# Using Financial and Business Calculators. Daniel J. Borgia

Save this PDF as:

Size: px
Start display at page:

## Transcription

1 Using Financial and Business Calculators Daniel J. Borgia

2

3 Table of Contents Texas Instruments (TI) BA-35 SOLAR Texas Instruments (TI) BA II PLUS Hewlett Packard (HP) 12C Hewlett Packard (HP) 17BII Hewlett Packard (HP) 19BII

4

5 Using Financial and Business Calculators Most business and financial calculators offer a multitude of powerful functions. The purpose of this guide is to provide students with an easy and quick reference for some of the most commonly used financial functions. More detailed operational descriptions can be obtained from the owner s manuals that accompany the calculators. This calculator guide discusses the basic functions of five business and financial calculators: the Texas Instruments (TI) BA-35 SOLAR, the Texas Instruments (TI) BA II PLUS, the Hewlett-Packard (HP) 12C, the Hewlett-Packard (HP) 17BII, and the Hewlett- Packard (HP) 19BII. The sections for each calculator present step-by-step instructions for using general and financial functions offered by each calculator. The calculations for each type of financial operation have been explained using sample problems. The display on the calculator s screen at the completion of each step has also been included to allow you to confirm your calculations as you proceed. V

6

7 Texas Instruments (TI) BA-35 Solar The TI BA-35 SOLAR can operate in three different modes: statistical (STAT), financial (FIN), and profit margin. No indicator is displayed for the profit margin mode. To set the calculator to a particular mode, press repeatedly until the appropriate indicator is displayed. Changing to a new mode clears the contents of the mode registers. Arithmetic, mathematical, and percentage operations can be executed in any of the three modes. The second function ( ) invokes the second functions that are marked above some of the keys. To perform a second function, press and then the appropriate function key. If you accidentally press the key, simply press it again to cancel its effect. A. Clearing the calculator display and memory, and setting the decimal points: 1. 0 Switches the calculator on. This will also clear the calculator completely, including the display, all pending operations, and the memory and mode operations. It also sets the calculator to floating-decimal mode and financial mode Clears incorrect entries, error conditions, the display, or pending operations. It does not affect the memory, the mode registers, or the display format. 3. CMR 0 Clears any values that have been stored in the mode registers. Changing to a new mode also clears the contents of the mode registers. 1

8 2\ TI BA-35 SOLAR 4. Fix 0.00 Sets the number of decimals to two. 5. Fix 0 Sets decimals back to floating. B. Calculating the present value of a lump sum amount: Example: Liz anticipates it will cost her \$65,000 to buy a house in 18 months. How much should she invest today at an annual interest rate of 15% (interest is compounded monthly) to be able to afford the house in one and a half years? Clear all memory Clears Time-Value-of-Money worksheet ,000 Records the future cash flow of \$65, Calculates the number of time periods as Records the periodic interest rate of 1.25% per month for 18 months , Calculates the present value of \$65,000 in 1.5 years discounted at a monthly rate of 1.25%. C. Calculating the future value of a lump sum amount: Example: If John invests \$1,850 today in an asset earning a 10% rate of return (compounded annually), how much will he have after two years?

9 TI BA-35 SOLAR \ 3 Clear all memory Clears Time-Value-of-Money worksheet. 2. 1,850 Records the present cash outflow of \$1, Stores annual rate of interest as 10% Records number of time periods as , Calculates the future value of \$1,850 after 2 years at 10%. D. Calculating the present value of an annuity: Example: How much should you invest now so that starting one year from today your daughter can receive \$6,000 per year for the next five years? Assume the discount rate is 15%. Clear all memory Clears Time-Value-of-Money worksheet. 2. 6,000 Records the amount of the periodic payments or annuity Records annual rate of interest as 15% Records number of time periods as PV = 20, Calculates the PV of the annuity.

10 4\ TI BA-35 SOLAR E. Calculating the present value of an annuity due: Example: In this case, instead of receiving payments at the end of each year, your daughter will receive the payments at the beginning of each year. Therefore, her first payment will be received immediately. There are two methods to calculate the present value of an annuity due: 1. You can calculate the present value of an annuity, as shown in Section D, and multiply it by (1 + k). In that case the additional step would be: Follow steps 1 5 from Section D , Calculates the PV of the annuity due. 2. The TI BA-35 SOLAR allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below: Clear all memory Clears Time-Value-of- Money worksheet. 2. BGN Begin Sets the payment mode to beginning of the period. 3. 6,000 Records the amount of the periodic payments Records annual rate of interest as 15% Records number of time periods as , Calculates the PV of the annuity due.

11 TI BA-35 SOLAR \ Clears Time-Value-of-Money worksheet and sets payments to the default end of the period position. F. Calculating the future value of an annuity: Example: You have recently won a lottery for \$10,000. Your winnings will come in five annual payments of \$2,000 each starting one year from now. If the annual compound rate is 11.4%, how much is the lottery worth at the end of five years? Clear all memory Clears Time-Value-of-Money worksheet. 2. 2,000 Records the amount of periodic payments Records the annual compound rate as 11.4% Records the number of time periods as , Calculates FV of the annuity. G. Calculating the future value of an annuity due: Example: In this case, your winnings will be paid at the beginning, instead of at the end, of each year for five years. So you are going to get the first payment of your \$10,000 lottery, i.e. \$2,000, immediately. There are two methods to calculate the future value of an annuity due: 1. You can calculate the future value of an annuity, as shown in Section F, and multiply it by (1 + k). In that case the additional step would be:

12 6\ TI BA-35 SOLAR Follow steps 1 5 from Section F. (i) , Calculates the FV of the annuity due. 2. The TI BA-35 SOLAR allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below. Clear all memory Clears Time-Value-of-Money worksheet. 2. BGN Begin Sets the payment mode to the beginning of the period. 3. 2,000 Records the amount of the periodic payments Records annual rate of interest as 11.4% Records number of time periods as , Calculates the FV of the annuity due Clears Time-Value-of-Money worksheet and sets payments to the default end of the period position. H. Calculating the net present value of an annuity: Example: Jane thinks if she invests \$80,000 by buying property today, she can get \$15,000 in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a rate of return of 12% (with quarterly discounting) on her investment, what is the net present value of this project?

13 TI BA-35 SOLAR \ 7 1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be 3%. 2. The number of time periods will be multiplied by four, i.e., The amount of annual rent will be divided by four, i.e., \$3,750. Clear all memory Clears Time-Value-of- Money worksheet. 2. 3,750 Records the amount of the quarterly periodic payments Records quarterly rate of interest as 3% Records number of quarterly time periods as , Calculates the PV of the annuity. 6. = 33, Computes the Net Present Value. I. Calculating the internal rate of return of an annuity: Example: ABC Inc. is planning to spend \$35,000 to buy a warehouse. Under the contract they will receive an annual after-tax cash flow of \$6,000 (paid semiannually) from the property for the next eight years. What is the internal rate of return for the investment?

14 8\ TI BA-35 SOLAR Clear all memory Clears Time-Value-of-Money worksheet. 2. 3,000 Records the amount of the semiannual periodic payments ,000 Records the cost of the warehouse Records number of quarterly time periods as Calculates semiannual IRR Computes the IRR. J. Bond valuation with interest compounded annually: Example: How much would you be willing to pay for a bond today if it pays \$100 in interest annually for 20 years (starting next year) and has a principal payment of \$1,000? The yield to maturity is 15%. This question can be interpreted as that of finding the NPV of an uneven cash flow series with the initial cash outflow equal to zero. Hence, we will follow the steps used for calculating NPV to compute the current price of the bond. Clear all memory Clears Time-Value-of-Money worksheet Records the amount of the periodic annual coupon payments.

15 TI BA-35 SOLAR \ Records annual yield-to-maturity as 15% Records number of time periods as Records the future face or par value of the bond Calculates the bond s current market price. K. Bond valuation with interest compounded semiannually: Because most bonds pay interest semiannually, we will show the conversion required to calculate the current value of such bonds. Example: If the bond described in Section J pays interest semiannually, the calculations will be: I t = \$50, P n = \$1000, i = 7.5%, n = 40. Clear all memory Clears Time-Value-of-Money worksheet Records the amount of the periodic semiannual coupon payments Records semiannual yield-tomaturity as 7.5% Records number of time periods as Records the future face or par value of the bond Calculates the bond s current market price.

