Homework Helper


    I normally do not respond to postings containing screen shots (as they are often unreadable), but I will make an exception for you this one and only time. I suspect that the function FV(rate,nper,pmt,(pv) ) is a built-in EXCEL function, that may round off to the nearest cent. (I don't know for sure, having not checked it myself). Your "manual" calculation reports the results to higher precision.
     
    Last edited by a moderator: Nov 7, 2014
  4. Nov 7, 2014 #3

    Mark44

    Staff: Mentor

    In addition to what Ray said, you could be formatting the cell with $28.83 in it to display two decimal places.
     
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