Trouble with the math
Posted: Wed Apr 26, 2017 5:41 am
Hi.
Finished reading the book. I'm having trouble with the most important equation in the book-- the one that tells you how long a retirement fund will last considering draw rate and interest rate.
As written in the book:
N = log[(1)/(1-(P)/(p)(i)/(1+i))]/log(1+i)
...where N is the number of years the fund will last
P is the initial fund size
p is the draw rate per year
i is the interest rate
If I plug in these numbers:
P = 10
p = 1
i = 0.04
...I can't get this to solve. Granted, my math isn't what it used to be.
This is what I am doing:
N = log[(1)/(1-(10)/(1)(0.04)/(1+0.04))]/log(1+0.04)
N = log[(1)/(1-(10)/(0.04)/(1.04))]/log(1.04)
N = log[(1)/(1-(250)/(1.04))]/log(1.04)
N = log[(1)/(1-(240.3846))]/log(1.04)
N = log[(1)/(-239.3846)]/log(1.04)
N = log[-0.004177]/log(1.04)
...and now we are in trouble because you can't take a log of a negative number.
I am certainly doing something wrong, I just don't know what it is.
Thanks in advance for the help!
Finished reading the book. I'm having trouble with the most important equation in the book-- the one that tells you how long a retirement fund will last considering draw rate and interest rate.
As written in the book:
N = log[(1)/(1-(P)/(p)(i)/(1+i))]/log(1+i)
...where N is the number of years the fund will last
P is the initial fund size
p is the draw rate per year
i is the interest rate
If I plug in these numbers:
P = 10
p = 1
i = 0.04
...I can't get this to solve. Granted, my math isn't what it used to be.
This is what I am doing:
N = log[(1)/(1-(10)/(1)(0.04)/(1+0.04))]/log(1+0.04)
N = log[(1)/(1-(10)/(0.04)/(1.04))]/log(1.04)
N = log[(1)/(1-(250)/(1.04))]/log(1.04)
N = log[(1)/(1-(240.3846))]/log(1.04)
N = log[(1)/(-239.3846)]/log(1.04)
N = log[-0.004177]/log(1.04)
...and now we are in trouble because you can't take a log of a negative number.
I am certainly doing something wrong, I just don't know what it is.
Thanks in advance for the help!