16

17 Texas Instruments (TI) BA II PLUS The TI BAII PLUS can perform two basic sets of financial functions. The first set of functions is invoked simply by pressing the relevant keys. The second set is invoked first by pressing the gray or yellow colored 2nd function key (depending on which calculator you are using), which is located at the far left on the second row from the top, and then selecting the appropriate gray colored function written above the calculator keys. This 2nd key will be represented by in this chapter. The BA II PLUS has a continuous memory. Turning off the calculator does not affect the contents stored in the memory, though the display is reset to zero. Therefore, it is extremely important to clear the calculator memory after each calculation. The BAII PLUS automatically turns itself off when not used for more than approximately ten minutes. A. Clearing the calculator display and memory, and setting the decimal points: Switch the calculator on. 2. QUIT 0.00 Resets the calculator to the standard mode, and clears the screen. 3. MEM CLRWor ork MO=0.00 Clears all the memory locations simultaneously. 4. Format DEC=9 Allows the number of decimal places on the calculator to float. 5. QUIT 0.00 Brings the calculator to the standard mode. To clear each memory location individually, use the following key sequence. 11

18 12 \ TI BA II PLUS 1. MEM 1. MO=0 Clears the memory location 2. M9=0 Clears the next memory location. A worksheet for this calculator is a framework of formulae, such as the Time-Value-of- Money worksheet. The term worksheet has been used extensively in the owner s manual and, hence, is being used in this book. Note: 1. We will be using two decimal places for all the calculations in this appendix. To reset the TI BA II PLUS to two decimal places, press Format. 2. Even though it displays two decimal digits, the TI BAII PLUS uses 13 digits in all calculations. 3. To erase a part of the entered display, use the CE/C key. 4. The CE/C key can be used to clear any error displays. B. Using the memory capability: Example: Before leaving on a sales call one morning, Alfred stored the price of a fax machine (\$1,200) and a printer (\$1,000) in his calculator. Later that day, he sold three fax machines and four printers to a customer. He used his calculator to get the total amount due from this customer in the following way: Clear all memory. 1. 1, Stores the price of the fax machine in memory location , Stores the price of the printer in memory location Turns the calculator off. Later that day: After the sale, Alfred turns the calculator on.

19 TI BA II PLUS \ , Recalls the cost of the fax to the display. 6. 3, Multiplies 1,200 by 3 to calculate the cost of the three fax machines. 7. 3, Stores the number in the memory location , Recalls the cost of the printer. 9. 4, Calculates cost of four printers , Recalls the cost of the fax machines to calculate the total amount for the sale. C. Calculating the present value of a lump sum amount: Example: Liz anticipates it will cost her \$65,000 to buy a house in 18 months. How much should she invest today at an annual interest rate of 15% (interest is compounded monthly) to be able to afford the house in one and a half years? Clear all memory. 1. CLRTVM 0.00 Clears Time-Value-of-Money worksheet. 2. P/Y P/Y=12.00 Sets number of payments per year to QUIT 0.00 Brings the calculator to the standard mode. 4. FV=65, Records the future cash flow of \$65,000.

20 14 \ TI BA II PLUS 5. I/Y=15.00 Records the periodic rate of interest as 15%. 6. xp/y Calculates the number of time periods as N=18.00 Stores the number of time periods. 8. PV=-51, Calculates the present value of \$65,000 in 1.5 years discounted at a monthly rate of 1.25%. Note: The display in step 8 has a negative sign because it represents a cash outflow (investment) today. D. Calculating the future value of a lump sum amount: Example: If John invests \$1,850 today in an asset earning a 10% rate of return (compounded annually), how much will he have after two years? Clear all memory. 1. CLRTVM 0.00 Clears Time-Value-of-Money worksheet. 2. P/Y P/Y=1.00 Sets number of payments per year to QUIT 0.00 Brings the calculator to the standard mode. 4. PV=-1, Records the present cash outflow of \$1, I/Y=10.00 Stores annual rate of interest as 10%. 6. N=2.00 Records number of time periods as FV=2, Calculates the future value of \$1,850 after two years at 10%.

21 TI BA II PLUS \ 15 E. Calculating the present value of an annuity: Example: How much should you invest now so that starting one year from today your daughter can receive \$6,000 per year for the next five years? Assume the discount rate is 15%. Clear all memory. 1. CLRTVM 0.00 Clears Time-Value-of-Money worksheet. 2. P/Y P/Y=1.00 Sets number of payments per year to QUIT 0.00 Brings the calculator to the standard mode. 4. PMT=6, Records the amount of the periodic payments. 5. I/Y=15.00 Records annual rate of interest as 15%. 6. N=5.00 Records number of time periods as PV=-20, Calculates the PV of the annuity. F. Calculating the present value of an annuity due: Example: In this case, instead of receiving payments at the end of each year, your daughter will receive the payments at the beginning of each year. Therefore, her first payment will be received immediately. There are two methods to calculate the present value of an annuity due: 1. You can calculate the present value of an annuity, as shown in Section E, and multiply it by (1 + k). In that case the additional step would be:

22 16 \ TI BA II PLUS Follow steps 1 7 from Section E , Calculates the PV of the annuity due. 2. The TI BAII PLUS allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below: Clear all memory. 1. CLRTVM 0.00 Clears Time-Value-of- Money worksheet. 2. P/Y P/Y=1.00 Sets number of payments per year to BGN END Shows the default setting for the payment mode. 4. SET BGN Sets the payment mode to beginning of the period. 5. QUIT 0.00 Brings the calculator to the standard mode. 6. PMT=6, Records the amount of the periodic payments. 7. I/Y=15.00 Records annual rate of interest as 15%. 8. N=5.00 Records number of time periods as PV=-23, Calculates the PV of the annuity due. 10. BGN BGN Invokes the payment mode. 11. SET END Sets the payment mode to the end of the period.

23 TI BA II PLUS \ QUIT 0.00 Brings the calculator to the standard mode. G. Calculating the future value of an annuity: Example: You have recently won a lottery for \$10,000. Your winnings will come in five annual payments of \$2,000 each starting one year from now. If the annual compound rate is 11.4%, how much is the lottery worth at the end of five years? Clear all memory. 1. CLRTVM 0.00 Clears Time-Value-of-Money worksheet. 2. P/Y P/Y=1.00 Sets number of payments per year to QUIT 0.00 Brings the calculator to the standard mode. 4. PMT=2, Records the amount of periodic payments. 5. I/Y=11.40 Records the annual compound rate as 11.4%. 6. N=5.00 Records the number of time periods as , Calculates FV of the annuity. H. Calculating the future value of an annuity due: Example: In this case, your winnings will be paid at the beginning instead of at the end of each year for five years. So you are going to get the first payment of your \$10,000 lottery, i.e. \$2,000, immediately. There are two methods to calculate the future value of an annuity due: 1. You can calculate the future value of an annuity, as shown in Section G, and multiply it by (1 + k). In that case the additional step would be:

24 18 \ TI BA II PLUS Follow steps 1 7 from Section G , Calculates the FV of the annuity due. 2. The TI BAII PLUS allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below. Clear all memory. 1. CLRTVM 0.00 Clears Time-Value-of-Money worksheet. 2. P/Y P/Y=1.00 Sets number of payments per year to BGN END Shows the default setting for the payment mode. 4. SET BGN Sets the payment mode to the beginning of the period. 5. QUIT 0.00 Brings the calculator to the standard mode. 6. PMT=2, Records the amount of the periodic payment. 7. I/Y=11.40 Records annual rate of interest as 11.4%. 8. N=5.00 Records number of time periods as , Calculates the FV of an annuity due. 10. BGN BGN Invokes the payment mode. 11. SET END Sets the payment mode to the end of the period. 12. QUIT 0.00 Brings the calculator to the standard mode.

25 TI BA II PLUS \ 19 I. Calculating the net present value of an annuity: Example: Jane thinks if she invests \$80,000 by buying property today, she can get \$15,000 in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a rate of return of 12% (with quarterly discounting) on her investment, what is the net present value of this project? 1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be 3%. 2. The number of time periods will be multiplied by four, i.e., The amount of annual rent will be divided by four, i.e., \$3,750. Clear all memory. 1. CLRWor ork 0.00 Clears the Cash Flow worksheet. 2. Reset RST 0.00 Resets all variables to zero. 3. CF 0-80,000 Inputs initial cash outflow. 4. CF 0 =-80, Stores initial cash outflow. 5. C01 15, Calculates periodic cash inflows. 6. C01=3, Stores quarterly cash inflow amount. 7. F01=80.00 Stores the number of times the quarterly cash inflow occurs. 8. I=3.00 Stores the quarterly interest rate as 3%. 9. NPV=33, Calculates the net present value of the investment.

26 20 \ TI BA II PLUS J. Calculating the net present value of a series of uneven cash flows: The TI BAII PLUS can store 24 cash flow groups besides the initial cash investment. A cash flow group comprises the cash flow amount and the number of times it repeats consecutively in the cash flow series. Each cash flow group can have up to 9,999 cash flows i.e., the maximum value of Fnn (the frequency of consecutive cash flows in one group) can be 9,999. Example: Beth is planning to buy a Pentium-based PC for rental purposes. She has calculated that her expected cash flows from the investment for the next five years would be as shown below. \$2,500 \$1,500 \$1,000 \$1,000 \$800 CF 0 = \$4,000 If she has to pay an annual interest rate of 9.75%, should she buy the computer? Clear all memory. 1. CLRWor ork 0.00 Clears the Cash Flow worksheet. 2. Reset RST 0.00 Resets all variables to zero. 3. CF 0-4,000 Inputs initial cash outflow. 4. CF 0 =-4, Stores initial cash outflow. 5. C01=2, Stores the first cash inflow. 6. F01=1.00 Records that cash inflow of \$2,500 occurs once. 7. C02=1, Stores the second cash inflow. 8. F02=1.00 Records that cash inflow of \$1,500 occurs once. 9. C03=1, Stores the third cash inflow.

