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*Subject*: **[OASIS Issue Tracker] Commented: (OFFICE-3040) Needs-Discussion:6.12.36: PDuration formula appears incorrect**

*From*:**OASIS Issues Tracker <workgroup_mailer@lists.oasis-open.org>***To*: office@lists.oasis-open.org*Date*: Tue, 10 Aug 2010 11:39:17 -0400 (EDT)

[ http://tools.oasis-open.org/issues/browse/OFFICE-3040?page=com.atlassian.jira.plugin.system.issuetabpanels:comment-tabpanel&focusedCommentId=20307#action_20307 ] Eric Patterson commented on OFFICE-3040: ---------------------------------------- 1.2 > Needs-Discussion: 6.12.36: PDuration formula appears incorrect > -------------------------------------------------------------- > > Key: OFFICE-3040 > URL: http://tools.oasis-open.org/issues/browse/OFFICE-3040 > Project: OASIS Open Document Format for Office Applications (OpenDocument) TC > Issue Type: Bug > Components: OpenFormula > Affects Versions: ODF 1.2 CD 05 > Reporter: Eric Patterson > Assignee: Robert Weir > > I believe that the denominator in the Pduration formula should be log(1+rate), not log(rate) > Actual: > PDURATION=(log(desiredValue)-log(currentValue))/log(rate) > Expected: > PDURATION=(log(desiredValue)-log(currentValue))/log(1+rate) > From wolfram the formula for interest calculations is > FV = PV(1 + r/f)^(nf) > where > FV = future value > PV = present value > r = interest rate > f = compounding frequency > n = number of periods > Given that pduration makes no mention of any compounding frequency it should be assumed to be 1. so the formula becomes > FV = PV(1 + r)^n > In the case of PDURATION we want to solve for n given FV, PV, and r > FV / PV = (1 + r)^n > n = log_(1+r)(FV/PV) where log_(1+r) is log base 1+ r > through change of base formula > n = log_(1+r)(FV/PV) = log(FV/PV) / log(1+r) = (log(FV) - log(PV))/log(1+r) where the base of log is irrelevant so long as it is consistent. > Below is a less rigorous justification for the (1+r) in the original equation: > The (1+r) is originally present in the compound interest formula as r is simply the rate of interest, not the growth factor. An investment that grows as 6% would have r = 0.06. Over 1 term r*PV evaluates to only the growth of the investment. We must add to the growth the value of the original investment. so FV = PV + r*PV = PV*(1+r). Hence the original growth factor in the formula must be (1+r) and the derivation from that to the PDURATION formula has already been shown. -- This message is automatically generated by JIRA. - If you think it was sent incorrectly contact one of the administrators: http://tools.oasis-open.org/issues/secure/Administrators.jspa - For more information on JIRA, see: http://www.atlassian.com/software/jira

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