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


 Alexander Claud Sharp
 2 years ago
 Views:
Transcription
1 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 flows but constant discount rate 4. Annuity 5. Loan 6. Bond 7. Yield to Maturity (YTM) 8. YTM with semiannual coupons 9. Internal Rate of Return (IRR) 10. IRR with uneven cash flows Examples 1, 3, and 6 show the exact order of how to enter the numbers into the calculator. Use these as a guide to the rest of the problems and practice figuring out how to enter numbers and ask for an answer given various forms of questions. At the end of this handout you will find answers to common questions. If you are having trouble or have any other questions, please send an to me or to Jen. 1. Problems on HP 12C (p.27 of class #2) n number of periods i interest rate (or discount rate) in % (so you don t need to enter it as a decimal) PV present value PMT periodic payment (repeats every period, as in an annuity or perpetuity) FV future value (i.e. onetime payment at end, as in a bond) 2. If you are given the following set of cash flows and discount rates, can you calculate the PV? (pg. 28 of class #2) C1 = 50.0 r1 = 0.06 C2 = 60.0 r2 = 0.06 step 1: clear all registers: {f} REG step 2: enter data: {50} [g] [CFj] ( enter period 1 cf ) {60} [g] [CFj] ( enter period 2 cf ) {6} [i] ( enter int. rate ) [f] [NPV] ( ask for answer ) =
2 3. If you are given the following set of cashflows (same every year) and discount rates, can you calculate the PV? (notice the discount rate is constant over time) (p.35 of class #2). C1 = 15.0 r1 = 7.50% C2 = 15.0 r2 = 7.50% C3 = 15.0 r3 = 7.50% {3} [g] [Nj] ( enter number of periods ) {7.5} [i] ( enter int. rate ) {15} [g] [CFj] (enter cf, which is constant over all periods ) [f] [NPV] ( ask for answer ) = Uneven cash flows. {g} CF0 = 0 {g} CF1 = 20,000 {g} CF2 = 22,000 {g} CF3 = 24,200 i = 8 Then click {f} NPV = $56, For CF1 through CF3 use the CFj button. 5. Annuities and the calculator (p.14 of class #3). You can afford to pay $632 per month toward the purchase of a new car. Your bank tells you that you can borrow money at 1% per month for 48 months. How much can you borrow? Calculator: N = 48 i = 1 PMT = 632 Then click PV = $23, For an annuity, you need four variablesthe periodic payment (C), the interest rate (i), the number of periods (t) and the PV of the borrowing. Given any 3 variables, you can calculate the 4 th. Pgs of class #3 go over these different scenarios. 6. Loan calculations (pg 26 of Class #3). Pages go over an auto loan in detail. {10000}[CHS][PV] Loan amount. {908.33}[PMT] Payments. {12}[n] Number of payments. [i] Calculate 1 mo. rate. (Note that the 1.35 is a percentage). Again, given any 3 variables out of 4 (PV, C, N, i) you can calculate the 4 th.
3 7. Bond Valuation (pg. 25 of Class #5). Consider a bond with a 10% annual coupon rate, 5 years to maturity and assume the market interest rate r is 12%. What is the current price of the bond? With a calculator: N = 5 i = 12 PMT = 100 FV = 1000 Then click PV = $ Remember the sign convention: this is what you pay for that stream of cash flows. So whenever you enter the price of a bond, hit {CHS} PV. 8. Computing the Yield to Maturity (YTM) (pg. 34 of Class #5) Finding the YTM is similar to finding r for an annuity Consider a bond with a 10% annual coupon rate, 15 years to maturity and a par value of $1,000. The current price is $ Calculator: N = 15 PV = Crucial the sign convention!! FV = 1,000 PMT = 100 Then click i = 11% There is no formula to find the YTM of a bond! 9. Computing the yield to maturity with semiannual coupons (pg 36. of Class #5). Same problem to midterm question just different numbers. Suppose a bond with a 10% coupon rate and semiannual coupons, has a face value of $1,000, 20 years to maturity and is selling for $ What is the semiannual coupon payment? PMT = 1,000 * 0.10 / 2 = 50 How many periods are there? N = 20 * 2 = 40 What is the YTM of this bond? PV = 1, FV = 1,000 Then click i = 4% This is the Period Rate!! YTM = APR = 4%*2 = 8%