27 TI BA II PLUS \ F03=2.00 Stores the number of times that cash inflow of \$1,000 repeats. 11. C04= Stores the fifth cash inflow. 12. I=9.75 Stores the annual interest rate as 9.75%. 13. NPV=1, Calculates the net present value of the investment. K. Calculating the internal rate of return of an annuity: Example: ABC Inc. is planning to spend \$35,000 to buy a warehouse. Under the contract they will receive an after-tax cash flow of \$6,000 (paid semiannually) from the property for the next eight years. What is the internal rate of return for the investment? Clear all memory. 1. CLRWor ork 0.00 Clears the Cash Flow worksheet. 2. Reset RST 0.00 Resets all variables to zero. 3. C0-35, Change sign to show cash outflow. 4. CF 0 =-35, Stores initial cash investment. 5. C01 6, Computes semi-annual cash inflow. 6. C01=3, Stores semi-annual cash inflow. 7. F Calculates the total number of time periods. 8. F01=16.00 Stores total number of time periods.

28 22 \ TI BA II PLUS 9. IRR=3.98 Calculates semi-annual IRR of this investment. 10. IRR 7.97 Calculates annual IRR of this investment. L. Calculating the internal rate of return of a series of uneven cash flows: Example: Healthtime has the opportunity to make an investment that requires an initial cash outflow of \$6,500. The estimated cash inflows from the project for the next six years are shown below. What is the IRR on this investment? \$1,000 \$1,000 \$900 \$900 \$750 \$60,000 CF 0 = \$6,500 Clear all memory. 1. CLRWor ork 0.00 Clears the Cash Flow worksheet. 2. Reset RST 0.00 Resets all variables to zero. 3. CF 0-6, Change sign to show cash outflow. 4. CF 0 =-6, Stores initial cash investment. 5. C01=1, Stores first cash inflow. 6. F01=2.00 Records that cash inflow of \$1,000 occurs twice 7. C02= Stores second cash flow amount. 8. F02=2.00 Records that cash inflow of \$900 occurs twice.

29 TI BA II PLUS \ C03= Stores third cash flow amount. 10. F03=1.00 Shows that cash flow of \$750,000 occurs once. 11. C04=60, Stores final cash inflow of \$60, IRR=51.88 Calculates IRR of this investment. M. Bond valuation with interest compounded annually: Example: How much would you be willing to pay for a bond today if it pays \$100 in interest annually for 20 years (starting next year) and has a principal payment of \$1,000? The yield to maturity is 15%. This question can be interpreted as that of finding the NPV of an uneven cash flow series with the initial cash outflow equal to zero. Hence, we will follow the steps used for calculating NPV to compute the current price of the bond. Clear all memory. 1. CLRWor ork 0.00 Clears the Cash Flow worksheet. 2. Reset RST 0.00 Resets all variables to zero. 3. CF 0 =0.00 Inputs initial cash outflow as zero. 4. C01= Stores the first cash inflow. 5. F01=19.00 Records that cash inflow of \$100 occurs 19 times. 6. C02=1, Stores the final cash inflow. 7. I=15.00 Stores the annual discount rate as 15%.

30 24 \ TI BA II PLUS 8. NPV= Calculates the initial price of the bond. N. Bond valuation with interest compounded semiannually: Because most bonds pay interest semiannually, we will show the conversion required to calculate the current value of such bonds. Example: If the bond described in Section K pays interest semiannually, the calculations will be: I t = \$50, P n = \$1000, i = 7.5%, n = 40. Clear all memory. 1. CLRWor ork 0.00 Clears the Cash Flow worksheet. 2. Reset RST 0.00 Resets all variables to zero. 3. CF O =0.00 Inputs initial cash outflow as zero. 4. C Calculates the semiannual interest payment. 5. C01=50.00 Stores the semiannual interest payment as \$ F Calculates the number of periods when cash inflow of \$50 will occur. 7. F01=39.00 Stores the number of interest periods. 8. C02=1, Stores the final cash inflow. 9. I Calculates semiannual discount rate.

31 TI BA II PLUS \ I=7.50 Stores semiannual discount rate as 7.5%. 11. NPV= Calculates the initial price of the bond.

32

33 Hewlett Packard (HP) 12C The HP 12C is color-coded. The gold f key refers to the function coded in gold above the keys on the calculator. Similarly, the blue g key refers to the functions coded in blue on the lower portion of the keys themselves. The HP 12C has continuous memory. Therefore, turning of the calculator does not affect the information you have previously stored in the calculator. If not turned off manually, the calculator will turn off automatically approximately 8 to 17 minutes after last use. A. Clearing the calculator display and memory, and setting the decimal points: 1. REG Clears screen and storage registers. 2. FIN Clears the financial registers Sets the number of decimal places equal to 2. Note: the HP12C will perform calculations to 10 decimals even though only two decimals are displayed. B. Using the memory capability: Example: Before leaving on a sales call one morning, Alfred stored the price of a fax machine (\$1,200) and a printer (\$1,000) in his calculator. Later that day, he sold three fax machines and four printers to a customer. He used his calculator to get the total amount due from this customer in the following way: Clear all memory and financial registers. 1. 1, Stores the price of the fax machine in memory location 1. 27

34 28 \ HP 12C 2. 1, Stores the price of the printer in memory location Turns the calculator off. Later that day: 4. 1, After the sale, Alfred turns the calculator on. 5. 1, Recalls the cost of the fax to the display. 6. 3, Multiplies 1,200 by 3 to calculate the cost of the three fax machines. 7. 1, Recalls the cost of the printer. 8. 4, Calculates cost of four printers. 9. 7, Totals the amount for this sale. C. Calculating the present value of a lump sum amount: Example: Liz anticipates it will cost her \$65,000 to buy a house in 18 months. How much should she invest today at an annual interest rate of 15% (interest is compounded monthly) to be able to afford the house in one and a half years? Clear the memory and financial registers , Records the future cash flow of \$65, Records the monthly interest rate of 1.25% Records the number of time periods as 18.

35 HP 12C \ , Calculates the present value of \$65,000 in 1.5 years discounted at a monthly rate of 1.25%. Note: The display in step 8 has a negative sign because it represents a cash outflow (investment) today. D. Calculating the future value of a lump sum amount: Example: If John invests \$1,850 today in an asset earning a 10% rate of return (compounded annually), how much will he have after two years? Clear the memory and financial registers , Records the present cash outflow of \$1, Records the annual interest rate of 10% Records the number of time periods as , Calculates the future value of \$1,850 after two years at 10%. E. Calculating the present value of an annuity: Example: How much should you invest now so that starting one year from today your daughter can receive \$6,000 per year for the next five years? Assume the discount rate is 15%. Clear the memory and financial registers. 1. 6, Records the amount of the periodic payments Records the annual interest rate of 15%.

36 30 \ HP 12C Records the number of time periods as , Calculates the present value of the annuity. F. Calculating the present value of an annuity due: Example: In this case, instead of receiving payments at the end of each year, your daughter will receive the payments at the beginning of each year. Therefore, her first payment will be received immediately. There are two methods to calculate the present value of an annuity due: 1. You can calculate the present value of an annuity, as shown in Section E, and multiply it by (1 + k). In that case the additional step would be: Follow steps 1 4 from Section E Records the second term (1 + k) in the formula for an annuity due , Calculates the PV of the annuity due. 2. The HP 12C allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below: Clear the memory and financial registers. 1. BEG BEGIN Displays BEGIN at the bottom of the screen to indicate that payment is made at the beginning of the period. 2. 6, Records the amount of the periodic payments.

