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## Months or Years?

Note: You can use any financial calculator to do this problem, but if you want the BEST, you can get our 10bii Financial Calculator for iOS, Android, Mac, and Windows!
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THE SCENARIO One of the most common problems people have when working with a financial calculator is in entering the wrong number for N. N means 'number of periods', but some people hear that as 'number of months' and some as 'number of years'. Sadly, both are incorrect, as periods can take up any amount of time (though months and years are the most common period-lengths I've seen used). Let's see the results of this type of misunderstanding in action, using the same initial deposit amount and monthly contribution to an investment account, but changing the length of time that elapses. The question: If I initially put \$10,000 in an investment account that earns 6.5% interest, and then contribute \$250 per month to that account, how much more do I have in the account if I do so for 50 years rather than 50 months?
THE SOLUTION This one is pretty straightforward, and has a few parts:
1. Find the answer after 50 years
2. Find the answer after 50 months
3. Find the difference
First things first, make sure the calculator is using 12 Payments per Year. Part 1: 50 years N: 600 (I'm doing the investment for 50 years, which is 50 x 12 = 600 months) I/YR: 6.5 (The account yields 6.5% interest) PV: -10,000 (My initial deposit is \$10,000) PMT: -250 (I'm investing \$250 per month) FV: (This is what I'm trying to find)

After 50 years, I'll have \$3,690,289.20 in the account.

Part 2: 50 months N: 50 (I'm doing the investment for 50 months) I/YR: 6.5 (The account yields 6.5% interest) PV: -10,000 (My initial deposit is \$10,000) PMT: -250 (I'm investing \$250 per month) FV: (This is what I'm trying to find)

After 50 months, I'll only have \$145,322.12 in the account.

Part 3: The difference Continuing the investment for 50 years rather than only 50 months gets me \$3,690,289.20 - \$145,322.12 = \$3,544,967.08 more. In other words, almost all of the money accrues after the first 50 months. Because answers can vary wildly based on different inputs, it's critical that we double-check our numbers and our scenarios when modeling them with the calculator.

What do you think? Does this answer surprise you? Why or why not? Let us know in the comments!