4 10. Computing the Internal Rate of Return (IRR) There is no formula for the IRR: You need: i) a spreadsheet, ii) a financial calculator, or iii) the ability to solve 3rd degree equations by hand Using the calculator, as for the NPV rule: {g} {CHS} CF0 = 165,000 {g} CF1 = 63,120 {g} CF2 = 70,800 {g} CF3 = 91,080 Then click IRR = 16.13% (pg. 21, Class #6) 11. Calculating the IRR with uneven cash flows. (pg.20 of Class #6) NPV = K (1 ) 1 (1 ) 2 (1 ) 3 (1 ) 4 + r + r + r + r (1 + r ) 20 If we want to make NPV=0, then r =??? (i) {CHS} {g} CF0= 2.7, (ii) {g} CF1 = 0.1, {g} Nj=1 (iii) {g} CF2 =0.3, {g} Nj =1, (iv) {g} CF4 = 0.5, {g} Nj =1 (v) {g} CF5=1.2, {g} Nj = 17 (vi) Click {f} IRR IRR = 26.6%
5 HP12C Questions 1. Question Why does my calculator only show two decimal places? The default precision is two decimal places, but that can be changed. If you want 4 decimal places, type [f] 4. For maximum precision, type [f] 9 2. Question I press the same buttons as you do, but get a different answer! Do you have the word "BEGIN" showing in your display? This is a bad thing. It means that when you do calculations using the [PV], [PMT], [n] etc. buttons, the calculator will assume that the periodic payments occur at the beginning of each period (so the first payment is right now), rather than at the end of each period (i.e. first payment is one period from today), which is the usual assumption. This will change all your results. If you have the word "BEGIN" displayed, you should get rid of it by pressing [g] [END] (under the "8" key). 3. Question I tried that, and I still get different answers If you cleared the calculator before starting by pressing the clear button, [CLX], this only clears the display. The last values you used for [PV], [PMT], etc. are still there, and can affect your calculations. The safest thing is to press [f] [REG] (above the [CLX] button), which clears everything. You can probably get away with [f] [FIN] (above the [x<>y] button), which (I think) clears the financial registers, but not all the numbers you've put into, for example, memory location Question HELP! My calculator has switched "," and ".", so, for example, 1, appears as "1.000,23" First turn off the calculator. Now press the "." button, and while keeping it pressed turn the calculator back on. You'll be back to normal. 5. Question 5a. How do I do calculations using the [PV] etc. buttons and fractional periods? 5b. What's that letter "C" in my display? By default, the HP12C will use the interest of the fractional period. For example, suppose you invest $100 for 1.5 years at 10%. Try: 100 [CHS][PV] 10 [i] 1.5 [n] [FV] You will (probably) get the answer $ This is equal to 100 x 1.10 x 1.05
6 In the extra 6 month period, you earn 5% (= 10% / 2), rather than the true 6 month rate of (1.1)^0.51 = 4.88% You were probably hoping for the answer $ (= 100 x 1.1^1.5). You can get the calculator to do this. Press [STO] [EEX] (obvious, huh?), and you'll see the letter "C" appear in your display. Now redo the calculation, and you'll get the behavior you want. 6. Question How do I get every bit of the display to switch on simultaneously? (This is not all that useful, but I discovered it by accident and thought you ought to know.) Switch off the calculator, press the "+" key, and while keeping it pressed turn the calculator back on. The calculator will do something (I've no idea what...) for a very long time, with "Running" flashing in the display. I'm not sure what it's doing, or if it will ever stop of its own accord, but if you press lots of keys it will eventually stop flashing, and every possible line and symbol in the display will be switched on.
Prepared by: Dalia A. Marafi Version 2.0
Kuwait University College of Business Administration Department of Finance and Financial Institutions Using )Casio FC200V( for Fundamentals of Financial Management (220) Prepared by: Dalia A. Marafi Version
More informationDiscounted 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
More informationKey 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
More informationUsing Financial And Business Calculators. Daniel J. Borgia
Using Financial And Business Calculators Daniel J. Borgia August 2000 Table of Contents I. Texas Instruments BA35 SOLAR II. Texas Instruments BAII PLUS III. Hewlett Packard 12C IV. Hewlett Packard 17BII..