37 HP 12C \ Records the annual interest rate of 15% Records the number of time periods as END Toggles to the default setting of end-of-the-period payments. G. Calculating the future value of an annuity: Example: You have recently won a lottery for \$10,000. Your winnings will come in five annual payments of \$2,000 each starting one year from now. If the annual compound rate is 11.4%, how much is the lottery worth at the end of five years? Clear the memory and financial registers. 1. 2, Records the amount of periodic payments Records the annual rate of interest of 11.4% Records the number of time periods as , Calculates the FV of an annuity. H. Calculating the future value of an annuity due: Example: In this case, your winnings will be paid at the beginning instead of at the end of each year for five years. So you are going to get the first payment of your \$10,000 lottery, i.e. \$2,000, immediately. There are two methods to calculate the future value of an annuity due: 1. You can calculate the future value of an annuity, as shown in Section G, and multiply it by (1 + k). In that case the additional step would be:

38 32 \ HP 12C Follow steps 1 4 from Section G Records the second (1 + k) term in the formula for an annuity due , Calculates the FV of the annuity due. 2. The HP 12C allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below. Clear the memory and financial registers. 1. BEG BEGIN Displays the BEGIN at the bottom of the screen to indicate that payment is made at the beginning of the period. 2. 2, Records the amount of periodic payments Records the annual rate of interest of 11.4% Records the number of time periods as , Calculates the FV of an annuity due. 6. END Toggles to the default setting of end-of-the-period payments. I. Calculating the net present value of an annuity: Example: Jane thinks if she invests \$80,000 by buying property today, she can get \$15,000 in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a rate of return of 12% (with quarterly discounting) on her investment, what is the net present value of this project? 1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be 3%.

39 HP 12C \ The number of time periods will be multiplied by four, i.e., The amount of annual rent will be divided by four, i.e., \$3,750. Clear the memory and financial registers ,000 Records the initial cash outflow of \$80, CF0-80, Stores the initial investment in the financial register. 3. CFj 3, Stores cash inflow amount. 4. Nj Records the number of time periods as Records the quarterly interest rate of 3%. 6. NPV 33, Calculates the net present value of the investment. J. Calculating the net present value of a series of uneven cash flows: The HP12C can store 24 cash flow groups besides the initial cash investment. A cash flow group comprises the cash flow amount and the number of times it repeats consecutively in the cash flow series. Each cash flow group can have up to 9,999 cash flows; that is the maximum value of Fnn (the frequency of consecutive cash flows in one group) can be 9,999. Example: Beth is planning to buy a Pentium-based PC for rental purposes. She has calculated that her expected cash flows from the investment for the next five years would be as shown below. \$2,500 \$1,500 \$1,000 \$1,000 \$800 CF 0 = \$4,000 If she has to pay an annual interest rate of 9.75%, should she buy the computer?

40 34 \ HP 12C Clear the memory and financial registers. 1. CHS -4, Enters the initial investment of \$4, CF0-4, Stores the initial investment in the financial register. 3. CFj 2, Stores the first cash inflow amount. 4. CFj 1, Stores the second cash inflow amount. 5. CFj 1, Stores the third cash inflow amount. 6. Nj 2.00 Records that \$1,000 occurs twice for both the third and fourth time periods. 7. CFj Stores the fifth cash inflow amount. 8. I 9.75 Records the annual interest rate of 9.75%. 9. NPV 1, Calculates the net present value of the investment. K. Calculating the internal rate of return of an annuity: Example: ABC Inc. is planning to spend \$35,000 to buy a warehouse. Under the contract they will receive an after-tax cash flow of \$6,000 (paid semiannually) from the property for the next eight years. What is the internal rate of return for the investment? Clear the memory and financial registers. 1. CHS -35,000 Enters the initial investment of \$35,000.

41 HP 12C \ CF0-35, Stores the initial investment in the financial register. 3. CFj 3, Stores the semi-annual cash inflow amount. 4. Nj Stores the total number of time periods as IRR 3.98 Calculates the semi-annual IRR Calculates the IRR of the investment. L. Calculating the internal rate of return of a series of uneven cash flows: Example: Healthtime has the opportunity to make an investment that requires an initial cash outflow of \$6,500. The estimated cash inflows from the project for the next six years are shown below. What is the IRR on this investment? \$1,000 \$1,000 \$900 \$900 \$750 \$60,000 CF 0 = \$6,500 Clear the memory and financial registers ,500 Enter the initial investment of \$6, CF0-6, Stores the initial investment in the financial register. 3. CFj 1, Stores the first cash inflow amount 4. Nj 2.00 Stores \$1,000 as the cash inflow amount for both the first and second periods.

42 36 \ HP 12C 5. CFj Stores the amount of the third cash inflow. 6. Nj 2.00 Records that \$900 occurs twice for the third and fourth periods. 7. CFj Stores the fifth cash inflow amount. 8. CFj 60, Stores the sixth cash inflow amount. 9. IRR Calculates the internal rate of return for the cash flow series. M. Bond valuation with interest compounded annually: Example: How much would you be willing to pay for a bond today if it pays \$100 in interest annually for 20 years (starting next year) and has a principal payment of \$1,000? The yield to maturity is 15%. This question can be interpreted as that of finding the NPV of an uneven cash flow series with the initial cash outflow equal to zero. Hence, we will follow the steps used for calculating NPV to compute the current price of the bond. Clear the memory and financial registers. 1. CF Stores the initial investment as zero in the financial register. 2. CFj Stores the first cash inflow amount. 3. Nj Records that interest payments of \$100 occur 19 times. 4. CFj Stores the amount of the last cash inflow (interest + principal).

43 HP 12C \ Records the yield-to-maturity as 15%. 6. NPV Computes the current bond price. N. Bond valuation with interest compounded semiannually: Because most bonds pay interest semiannually, we will show the conversion required to calculate the current value of such bonds. Example: If the bond described in Section M pays interest semiannually, the calculations will be: I t = \$50, P n = \$1000, i = 7.5%, n = 40. Clear the memory and financial registers. 1. CF Stores the initial investment as zero in the financial register. 2. CFj Stores the first cash inflow amount. 3. Nj Records that interest payments of \$50 occur 39 times. 4. CFj Stores the amount of the last cash inflow (interest + principal payment) Records the semi-annual YTM as 7.5%. 6. NPV Calculates the current bond value.

44

45 Hewlett Packard (HP) 17BII The HP 17BII contains a two-line display space for messages, prompts, and labels. Menus and messages show you options and guide you through problems. Some keys and functions are activated by pressing the SHIFT key, which is the amber colored key ( ) located at the far left on the second line of keys from the bottom. The CLR (clear key) clears the calculator display line. Pressing SHIFT CLEAR DATA will clear all information in the current work area such as a time value of money worksheet. It is also important to note that most financial calculations are accomplished by accessing the appropriate variable as displayed on the display panel. In order to select a particular variable, it is necessary to press the up arrow symbol ^ located directly beneath the variable along the row of keys just beneath the display panel. For the sake of brevity in this guide, only the actual variable name will be indicated even though the up arrow symbol beneath the variable is actually pressed. To return to the main display line menu, simply press SHIFT MAIN. To back out of a particular menu without going all the way back to the main menu, simply press EXIT. The HP 17BII has continuous memory. Therefore, turning of the calculator does not affect the information you have previously stored in the calculator. If not turned off manually, the calculator will turn off automatically approximately 10 minutes after last use. A. Clearing the calculator display and memory and setting the decimal points: 1. CLEAR DATAD 0.00 Clears screen and storage registers. 2. FIX 0.00 Sets the number of decimal places equal to 2. B. Using the memory capability: Example: Before leaving on a sales call one morning, Alfred stored the price of a fax machine (\$1,200) and a printer (\$1,000) in his calculator. Later that day, he sold three fax machines 39

46 40 \ HP 17BII and four printers to a customer. He used his calculator to get the total amount due from this customer in the following way: Clear all memory and financial registers. 1. 1, Stores the price of the fax machine in memory location , Stores the price of the printer in memory location OFF Turns the calculator off. Later that day: 4. ON 1, After the sale, Alfred turns the calculator on. 5. 1, Recalls the cost of the fax to the display. 6. 3, Multiplies 1,200 by 3 to calculate the cost of the three fax machines. 7. 3, Stores the cost of the three fax machine. 8. 1, Recalls the cost of the printer. 9. 4, Calculates cost of four printers , Totals the amount for this sale. C. Navigating Menus The main menu is obtained by turning the calculator ON. The main Menu appears as follows:

47 HP 17BII \ FIN BUS SUM TIME SOLVE For most calculations finance students will undertake, it will be necessary to next select the finance menu by selecting FIN, and then TVM for time value of money. The TVM menu appears as follows: 12 P/YR END MODE N I%Y PV PMT FV OTHER The HP 17BII is programmed with the assumption that interest is compounded 12 times each year (monthly compounding). This manual will reset the number of compounding periods to once per year and adjust the interest rate as needed in the calculations. The number of compounding periods and interest can be set to annual compounding as follows: 1. Select the TVM Menu 2. OTHER P/YR 1 P/YR END MODE Sets the calculator for annual compounding (one compounding period per year). Note: To back out of menus, simply press the EXIT key. D. Calculating the present value of a lump sum amount: Example: Liz anticipates it will cost her \$65,000 to buy a house in 18 months. How much should she invest today at an annual interest rate of 15% (interest is compounded monthly) to be able to afford the house in one and a half years? 1. CLEAR DATAD 0.00 Clears previously stored data. 2. FIN TVM 1 P/YR END MODE Accesses the TVM Menu

48 42 \ HP 17BII 3. FV FV=65, Records the FV amount of \$65, I%YR I%YR=1.25 Records the monthly interest rate of 1.25% 5. N N=18 Records the number of monthly periods as PV PV = -51, Calculates the present value. Note: The display in step 8 has a negative sign because it represents a cash outflow (investment) today. E. Calculating the future value of a lump sum amount: Example: If John invests \$1,850 today in an asset earning a 10% rate of return (compounded annually), how much will he have after two years? Clear the data and select the TVM Menu 1. PV PV = -1, Records the present cash outflow of \$1, I%YR I%YR = Records the annual interest rate of 10%. 3. N N = 2.00 Records the number of time periods as FV FV = 2, Calculates the future value of \$1,850 after two years at 10%. F. Calculating the present value of an annuity: Example: How much should you invest now so that starting one year from today your daughter can receive \$6,000 per year for the next five years? Assume the discount rate is 15%.

