Finance
Calculator
Texas Instruments BA II +
Single Payment Time Value of Money Problems:
a. FV or Future Value Problem: If $500 investment earned an
annual interest rate of 10 percent with annual compounding what would its' value be in
five years?
Note :
All the Time Value of Money keys are on the third row of the calculator.
Always press the number first before pressing the Time Value of Money Keys.
Clear time value of money memory: 2nd CLR TVM (above the FV
key)
Proper compounding: 2nd, P/Y = 1 (third row second column), ENTER
(first row second column),
down arrow (first row fourth column), C/Y = 1.
Enter number of years: N = 5 (press 5 and then N)
Enter interest rate: i = 10 (press 10 and then I/Y)
Enter amount of investment: PV = 500 +/- (press 500,+/-, so it looks like
-500, and then PV)
Not using payment key: PMT = 0 (press 0 and then PMT)
Calculate unknown: CPT FV, answer is $805.26 (CPT can be
found on the first row first column)
Another way of doing this problem,
Clear time value of money memory: 2nd CLR TVM (above the FV
key)
Change the compounding: 2nd, P/Y=12 (third row second column), ENTER
(first row second column),
down arrow (first row fourth column), C/Y = 12. This is
to change from monthly payment to annually payment.
Enter number of years: N = 5
Enter interest rate: i = 120 (10*12)
Enter amount of investment: PV = 500 +/-
Not using payment key: PMT = 0
Calculate unknown: CPT FV, the answer is $805.26
b. PV or Present Value Problem: What amount would have to be
invested for five years, earning an annual interest rate of 10 percent, to have $805.26?
In other words, what is the present value of 805.26 discounted back five years at an
annual rate of 10 percent.
Clear time value of money memory: 2nd CLR TVM
Compounding should remain at P/Y = 1 and C/Y = 1
Enter number of years: N = 5
Enter interest rate: i = 10 (press 10 and then I/Y)
Enter Future Value: FV = 805.26
Not using payment key: PMT = 0
Calculate unknown: CPT PV, answer is 500+/-
Another way of doing this problem,
Clear time value of money memory: 2nd CLR TVM (above the FV
key)
Change the compounding: 2nd, P/Y=12 (third row second column), ENTER
(first row second column),
down arrow (first row fourth column), C/Y = 12. This is
to change from monthly payment to annually payment.
Enter number of years: N = 5
Enter interest rate: i = 120
Enter Future Value: FV = 805.26
Not using payment key: PMT = 0
Calculate unknown: CPT PV, answer is 500+/-
c. Unkown: N. How long must $500 remain invested, earning a 10 percent
annual return, to grow to $805.26?
Clear time value of money memory: 2nd CLR TVM
Compounding should remain at P/Y = 1 and C/Y = 1
Enter interest rate: i = 10
Enter Present Value: PV = 500+/-
Enter Future Value: FV = 805.26
Not using payment key: PMT = 0
Calculate unknown: CPT N , answer is 5.
Another way of doing this problem,
Clear time value of money memory: 2nd CLR TVM (above the FV
key)
Change the compounding: 2nd, P/Y=12 (third row second column), ENTER
(first row second column),
down arrow (first row fourth column), C/Y = 12. This is
to change from monthly payment to annually payment.
Enter interest rate: i = 120
Enter Present Value: PV = 500+/-
Enter Future Value: FV = 805.26
Not using payment key: PMT = 0
Calculate unknown: CPT N , answer is 5.
d. Unkown: i. What annual percentage rate must $500 earn to
grow to 805.26 at the end of 5 years.
Clear time value of money memory: 2nd CLR TVM
Compounding should remain at P/Y = 1 and C/Y = 1
Enter Present Value: PV = 500+/-
Enter Future Value: FV = 805.26
Enter number of years: N = 5
Not using payment key: PMT = 0
Calculate unknown: CPT I/Y, answer is 10 percent
Another way of doing this problem,
Clear time value of money memory: 2nd CLR TVM (above the FV
key)
Change the compounding: 2nd, P/Y=12 (third row second column), ENTER
(first row second column),
down arrow (first row fourth column), C/Y = 12. This is
to change from monthly payment to annually payment.
Enter Present Value: PV = 500+/-
Enter Future Value: FV = 805.26
Enter number of years: N = 5
Not using payment key: PMT = 0
Calculate unknown: CPT I/Y, answer is 120 percent. But,
since this is the annual payment, divide the result by12, therefore the answer is 10
percent
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Last Updated on 1 May 2002, e-mail any comments to: robert.balik@wmich.edu |