What is formula?

Question

What is formula for calculating sip returns of mutual funds?
if i invest 1000 per month for 50 months and my amount has grown to 125000 what is return rate ? or if returns on my investment is 12%p.a and i invest 1000 p.m what amount will i get after 65 months?
what is the formula for your answer?

Answer 1

A=P(1+rt)

1000 per month (invested at beginning of month) will grow to 125000 if the return is 38.86% per year.

1000 per month at 12% return for 65 months will get you 91,846.02.

To take that second formula a bit further. If you stopped investing the 1000/month at month 65 but let the balance sit at 12% for another 65 months your balance would almost double to 175,367.70. THAT is the power of compounding at work.

Answer 2

I will answer the second question.

I have to break it into two parts. First I will show you how to find the present value, then the future value.

You are paying out an annuiity of 1000 per month. At 12% per year -- what is the present value of that?

The formula is:

PV = A/r - A/(r*(1+r)^N)

where:

PV = Present Value
A = periodic payment -- which is 1000
r = monthly rate = 12%/12 = 0.01
N = number of payments = 65

For you, the PV is 47,626.61

this assumes that the first [ayment is made one month from now -- not now.

The formula for future value is:

FV = PV*(1+r)^N

For you that is

FV = 47,626.61*1.01)^65 = 90,936.65