49 HP 17BII \ 43 Clear the data and select the TVM Menu 1. PMT PMT = 6, Records the amount of the periodic payments. 2. I%YR I%YR = Records the annual interest rate of 15%. 3. N N = 5.00 Records the number of time periods as PV PV = -20, Calculates the present value of the annuity. G. Calculating the present value of an annuity due: Example: In this case, instead of receiving payments at the end of each year, your daughter will receive the payments at the beginning of each year. Therefore, her first payment will be received immediately. There are two methods to calculate the present value of an annuity due: 1. You can calculate the present value of an annuity, as shown in section F, and multiply it by (1 + k). In that case the additional step would be: Follow steps 1 4 from Section F , Records the second term (1 + k) in the formula for an annuity due. 2. The HP 17BII allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below:

50 44 \ HP 17BII Clear the data and select the TVM Menu 1. OTHER BEG 1 P/YR BEGIN MODE Sets the calculator to beginning of the period payments. 2. PMT PMT = 6, Records the amount of the periodic payments. 3. I%YR I%YR = Records the annual interest rate of 15%. 4. N N = 5.00 Records the number of time periods as PV PV = - 23, Calculates the PV of the annuity due. H. Calculating the future value of an annuity: Example: You have recently won a lottery for \$10,000. Your winnings will come in five annual payments of \$2,000 each starting one year from now. If the annual compound rate is 11.4%, how much is the lottery worth at the end of five years? Clear the data and select the TVM Menu 1. PMT PMT = 2, Records the amount of periodic payments. 2. I%YR I%YR = 11.4 Records the annual rate of interest of 11.4%. 3. N N = 5.00 Records the number of time periods as FV FV = 12, Calculates the FV of an annuity.

51 HP 17BII \ 45 I. Calculating the future value of an annuity due: Example: In this case, your winnings will be paid at the beginning instead of at the end of each year for five years. So you are going to get the first payment of your \$10,000 lottery, i.e. \$2,000, immediately. There are two methods to calculate the future value of an annuity due: 1. You can calculate the future value of an annuity, as shown in section H, and multiply it by (1 + k). In that case the additional step would be: Follow steps 1 4 from Section H , Calculates the FV of the annuity due. 2. The HP 17BII allows you to set the timing of the payment. You have to set the payment mode at BEGIN and start from the first step. This method is shown below. Clear the data and select the TVM Menu 1. OTHER BEG 1 P/YR BEGIN MODE Sets the calculator to beginning of the period payments. 2. PMT PMT = 2, Records the amount of the periodic payments. 3. I%YR I%YR = Records the annual interest rate of 11.4%. 4. N N = 5.00 Records the number of time periods as FV FV = -13, Calculates the FV of the annuity due.

52 46 \ HP 17BII J. Calculating the net present value of an annuity: Example: Jane thinks if she invests \$80,000 by buying property today, she can get \$15,000 in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a rate of return of 12% (with quarterly discounting) on her investment, what is the net present value of this project? 1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be 3%. 2. The number of time periods will be multiplied by four, i.e., The amount of annual rent will be divided by four, i.e., \$3, ON CLEAR DATAD 0.00 Turns on and clears the calculator 2. FIN CFLO FLOW (0) =? Selects the cash flow data input register. 3. FLOW (1) =? -80, Stores the initial investment in the financial register. 4. TIMES (1) = 1 Enters the quarterly annuity cash inflow and prompts the user to enter the number of periods. 5. CALC NPV, NUS, NFV = I% Enters the number of periods and prompts the user for the interest rate. 6. I%NPV NPV = 33, Enters the quarterly interest rate and calculates the net present value of the investment.

53 HP 17BII \ 47 K. Calculating the net present value of a series of uneven cash flows: Example: Beth is planning to buy a Pentium-based PC for rental purposes. She has calculated that her expected cash flows from the investment for the next five years would be as shown below. \$2,500 \$1,500 \$1,000 \$1,000 \$800 CF 0 = \$4,000 If she has to pay an annual interest rate of 9.75%, should she buy the computer? 1. ON CLEAR DATAD 0.00 Turn on and clear the calculator 2. FIN CFLO FLOW (0) =? Select the cash flow data input register FLOW (1) =? -4, FLOW (2) =? 1.00 FLOW (3) =? 1.00 Stores the initial investment in the financial register. Stores the second cash inflow amount. Stores the third cash inflow amount. FLOW (4) =? 2.00 Stores the third and fourth cash inflow Stores the fifth cash inflow amount.

54 48 \ HP 17BII 7. CALC I% I% = 9.75 Enters the discount rate. 8. NPV 1, Calculates the net present value of the investment. L. Calculating the internal rate of return of an annuity: Example: ABC Inc. is planning to spend \$35,000 to buy a warehouse. Under the contract they will receive an after-tax cash flow of \$6,000 (paid semiannually) from the property for the next eight years. What is the internal rate of return for the investment? 1. ON CLEAR DATAD 0.00 Turns on and clears the calculator 2. FIN CFLO FLOW (0) =? Selects the cash flow data input register. 3. FLOW (1) =? -35, Stores the initial investment in the financial register. 4. TIMES (1) = 1 Enters the semiannual annuity cash inflow and prompts the user to enter the number of periods. 5. CALC NPV, NUS, NFV = I% Enters the number of semiannual time periods. 6. IRR IRR% = 3.98 Results in the present value of the investment Compute the IRR

55 HP 17BII \ 49 M. Calculating the internal rate of return of a series of uneven cash flows: Example: Healthtime has the opportunity to make an investment that requires an initial cash outflow of \$6,500.The estimated cash inflows from the project for the next six years are shown below. What is the IRR on this investment? \$1,000 \$1,000 \$900 \$900 \$750 \$60,000 CF 0 = \$6, ON CLEAR DATAD 0.00 Turn on and clear the calculator 2. FIN CFLO FLOW (0) =? Select the cash flow data input register FLOW (1) =? -6, FLOW (2) =? 2.00 FLOW (3) =? 2.00 FLOW (4) =? 1.00 FLOW (5) =? 1.00 Stores the initial investment in the financial register. Stores the first and second cash inflow amounts. Stores the third and fourth cash inflow amounts. Stores the fifth cash inflow amount. Stores the sixth cash inflow amount.

56 50 \ HP 17BII 8. CALC IRR IRR% = Calculates the IRR. N. Bond valuation with interest compounded annually: The HP 17BII has an extremely sophisticated bond calculator menu that is often used by practicing bond professionals. However, most finance students using the HP 17BII will be given bond data in a simplified format. As a result, it is more simple and convenient to use the time value of money (TVM) menu. This guide will therefore illustrate bond valuation principles using the TVM menu. Example: How much would you be willing to pay for a bond today if it pays \$100 in interest annually for 20 years (starting next year) and has a principal payment of \$1,000? The yield to maturity is 15%. This question can be interpreted as that of finding the NPV of an uneven cash flow series, with the initial cash outflow equal to zero. Hence, we will follow the steps used for calculating NPV to compute the current price of the bond. Clear the data and select the TVM Menu 1. PMT PMT = Records the amount of the annual coupon payments. 2. I%YR I%YR = Records the yield-to-maturity of 15%. 3. N N = Records the number of time periods as FV FV = 1, Records the future or face value of the bond. 5. PV PV = Calculates the present value of the Bond O. Bond valuation with interest compounded semiannually: Because most bonds pay interest semiannually, we will show the conversion required to calculate the current value of such bonds.

### Using Financial And Business Calculators. Daniel J. Borgia

Using Financial And Business Calculators Daniel J. Borgia August 2000 Table of Contents I. Texas Instruments BA-35 SOLAR II. Texas Instruments BAII PLUS III. Hewlett Packard 12C IV. Hewlett Packard 17BII..

### Continue this process until you have cleared the stored memory positions that you wish to clear individually and keep those that you do not.