More informationDISCOUNTED CASH FLOW VALUATION and MULTIPLE CASH FLOWS
Chapter 5 DISCOUNTED CASH FLOW VALUATION and MULTIPLE CASH FLOWS The basic PV and FV techniques can be extended to handle any number of cash flows. PV with multiple cash flows: Suppose you need $500 one
More informationChapter 6. Discounted Cash Flow Valuation. Key Concepts and Skills. Multiple Cash Flows Future Value Example 6.1. Answer 6.1
Chapter 6 Key Concepts and Skills Be able to compute: the future value of multiple cash flows the present value of multiple cash flows the future and present value of annuities Discounted Cash Flow Valuation
More informationUsing Financial and Business Calculators. Daniel J. Borgia
Using Financial and Business Calculators Daniel J. Borgia Table of Contents Texas Instruments (TI) BA35 SOLAR......................................1 Texas Instruments (TI) BA II PLUS........................................11
More informationChapter 4. The Time Value of Money
Chapter 4 The Time Value of Money 1 Learning Outcomes Chapter 4 Identify various types of cash flow patterns Compute the future value and the present value of different cash flow streams Compute the return
More informationCALCULATOR 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
More informationDiscounted Cash Flow Valuation
6 Formulas Discounted Cash Flow Valuation McGrawHill/Irwin Copyright 2008 by The McGrawHill Companies, Inc. All rights reserved. Chapter Outline Future and Present Values of Multiple Cash Flows Valuing
More informationappendix 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
More informationUsing Financial Calculators
Chapter 4 Discounted Cash Flow Valuation 4B1 Appendix 4B Using Financial Calculators This appendix is intended to help you use your HewlettPackard or Texas Instruments BA II Plus financial calculator
More informationOverview of Lecture 4
Overview of Lecture 4 Examples of Quoted vs. True Interest Rates Banks Auto Loan Forward rates, spot rates and bond prices How do things change when interest rates vary over different periods? Present
More informationHOW 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
More informationChapter 4: Time Value of Money
FIN 301 Homework Solution Ch4 Chapter 4: Time Value of Money 1. a. 10,000/(1.10) 10 = 3,855.43 b. 10,000/(1.10) 20 = 1,486.44 c. 10,000/(1.05) 10 = 6,139.13 d. 10,000/(1.05) 20 = 3,768.89 2. a. $100 (1.10)
More informationCHAPTER 2. Time Value of Money 21
CHAPTER 2 Time Value of Money 21 Time Value of Money (TVM) Time Lines Future value & Present value Rates of return Annuities & Perpetuities Uneven cash Flow Streams Amortization 22 Time lines 0 1 2 3
More informationFinding the Payment $20,000 = C[1 1 / 1.0066667 48 ] /.0066667 C = $488.26
Quick Quiz: Part 2 You know the payment amount for a loan and you want to know how much was borrowed. Do you compute a present value or a future value? You want to receive $5,000 per month in retirement.
More informationTime 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.
More informationChapter. 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
More informationYou just paid $350,000 for a policy that will pay you and your heirs $12,000 a year forever. What rate of return are you earning on this policy?
1 You estimate that you will have $24,500 in student loans by the time you graduate. The interest rate is 6.5%. If you want to have this debt paid in full within five years, how much must you pay each
More informationChapter 5: Valuing Bonds
FIN 302 Class Notes Chapter 5: Valuing Bonds What is a bond? A longterm debt instrument A contract where a borrower agrees to make interest and principal payments on specific dates Corporate Bond Quotations
More informationCalculator (HewlettPackard 10BII) Tutorial
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Calculator (HewlettPackard 10BII) Tutorial To begin, look at the face of the calculator. Most keys (except a few) have two functions: Each key s primary function
More informationEhrhardt 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,
More informationChapter 11. Bond Pricing  1. Bond Valuation: Part I. Several Assumptions: To simplify the analysis, we make the following assumptions.
Bond Pricing  1 Chapter 11 Several Assumptions: To simplify the analysis, we make the following assumptions. 1. The coupon payments are made every six months. 2. The next coupon payment for the bond is
More informationHewlett 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
More informationHewlettPackard 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,
More informationContinue 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
More informationCHAPTER 9 Time Value Analysis
Copyright 2008 by the Foundation of the American College of Healthcare Executives 6/11/07 Version 91 CHAPTER 9 Time Value Analysis Future and present values Lump sums Annuities Uneven cash flow streams
More informationChapter 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
More information5. 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
More informationHow to calculate present values
How to calculate present values Back to the future Chapter 3 Discounted Cash Flow Analysis (Time Value of Money) Discounted Cash Flow (DCF) analysis is the foundation of valuation in corporate finance
More informationGordon 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
More informationKey Concepts and Skills
McGrawHill/Irwin Copyright 2014 by the McGrawHill 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
More information3. Time value of money. We will review some tools for discounting cash flows.
