This investment returns calc, which seems to be widely used, explicitly states that contributions are made at the beginning of each period. If I enter:

• 10 years
• 7% RoR
• \$10,000 initial investment
• \$1,000 additional investment per year
• 3% expected inflation
• 0% tax rate
• Show all totals after inflation

It generates Year 1 activity of: \$970.87 investment, \$456.31 return, for an ending balance of \$11,427.18

If the contribution is indeed made at the beginning of the period, shouldn't it be as-entered, as \$1,000? Since the inflation has not occurred yet.

If I were to run that in a spreadsheet, it would generate Year 1 activity of: \$1,000 investment, \$427.18 return, for an ending balance of \$11,427.18.

The `\$427.18 = (10000+1000)*((7%-3%)/(1+3%))`

So the end balances match but the underlying elements differ. Which is correct and why?

``````(1+7%)*(9708.74 + 970.87) = \$11,427.18
• OK, so they are taking each element as of "December 31" and then applying the nominal RoR. But how are they calculating the \$456.31 - backing into it? Shouldn't it be `(9708.74+970.87)*(7%)` Back to the question, is my original approach "correct" or is theirs - or are each of these fair and equally "correct" alternatives? Commented May 28 at 13:23
• Hi, it looks like it's being incorrectly calculated like this: `(10000 + 1000)*(1 + 0.07)/(1 + 0.03) - (10000 + 970.87) = 456.31` Commented May 28 at 13:51
• Thanks. So just to finish this off, you wouldn't see anything impoper or incorrect by applying the following approach, assuming beginning of period contributions? `Return = (10000+1000)*(7%-3%)/(1+3%) = 427.18` and `End Balance = 10000+1000+427.18=11427.18` Commented May 28 at 18:58
• Although the results are the same, as I previously posted here, it is clearer to me to apply the 7% interest then depreciate by the 3% inflation, so `End Balance = 11000*(1+7%)/(1+3%) = 11427.18` then `Return = End Balance - 11000 = 427.18` Commented May 28 at 20:23