Texas Instruments (TI) BA II PLUS Professional The TI BA II PLUS Professional functions similarly to the TI BA II PLUS model. Any exceptions are noted here. The TI BA II PLUS Professional can perform two

### Hewlett Packard (HP) 10BII

Hewlett Packard (HP) 10BII The HP10BII is programmed to perform two basic types of operations: statistical operations and financial operations. Various types of computations are activated by depressing

### Using Financial Calculators

Chapter 4 Discounted Cash Flow Valuation 4B-1 Appendix 4B Using Financial Calculators This appendix is intended to help you use your Hewlett-Packard or Texas Instruments BA II Plus financial calculator

BA II Plus Advanced Business Analyst Calculator Quick Guide to Settings and Concepts Purpose of Guide This Quick Guide is a supplement to the BA II Plus Guidebook. It includes brief examples of commonly

### Texas Instruments BAII PLUS Tutorial

To begin, look at the face of the calculator. Almost every key on the BAII PLUS has two functions: each key's primary function is noted on the key itself, while each key's secondary function is noted in

### HANDBOOK: HOW TO USE YOUR TI BA II PLUS CALCULATOR

HANDBOOK: HOW TO USE YOUR TI BA II PLUS CALCULATOR This document is designed to provide you with (1) the basics of how your TI BA II Plus financial calculator operates, and (2) the typical keystrokes that

### Note: In the authors opinion the Ativa AT 10 is not recommended as a college financial calculator at any level of study

Appendix 1: Ativa AT 10 Instructions Note: DNS = Does Not Calculate Note: Loan and Savings Calculations Automatically round to two decimals. -Clear -Store Data in Memory -Recall Stored Data in Memory [CE]

### Introduction. Turning the Calculator On and Off

Texas Instruments BAII PLUS Calculator Tutorial to accompany Cyr, et. al. Contemporary Financial Management, 1 st Canadian Edition, 2004 Version #6, May 5, 2004 By William F. Rentz and Alfred L. Kahl Introduction

### Texas Instruments BAII Plus Tutorial for Use with Fundamentals 11/e and Concise 5/e

Texas Instruments BAII Plus Tutorial for Use with Fundamentals 11/e and Concise 5/e This tutorial was developed for use with Brigham and Houston s Fundamentals of Financial Management, 11/e and Concise,

### Course FM / Exam 2. Calculator advice

Course FM / Exam 2 Introduction It wasn t very long ago that the square root key was the most advanced function of the only calculator approved by the SOA/CAS for use during an actuarial exam. Now students

### TIME VALUE OF MONEY. Hewlett-Packard HP-12C Calculator

SECTION 1, CHAPTER 6 TIME VALUE OF MONEY CHAPTER OUTLINE Clues, Hints, and Tips Present Value Future Value Texas Instruments BA II+ Calculator Hewlett-Packard HP-12C Calculator CLUES, HINTS, AND TIPS Present

### In this section, the functions of a financial calculator will be reviewed and some sample problems will be demonstrated.

Section 4: Using a Financial Calculator Tab 1: Introduction and Objectives Introduction In this section, the functions of a financial calculator will be reviewed and some sample problems will be demonstrated.

### appendix B COMPOUND SUM OF AN ANNUITY OF \$1 appendix C PRESENT VALUE OF \$1 appendix D PRESENT VALUE OF AN ANNUITY OF \$1

appendices appendix A COMPOUND SUM OF \$1 appendix B COMPOUND SUM OF AN ANNUITY OF \$1 appendix C PRESENT VALUE OF \$1 appendix D PRESENT VALUE OF AN ANNUITY OF \$1 appendix E TIME VALUE OF MONEY AND INVESTMENT

### Main TVM functions of a BAII Plus Financial Calculator

Main TVM functions of a BAII Plus Financial Calculator The BAII Plus calculator can be used to perform calculations for problems involving compound interest and different types of annuities. (Note: there

### Calculator (Hewlett-Packard 10BII) Tutorial

UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Calculator (Hewlett-Packard 10BII) Tutorial To begin, look at the face of the calculator. Most keys (except a few) have two functions: Each key s primary function

### Texas Instruments BAII PLUS Tutorial

Omar M. Al Nasser, Ph.D., MBA. Visiting Assistant Professor of Finance School of Business Administration University of Houston-Victoria Email: alnassero@uhv.edu Texas Instruments BAII PLUS Tutorial To

### CALCULATOR TUTORIAL. Because most students that use Understanding Healthcare Financial Management will be conducting time

CALCULATOR TUTORIAL INTRODUCTION Because most students that use Understanding Healthcare Financial Management will be conducting time value analyses on spreadsheets, most of the text discussion focuses

### Time Value of Money. If you deposit \$100 in an account that pays 6% annual interest, what amount will you expect to have in

Time Value of Money Future value Present value Rates of return 1 If you deposit \$100 in an account that pays 6% annual interest, what amount will you expect to have in the account at the end of the year.

### Key Concepts and Skills

McGraw-Hill/Irwin Copyright 2014 by the McGraw-Hill Companies, Inc. All rights reserved. Key Concepts and Skills Be able to compute: The future value of an investment made today The present value of cash

### Discounted Cash Flow Valuation

Discounted Cash Flow Valuation Chapter 5 Key Concepts and Skills Be able to compute the future value of multiple cash flows Be able to compute the present value of multiple cash flows Be able to compute

### BASICS. Access blue functions with [Shift up] Access orange functions with [Shift down]

CALCULATOR COURSE BASICS Most keys have three functions: Primary function printed in white Secondary function printed in orange Tertiary function printed in blue Access blue functions with [Shift up] Access

### HP 12C Calculations. 2. If you are given the following set of cash flows and discount rates, can you calculate the PV? (pg.

HP 12C Calculations This handout has examples for calculations on the HP12C: 1. Present Value (PV) 2. Present Value with cash flows and discount rate constant over time 3. Present Value with uneven cash

### Hewlett-Packard 10BII Tutorial

This tutorial has been developed to be used in conjunction with Brigham and Houston s Fundamentals of Financial Management 11 th edition and Fundamentals of Financial Management: Concise Edition. In particular,

### hp calculators HP 17bII+ Discounting & Discounted Cash Flow Analysis It's About Time The Financial Registers versus Discounted Cash Flow

HP 17bII+ Discounting & Discounted Cash Flow Analysis It's About Time The Financial Registers versus Discounted Cash Flow Discounting a Single Sum Discounting and Compounding Discounting a Series of Sums

### The Time Value of Money

The following is a review of the Quantitative Methods: Basic Concepts principles designed to address the learning outcome statements set forth by CFA Institute. This topic is also covered in: The Time

### The explanations below will make it easier for you to use the calculator. The ON/OFF key is used to turn the calculator on and off.

USER GUIDE Texas Instrument BA II Plus Calculator April 2007 GENERAL INFORMATION The Texas Instrument BA II Plus financial calculator was designed to support the many possible applications in the areas

### Introduction to the Hewlett-Packard (HP) 10BII Calculator and Review of Mortgage Finance Calculations

Introduction to the Hewlett-Packard (HP) 10BII Calculator and Review of Mortgage Finance Calculations Real Estate Division Sauder School of Business University of British Columbia Introduction to the Hewlett-Packard

### Hewlett-Packard 17BII Tutorial

To begin, look at the face of the calculator. Most keys on the 17BII have two functions: a key's primary function is noted in white on the key itself, while the key's secondary function is noted in gold

### Time Value of Money. Reading 5. IFT Notes for the 2015 Level 1 CFA exam

Time Value of Money Reading 5 IFT Notes for the 2015 Level 1 CFA exam Contents 1. Introduction... 2 2. Interest Rates: Interpretation... 2 3. The Future Value of a Single Cash Flow... 4 4. The Future Value

### PV Tutorial Using Calculator (Sharp EL-738)

EYK 15-2 PV Tutorial Using Calculator (Sharp EL-738) TABLE OF CONTENTS Calculator Configuration and Abbreviations Exercise 1: Exercise 2: Exercise 3: Exercise 4: Exercise 5: Exercise 6: Exercise 7: Exercise

### Texas Instruments BA II Plus. Calculator tutorial

Chartered Financial Analyst Program Texas Instruments BA II Plus calculator tutorial Nicholas J Blain, CFA Chief Executive Quartic Training 1 outline 0. Calculator setup and introduction 1. Basic algebra

### Time Value of Money. 2014 Level I Quantitative Methods. IFT Notes for the CFA exam

Time Value of Money 2014 Level I Quantitative Methods IFT Notes for the CFA exam Contents 1. Introduction... 2 2. Interest Rates: Interpretation... 2 3. The Future Value of a Single Cash Flow... 4 4. The

### The Mathematics of Financial Planning (supplementary lesson notes to accompany FMGT 2820)

The Mathematics of Financial Planning (supplementary lesson notes to accompany FMGT 2820) Using the Sharp EL-738 Calculator Reference is made to the Appendix Tables A-1 to A-4 in the course textbook Investments:

### Key Concepts and Skills. Multiple Cash Flows Future Value Example 6.1. Chapter Outline. Multiple Cash Flows Example 2 Continued

6 Calculators Discounted Cash Flow Valuation Key Concepts and Skills Be able to compute the future value of multiple cash flows Be able to compute the present value of multiple cash flows Be able to compute

### HOW TO USE YOUR HP 12 C CALCULATOR

HOW TO USE YOUR HP 12 C CALCULATOR This document is designed to provide you with (1) the basics of how your HP 12C financial calculator operates, and (2) the typical keystrokes that will be required on

### BA II PLUS Calculator

BA II PLUS Calculator 1997, 2002 Texas Instruments Incorporated Important Texas Instruments makes no warranty, either expressed or implied, including but not limited to any implied warranties of merchantability

### Math Workshop Algebra (Time Value of Money; TVM)

Math Workshop Algebra (Time Value of Money; TVM) FV 1 = PV+INT 1 = PV+PV*I = PV(1+I) = \$100(1+10%) = \$110.00 FV 2 = FV 1 (1+I) = PV(1+I)(1+I) = PV(1+I) 2 =\$100(1.10) 2 = \$121.00 FV 3 = FV 2 (1+I) = PV(1

### 1. If you wish to accumulate \$140,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 14%?

Chapter 2 - Sample Problems 1. If you wish to accumulate \$140,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 14%? 2. What will \$247,000 grow to be in

### BUSI 121 Foundations of Real Estate Mathematics

Real Estate Division BUSI 121 Foundations of Real Estate Mathematics SESSION 2 By Graham McIntosh Sauder School of Business University of British Columbia Outline Introduction Cash Flow Problems Cash Flow

### Hewlett-Packard 10B Tutorial

To begin, look at the face of the calculator. Every key (except one, the gold shift key) on the 10B has two functions: each key's primary function is noted in white on the key itself, while each key's

### Purpose EL-773A HP-10B BA-II PLUS Clear memory 0 n registers

D-How to Use a Financial Calculator* Most personal finance decisions involve calculations of the time value of money. Three methods are used to compute this value: time value of money tables (such as those

### The Mathematics of Financial Planning (supplementary lesson notes to accompany FMGT 2820)

The Mathematics of Financial Planning (supplementary lesson notes to accompany FMGT 2820) Using the Sharp EL-733A Calculator Reference is made to the Appendix Tables A-1 to A-4 in the course textbook Investments:

### Prepared by: Dalia A. Marafi Version 2.0

Kuwait University College of Business Administration Department of Finance and Financial Institutions Using )Casio FC-200V( for Fundamentals of Financial Management (220) Prepared by: Dalia A. Marafi Version

### hp calculators HP 12C Net Present Value Cash flow and NPV calculations Cash flow diagrams The HP12C cash flow approach Practice solving NPV problems

Cash flow and NPV calculations Cash flow diagrams The HP12C cash flow approach Practice solving NPV problems How to modify cash flow entries Cash Flow and NPV calculations Cash flow analysis is an extension

### Sharp EL-733A Tutorial

To begin, look at the face of the calculator. Almost every key on the EL-733A has two functions: each key's primary function is noted on the key itself, while each key's secondary function is noted in

### BA II PLUS Calculator

BA II PLUS Calculator Important Information Texas Instruments makes no warranty, either express or implied, including but not limited to any implied warranties of merchantability and fitness for a particular

### Topics. Chapter 5. Future Value. Future Value - Compounding. Time Value of Money. 0 r = 5% 1

Chapter 5 Time Value of Money Topics 1. Future Value of a Lump Sum 2. Present Value of a Lump Sum 3. Future Value of Cash Flow Streams 4. Present Value of Cash Flow Streams 5. Perpetuities 6. Uneven Series

### Chapter The Time Value of Money

Chapter The Time Value of Money PPT 9-2 Chapter 9 - Outline Time Value of Money Future Value and Present Value Annuities Time-Value-of-Money Formulas Adjusting for Non-Annual Compounding Compound Interest

### substantially more powerful. The internal rate of return feature is one of the most useful of the additions. Using the TI BA II Plus

for Actuarial Finance Calculations Introduction. This manual is being written to help actuarial students become more efficient problem solvers for the Part II examination of the Casualty Actuarial Society

### Time-Value-of-Money and Amortization Worksheets

2 Time-Value-of-Money and Amortization Worksheets The Time-Value-of-Money and Amortization worksheets are useful in applications where the cash flows are equal, evenly spaced, and either all inflows or

### hp calculators HP 12C Internal Rate of Return Cash flow and IRR calculations Cash flow diagrams The HP12C cash flow approach

Cash flow and IRR calculations Cash flow diagrams The HP12C cash flow approach Practice with solving cash flow problems related to IRR How to modify cash flow entries Cash Flow and IRR calculations Cash

### PV Tutorial Using Excel

EYK 15-3 PV Tutorial Using Excel TABLE OF CONTENTS Introduction Exercise 1: Exercise 2: Exercise 3: Exercise 4: Exercise 5: Exercise 6: Exercise 7: Exercise 8: Exercise 9: Exercise 10: Exercise 11: Exercise

### Compounding Assumptions. Compounding Assumptions. Financial Calculations on the Texas Instruments BAII Plus. Compounding Assumptions.

Compounding Assumptions Financial Calculations on the Texas Instruments BAII Plus This is a first draft, and may contain errors. Feedback is appreciated The TI BAII Plus has built-in preset assumptions

### BA-35 Solar Quick Reference Guide

BA-35 Solar Quick Reference Guide Table of Contents General Information... 2 The Display... 4 Arithmetic Operations... 6 Correcting Errors... 7 Display Formats... 8 Memory Operations... 9 Math Operations...

### TVM Appendix B: Using the TI-83/84. Time Value of Money Problems on a Texas Instruments TI-83 1

Before you start: Time Value of Money Problems on a Texas Instruments TI-83 1 To calculate problems on a TI-83, you have to go into the applications menu, the blue APPS key on the calculator. Several applications

### REVIEW MATERIALS FOR REAL ESTATE ANALYSIS

REVIEW MATERIALS FOR REAL ESTATE ANALYSIS 1997, Roy T. Black REAE 5311, Fall 2005 University of Texas at Arlington J. Andrew Hansz, Ph.D., CFA CONTENTS ITEM ANNUAL COMPOUND INTEREST TABLES AT 10% MATERIALS

### Time Value of Money. 2014 Level I Quantitative Methods. IFT Notes for the CFA exam

Time Value of Money 2014 Level I Quantitative Methods IFT Notes for the CFA exam Contents 1. Introduction...2 2. Interest Rates: Interpretation...2 3. The Future Value of a Single Cash Flow...4 4. The

### CHAPTER 9 Time Value Analysis

Copyright 2008 by the Foundation of the American College of Healthcare Executives 6/11/07 Version 9-1 CHAPTER 9 Time Value Analysis Future and present values Lump sums Annuities Uneven cash flow streams

### CHAPTER 2. Time Value of Money 2-1

CHAPTER 2 Time Value of Money 2-1 Time Value of Money (TVM) Time Lines Future value & Present value Rates of return Annuities & Perpetuities Uneven cash Flow Streams Amortization 2-2 Time lines 0 1 2 3

### BA II PLUS PROFESSIONAL Calculator

BA II PLUS PROFESSIONAL Calculator Important Information Texas Instruments makes no warranty, either express or implied, including but not limited to any implied warranties of merchantability and fitness

### Oklahoma State University Spears School of Business. Time Value of Money

Oklahoma State University Spears School of Business Time Value of Money Slide 2 Time Value of Money Which would you rather receive as a sign-in bonus for your new job? 1. \$15,000 cash upon signing the

### Key Concepts and Skills. Chapter Outline. Basic Definitions. Future Values. Future Values: General Formula 1-1. Chapter 4

Key Concepts and Skills Chapter 4 Introduction to Valuation: The Time Value of Money Be able to compute the future value of an investment made today Be able to compute the present value of cash to be received

### Module 5: Interest concepts of future and present value

file:///f /Courses/2010-11/CGA/FA2/06course/m05intro.htm Module 5: Interest concepts of future and present value Overview In this module, you learn about the fundamental concepts of interest and present

### Gordon Guides For the LLQP Exam. Financial Math

Financial Math, candidates are expected to have a high degree of understanding of time value of money principles, security valuation and basic statistics. Formulas are provided on the exam, therefore do

### Chapter 4 Time Value of Money ANSWERS TO END-OF-CHAPTER QUESTIONS

Chapter 4 Time Value of Money ANSWERS TO END-OF-CHAPTER QUESTIONS 4-1 a. PV (present value) is the value today of a future payment, or stream of payments, discounted at the appropriate rate of interest.