1 3. Time value of money We will review some tools for discounting cash flows. Simple interest 2 With simple interest, the amount earned each period is always the same: i = rp o where i = interest earned
More informationChapter 4 Time Value of Money ANSWERS TO ENDOFCHAPTER QUESTIONS
Chapter 4 Time Value of Money ANSWERS TO ENDOFCHAPTER QUESTIONS 41 a. PV (present value) is the value today of a future payment, or stream of payments, discounted at the appropriate rate of interest.
More informationBASICS. 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
More informationTVM Appendix B: Using the TI83/84. Time Value of Money Problems on a Texas Instruments TI83 1
Before you start: Time Value of Money Problems on a Texas Instruments TI83 1 To calculate problems on a TI83, you have to go into the applications menu, the blue APPS key on the calculator. Several applications
More information3. Time value of money
1 Simple interest 2 3. 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
More informationAnalysis of Deterministic Cash Flows and the Term Structure of Interest Rates
Analysis of Deterministic Cash Flows and the Term Structure of Interest Rates Cash Flow Financial transactions and investment opportunities are described by cash flows they generate. Cash flow: payment
More informationTexas 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,
More informationHewlettPackard 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
More informationHOW TO CALCULATE PRESENT VALUES
Chapter 2 HOW TO CALCULATE PRESENT VALUES Brealey, Myers, and Allen Principles of Corporate Finance 11th Edition McGrawHill/Irwin Copyright 2014 by The McGrawHill Companies, Inc. All rights reserved.
More informationFinancial Markets and Valuation  Tutorial 1: SOLUTIONS. Present and Future Values, Annuities and Perpetuities
Financial Markets and Valuation  Tutorial 1: SOLUTIONS Present and Future Values, Annuities and Perpetuities (*) denotes those problems to be covered in detail during the tutorial session (*) Problem
More informationThe 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
More informationToday s Plan. MBA Jump Start. Finance Day 3 Thomas Gilbert
MBA Jump Start Finance Day 3 Thomas Gilbert September 2013 Today s Plan Excel is a very important tool for finance (and also for the other courses) Model building Pricing Sensitivity analysis Today, we
More informationThe Time Value of Money
The Time Value of Money Future Value  Amount to which an investment will grow after earning interest. Compound Interest  Interest earned on interest. Simple Interest  Interest earned only on the original
More informationChapter 5 Time Value of Money 2: Analyzing Annuity Cash Flows
1. Future Value of Multiple Cash Flows 2. Future Value of an Annuity 3. Present Value of an Annuity 4. Perpetuities 5. Other Compounding Periods 6. Effective Annual Rates (EAR) 7. Amortized Loans Chapter
More informationF V P V = F V = P (1 + r) n. n 1. FV n = C (1 + r) i. i=0. = C 1 r. (1 + r) n 1 ]
1 Week 2 1.1 Recap Week 1 P V = F V (1 + r) n F V = P (1 + r) n 1.2 FV of Annuity: oncept 1.2.1 Multiple Payments: Annuities Multiple payments over time. A special case of multiple payments: annuities
More informationhp 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
More informationFor both models, to turn the calculator on: press the "C" button and to turn calculator off:
This is stolen from Mark J. Perry s web page. Thanks Mark! CALCULATOR KEYSTROKES FOR THE HP10B and the HP10BII ******* NOTE: The HP calculators come from the factory with the PMTS/YR set to 12. Change
More informationIntegrated Case. 542 First National Bank Time Value of Money Analysis
Integrated Case 542 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
More informationFI 302, Business Finance Exam 2, Fall 2000 versions 1 & 8 KEYKEYKEYKEYKEYKEYKEYKEYKEYKEYKEYKEYKEY
FI 302, Business Finance Exam 2, Fall 2000 versions 1 & 8 KEYKEYKEYKEYKEYKEYKEYKEYKEYKEYKEYKEYKEY 1. (3 points) BS16 What is a 401k plan Most U.S. households single largest lifetime source of savings is
More informationMath 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
More informationIntroduction. 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
More informationChapter 6. Learning Objectives Principles Used in This Chapter 1. Annuities 2. Perpetuities 3. Complex Cash Flow Streams
Chapter 6 Learning Objectives Principles Used in This Chapter 1. Annuities 2. Perpetuities 3. Complex Cash Flow Streams 1. Distinguish between an ordinary annuity and an annuity due, and calculate present
More informationFinancial 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
