PDURATION

Calculates the number of periods required to reach a particular value for an investment

Syntax:

PDURATION(rate, present_value, future_value)

rate is the interest rate per period

present_value is the present value of the investment

future_value is the value that you want in the future for the investment

rate, present_value and future_value have to be positive values.

Calculation for PDURATION is:

$\frac{lo g ( f u t u re _ v a l u e ) - lo g ( p rese n t _ v a l u e )}{lo g ( 1 + r a t e )}$

Example:

If rate contains 11%, present_value contains 50, and future_value contains 250:

PDURATION(11%, 50, 250)

returns 15.421978499

Rate:

Present value:

Future value:

Result:

15.421978499

Application:

Imagine you've received a bonus of $50,000 and you decide to invest it for your child's future education. You find an investment opportunity that offers a fixed annual return of 7.5% (compounded annually). You have a target of accumulating $150,000 for their university expenses. You want to know how many years it will take to reach your goal.

Using the PDURATION function

The PDURATION function is a specialized financial function. The syntax is:

PDURATION(rate, present_value, future_value)

rate: The interest rate per period. In this case, 7.5% or 0.075.
present_value: The current value of the investment. This is the initial $50,000.
future_value: The desired value of the investment. This is the target of $150,000.

Calculation

Using the values from our scenario, the formula would be:

PDURATION(0.075, 50000, 150000)

When you input this into a spreadsheet, the result would be approximately 15.19 years.

Interpretation

This means it will take roughly 15.19 years for your initial $50,000 investment to grow to $150,000, assuming a consistent annual return of 7.5%. This information is critical for long-term financial planning, allowing you to set realistic timelines for your goals.

Example in a Spreadsheet Table

Here is how you would organize this data in a spreadsheet:


	A	B
1	Initial Investment (Present Value)	$50,000.00
2	Annual Interest Rate (Rate)	7.50%
3	Target Value (Future Value)	$150,000.00
4	Formula	PDURATION(B2, B1, B3)
5	Periods to Reach Goal (Years)	15.19

This table clearly shows the inputs and the resulting output, making it easy to understand and replicate. It's a straightforward and powerful way to determine the duration of an investment for a specific financial goal.