### Chapter 7 SOLUTIONS TO END-OF-CHAPTER PROBLEMS

Chapter 7 SOLUTIONS TO END-OF-CHAPTER PROBLEMS 7-1 0 1 2 3 4 5 10% PV 10,000 FV 5? FV 5 \$10,000(1.10) 5 \$10,000(FVIF 10%, 5 ) \$10,000(1.6105) \$16,105. Alternatively, with a financial calculator enter the

### Excel Financial Functions

Excel Financial Functions PV() Effect() Nominal() FV() PMT() Payment Amortization Table Payment Array Table NPer() Rate() NPV() IRR() MIRR() Yield() Price() Accrint() Future Value How much will your money

### BEST INTEREST RATE. To convert a nominal rate to an effective rate, press

FINANCIAL COMPUTATIONS George A. Jahn Chairman, Dept. of Mathematics Palm Beach Community College Palm Beach Gardens Location http://www.pbcc.edu/faculty/jahng/ The TI-83 Plus and TI-84 Plus have a wonderful

### Chapter 4 Discounted Cash Flow Valuation

University of Science and Technology Beijing Dongling School of Economics and management Chapter 4 Discounted Cash Flow Valuation Sep. 2012 Dr. Xiao Ming USTB 1 Key Concepts and Skills Be able to compute

### Integrated Case. 5-42 First National Bank Time Value of Money Analysis

Integrated Case 5-42 First National Bank Time Value of Money Analysis You have applied for a job with a local bank. As part of its evaluation process, you must take an examination on time value of money

### Ehrhardt Chapter 8 Page 1

Chapter 2 Time Value of Money 1 Time Value Topics Future value Present value Rates of return Amortization 2 Time lines show timing of cash flows. 0 1 2 3 I% CF 0 CF 1 CF 2 CF 3 Tick marks at ends of periods,

### 1.4 Interest-Rate calculations and returns

.4 Interest-Rate calculations and returns Effective Annual Rate (EAR) The Effective Annual Rate (EAR) is the actual rate paid (or received) after accounting for compounding that occurs during the year

### Problem Set: Annuities and Perpetuities (Solutions Below)

Problem Set: Annuities and Perpetuities (Solutions Below) 1. If you plan to save \$300 annually for 10 years and the discount rate is 15%, what is the future value? 2. If you want to buy a boat in 6 years

### Chapter 5 & 6 Financial Calculator and Examples

Chapter 5 & 6 Financial Calculator and Examples Konan Chan Financial Management, Spring 2016 Five Factors in TVM Present value: PV Future value: FV Discount rate: r Payment: PMT Number of periods: N Get

### BA II Plus. Guidebook. Texas Instruments Instructional Communications. Dave Caldwell David Santucci Gary Von Berg

BA II Plus Guidebook Guidebook developed by: Texas Instruments Instructional Communications With contributions by: Dave Caldwell David Santucci Gary Von Berg 1997 by Texas Instruments Incorporated. Important

### The Time Value of Money

C H A P T E R6 The Time Value of Money When plumbers or carpenters tackle a job, they begin by opening their toolboxes, which hold a variety of specialized tools to help them perform their jobs. The financial

### Module 5: Interest concepts of future and present value

Page 1 of 23 Module 5: Interest concepts of future and present value Overview In this module, you learn about the fundamental concepts of interest and present and future values, as well as ordinary annuities

### Dick Schwanke Finite Math 111 Harford Community College Fall 2013

Annuities and Amortization Finite Mathematics 111 Dick Schwanke Session #3 1 In the Previous Two Sessions Calculating Simple Interest Finding the Amount Owed Computing Discounted Loans Quick Review of

### A Textual Explanation

NAVIGATION INSTRUCTIONS GLOSSARY FINANCIAL CALCULATIONS FOR LAWYERS LECTURES INDEX INTRODUCTION PRESENT VALUE OF A SUM FUTURE VALUE OF A SUM SINKING FUND AMORTIZATION WITH CHART PRESENT VALUE OF AN ANNUITY

### Chapter 2 Applying Time Value Concepts

Chapter 2 Applying Time Value Concepts Chapter Overview Albert Einstein, the renowned physicist whose theories of relativity formed the theoretical base for the utilization of atomic energy, called the

### TT03 Financial Calculator Tutorial And Key Time Value of Money Formulas November 6, 2007

TT03 Financial Calculator Tutorial And Key Time Value of Money Formulas November 6, 2007 The purpose of this tutorial is to help students who use the HP 17BII+, and HP10bll+ calculators understand how

### The values in the TVM Solver are quantities involved in compound interest and annuities.

Texas Instruments Graphing Calculators have a built in app that may be used to compute quantities involved in compound interest, annuities, and amortization. For the examples below, we ll utilize the screens

### To switch back to the ordinary annuity mode, enter

HANDBOOK: HOW TO USE YOUR HP 12C CALCULATOR This document is designed to provide you with (1) the basics of how your HP 12C financial calculator operates, and (2) the typical keystrokes that will be required

### Chapter 8. 48 Financial Planning Handbook PDP

Chapter 8 48 Financial Planning Handbook PDP The Financial Planner's Toolkit As a financial planner, you will be doing a lot of mathematical calculations for your clients. Doing these calculations for

### USING FINANCIAL CALCULATORS

lwww.wiley.com/col APPEDIX C USIG FIACIAL CALCULATORS OBJECTIVE 1 Use a financial calculator to solve time value of money problems. Illustration C-1 Financial Calculator Keys Business professionals, once

### Chapter 8. Present Value Mathematics for Real Estate

Chapter 8 Present Value Mathematics for Real Estate Real estate deals almost always involve cash amounts at different points in time. Examples: Buy a property now, sell it later. Sign a lease now, pay

### 5. Time value of money

1 Simple interest 2 5. Time value of money With simple interest, the amount earned each period is always the same: i = rp o We will review some tools for discounting cash flows. where i = interest earned

### NPV calculation. Academic Resource Center

NPV calculation Academic Resource Center 1 NPV calculation PV calculation a. Constant Annuity b. Growth Annuity c. Constant Perpetuity d. Growth Perpetuity NPV calculation a. Cash flow happens at year

### Chapter. Discounted Cash Flow Valuation. CORPRATE FINANCE FUNDAMENTALS by Ross, Westerfield & Jordan CIG.

Chapter 6 Discounted Cash Flow Valuation CORPRATE FINANCE FUNDAMENTALS by Ross, Westerfield & Jordan CIG. Key Concepts and Skills Be able to compute the future value of multiple cash flows Be able to compute

### CFALA Review: Tips for using the TI calculator 2/9/2015. Using the TI BA2+

CFALA REVIEW MATERIALS USING THE TI-BAII PLUS CALCULATOR David Cary, PhD, CFA Spring 2015 dcary@dcary.com (helpful if you put CFA Review in subject line) Using the TI BA2+ Notes by David Cary These should

### SUPPLEMENTARY NOTES. For examination purposes, the following amendments shall take effect from 3 June 2011: 1. Chapter 12, Page 329, Chapter Outline

SUPPLEMENTARY NOTES ChFC01 Fundamentals Of Financial Planning And Investments Date Of Issue : 3 May 2011 [Applicable to 1 st Edition (2003), Re-printed March 2006 version and earlier] The following amendments

### Lease Analysis Tools

Lease Analysis Tools 2009 ELFA Lease Accountants Conference Presenter: Bill Bosco, Pres. wbleasing101@aol.com Leasing 101 914-522-3233 Overview Math of Finance Theory Glossary of terms Common calculations

### Introduction to the Time Value of Money

Module 3 Introduction to the Time Value of Money David Mannaioni CPCU, CLU, ChFC, CFP 7483 This publication may not be duplicated in any way without the express written consent of the publisher. The information

### Accounting Building Business Skills. Interest. Interest. Paul D. Kimmel. Appendix B: Time Value of Money

Accounting Building Business Skills Paul D. Kimmel Appendix B: Time Value of Money PowerPoint presentation by Kate Wynn-Williams University of Otago, Dunedin 2003 John Wiley & Sons Australia, Ltd 1 Interest

### 1.2-1.3 Time Value of Money and Discounted Cash Flows

1.-1.3 ime Value of Money and Discounted ash Flows ime Value of Money (VM) - the Intuition A cash flow today is worth more than a cash flow in the future since: Individuals prefer present consumption to

### Time Value of Money Problems

Time Value of Money Problems 1. What will a deposit of \$4,500 at 10% compounded semiannually be worth if left in the bank for six years? a. \$8,020.22 b. \$7,959.55 c. \$8,081.55 d. \$8,181.55 2. What will

### Financial Math on Spreadsheet and Calculator Version 4.0

Financial Math on Spreadsheet and Calculator Version 4.0 2002 Kent L. Womack and Andrew Brownell Tuck School of Business Dartmouth College Table of Contents INTRODUCTION...1 PERFORMING TVM CALCULATIONS