More informationAppendix C 1. Time Value of Money. Appendix C 2. Financial Accounting, Fifth Edition
C 1 Time Value of Money C 2 Financial Accounting, Fifth Edition Study Objectives 1. Distinguish between simple and compound interest. 2. Solve for future value of a single amount. 3. Solve for future
More informationTT03 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
More informationTo 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
More informationNote: 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]
More informationMHSA 8630  Healthcare Financial Management Time Value of Money Analysis
MHSA 8630  Healthcare Financial Management Time Value of Money Analysis ** One of the most fundamental tenets of financial management relates to the time value of money. The old adage that a dollar in
More informationProblem 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
More informationPowerPoint. to accompany. Chapter 5. Interest Rates
PowerPoint to accompany Chapter 5 Interest Rates 5.1 Interest Rate Quotes and Adjustments To understand interest rates, it s important to think of interest rates as a price the price of using money. When
More informationCHAPTER 4. The Time Value of Money. Chapter Synopsis
CHAPTER 4 The Time Value of Money Chapter Synopsis Many financial problems require the valuation of cash flows occurring at different times. However, money received in the future is worth less than money
More informationEXAM 2 OVERVIEW. Binay Adhikari
EXAM 2 OVERVIEW Binay Adhikari FEDERAL RESERVE & MARKET ACTIVITY (BS38) Definition 4.1 Discount Rate The discount rate is the periodic percentage return subtracted from the future cash flow for computing
More informationBUSI 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
More informationExcel 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
More informationChapter 7 SOLUTIONS TO ENDOFCHAPTER PROBLEMS
Chapter 7 SOLUTIONS TO ENDOFCHAPTER PROBLEMS 71 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
More informationChapter 5 Discounted Cash Flow Valuation
Chapter Discounted Cash Flow Valuation Compounding Periods Other Than Annual Let s examine monthly compounding problems. Future Value Suppose you invest $9,000 today and get an interest rate of 9 percent
More informationChapter 2 Present Value
Chapter 2 Present Value Road Map Part A Introduction to finance. Financial decisions and financial markets. Present value. Part B Valuation of assets, given discount rates. Part C Determination of riskadjusted
More informationOrdinary Annuities Chapter 10
Ordinary Annuities Chapter 10 Learning Objectives After completing this chapter, you will be able to: > Define and distinguish between ordinary simple annuities and ordinary general annuities. > Calculate
More informationChapter The Time Value of Money
Chapter The Time Value of Money PPT 92 Chapter 9  Outline Time Value of Money Future Value and Present Value Annuities TimeValueofMoney Formulas Adjusting for NonAnnual Compounding Compound Interest
More informationInvestment Analysis (FIN 670) Fall Homework 3
Investment Analysis (FIN 670) Fall 2009 Homework 3 Instructions: please read carefully You should show your work how to get the answer for each calculation question to get full credit You should make 2
More informationAnswers to Review Questions
Answers to Review Questions 1. The real rate of interest is the rate that creates an equilibrium between the supply of savings and demand for investment funds. The nominal rate of interest is the actual
More informationCompounding 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 builtin preset assumptions
More informationPractice Set #1 and Solutions.
Bo Sjö 140503 Practice Set #1 and Solutions. What to do with this practice set? Practice sets are handed out to help students master the material of the course and prepare for the final exam. These sets
More informationGoals. The Time Value of Money. First example. Compounding. Economics 71a Spring 2007 Mayo, Chapter 7 Lecture notes 3.1
Goals The Time Value of Money Economics 7a Spring 2007 Mayo, Chapter 7 Lecture notes 3. More applications Compounding PV = present or starting value FV = future value R = interest rate n = number of periods
More informationhp 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
More informationAppendix. Time Value of Money. Financial Accounting, IFRS Edition Weygandt Kimmel Kieso. Appendix C 1
C Time Value of Money C 1 Financial Accounting, IFRS Edition Weygandt Kimmel Kieso C 2 Study Objectives 1. Distinguish between simple and compound interest. 2. Solve for future value of a single amount.
More informationUNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT, 5ed. Time Value Analysis
This is a sample of the instructor resources for Understanding Healthcare Financial Management, Fifth Edition, by Louis Gapenski. This sample contains the chapter models, endofchapter problems, and endofchapter
More informationBond Valuation. Chapter 7. Example (coupon rate = r d ) Bonds, Bond Valuation, and Interest Rates. Valuing the cash flows
Bond Valuation Chapter 7 Bonds, Bond Valuation, and Interest Rates Valuing the cash flows (1) coupon payment (interest payment) = (coupon rate * principal) usually paid every 6 months (2) maturity value
More informationChapter 4. The Time Value of Money
Chapter 4 The Time Value of Money 42 Topics Covered Future Values and Compound Interest Present Values Multiple Cash Flows Perpetuities and Annuities Inflation and Time Value Effective Annual Interest
More informationANSWERS TO STUDY QUESTIONS
ANSWERS TO STUDY QUESTIONS Chapter 17 17.1. The details are described in section 17.1.1. 17.3. Because of its declining payment pattern, a CAM would be most useful in an economy with persistent deflation
More informationTexas Instruments BAII PLUS Tutorial
Omar M. Al Nasser, Ph.D., MBA. Visiting Assistant Professor of Finance School of Business Administration University of HoustonVictoria Email: alnassero@uhv.edu Texas Instruments BAII PLUS Tutorial To
More informationDiscounted Cash Flow Valuation
BUAD 100x Foundations of Finance Discounted Cash Flow Valuation September 28, 2009 Review Introduction to corporate finance What is corporate finance? What is a corporation? What decision do managers make?
More information10. Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans
10. Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans Introduction This chapter continues the discussion on the time value of money. In this chapter, you will learn how inflation
More informationOklahoma 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 signin bonus for your new job? 1. $15,000 cash upon signing the
More informationCourse 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
More informationCHAPTER 5 HOW TO VALUE STOCKS AND BONDS
CHAPTER 5 HOW TO VALUE STOCKS AND BONDS Answers to Concepts Review and Critical Thinking Questions 1. Bond issuers look at outstanding bonds of similar maturity and risk. The yields on such bonds are used
More informationChapter 6 APPENDIX B. The Yield Curve and the Law of One Price. Valuing a Coupon Bond with ZeroCoupon Prices
196 Part Interest Rates and Valuing Cash Flows Chapter 6 APPENDIX B The Yield Curve and the Law of One Price Thus far, we have focused on the relationship between the price of an individual bond and its
More informationChapter 6 Contents. Principles Used in Chapter 6 Principle 1: Money Has a Time Value.
Chapter 6 The Time Value of Money: Annuities and Other Topics Chapter 6 Contents Learning Objectives 1. Distinguish between an ordinary annuity and an annuity due, and calculate present and future values
More informationBond valuation. Present value of a bond = present value of interest payments + present value of maturity value
Bond valuation A reading prepared by Pamela Peterson Drake O U T L I N E 1. Valuation of longterm debt securities 2. Issues 3. Summary 1. Valuation of longterm debt securities Debt securities are obligations
More information1. 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
More informationChapter 4. Time lines show timing of cash flows. Time Value Topics. Future value Present value Rates of return Amortization
Time Value Topics Chapter 4 Time Value of Money Future value Present value Rates of return Amortization 1 2 Determinants of Intrinsic Value: The Present Value Equation Net operating Required investments
More informationNPV 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
More information2 The Mathematics. of Finance. Copyright Cengage Learning. All rights reserved.
2 The Mathematics of Finance Copyright Cengage Learning. All rights reserved. 2.3 Annuities, Loans, and Bonds Copyright Cengage Learning. All rights reserved. Annuities, Loans, and Bonds A typical definedcontribution
More informationThis is Time Value of Money: Multiple Flows, chapter 7 from the book Finance for Managers (index.html) (v. 0.1).
This is Time Value of Money: Multiple Flows, chapter 7 from the book Finance for Managers (index.html) (v. 0.1). This book is licensed under a Creative Commons byncsa 3.0 (http://creativecommons.org/licenses/byncsa/
More informationsubstantially 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
More informationSharp EL733A Tutorial
To begin, look at the face of the calculator. Almost every key on the EL733A has two functions: each key's primary function is noted on the key itself, while each key's secondary function is noted in
More informationTime Value of Money. Background
Time Value of Money (Text reference: Chapter 4) Topics Background One period case  single cash flow Multiperiod case  single cash flow Multiperiod case  compounding periods Multiperiod case  multiple
More information