Just Keep Buying

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plutonio

New member
Hello,
I am reading the book Just Keep Buying.
I am on page 62 and I am not sure I get what the author is trying to say.
Can anyone explain the math behind the example when the author says "the proper way to find the current value of these future earnings is to discount this payment stream by 4% per year"?
Which formula I should use in this web page (LINK):
1. present value of future money or
2. present value of periodical deposit?
If I use the second formula, I get the current value as in the book.

Thank you
 
Last edited:
Hi

That's a good question, and re-reading that paragraph it's not that clear indeed.

In the page you are using, you need to use the second one (present value of periodical deposits) with 40 periods, 4% interest rate and 20'000 USD per period. This will give you about 395'000 USD. Interestingly, this is very close to the approximation of lifetime earnings divided by 2 which gives us 400'000 USD and can be done in the head as pointed as out by Nick.
 
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