Accounting principles 10e by kieso appendix f

APPENDIX EUsing Financial Calculators... Illustration E-2Calculator solution for present value of a single sum Illustration: Assume that you want to know the present value of $84,253 to

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APPENDIX E

Using Financial Calculators

E- 3 SO 1 Use a financial calculator to solve time value of money problems.

Illustration E-1

Financial calculator keys

N = number of periods

I = interest rate per period

PV = present value

PMT = payment

FV = future value

Using Financial Calculators

Illustration E-2

Calculator solution for present value of a single sum

Illustration: Assume that you want to know the present

value of $84,253 to be received in five years, discounted at

11% compounded annually.

Present Value of a Single Sum

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Illustration E-3

Calculator solution for present value of an annuity

Illustration: Assume that you are asked to determine the

present value of rental receipts of $6,000 each to be received

at the end of each of the next five years, when discounted at

12%.

Present Value of an Annuity

SO 1 Use a financial calculator to solve time value of money problems.

Illustration E-4

Auto Loan

Illustration: The loan has a 9.5% nominal annual interest rate, compounded monthly The price of the car is $6,000, and you

want to determine the monthly payments, assuming that the

payments start one month after the purchase.

Useful Applications

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Illustration E-5

Mortgage Loan

Useful Applications

Illustration: You decide that the maximum mortgage payment

you can afford is $700 per month The annual interest rate is

8.4% If you get a mortgage that requires you to make monthly

payments over a 15-year period, what is the maximum purchase

price you can afford?

SO 1 Use a financial calculator to solve time value of money problems.

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