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H Using Financial CalculatorsLearning Objectives After studying this chapter, you should be able to: [1] Use a financial calculator to solve time value of money problems... Present Val

Prepared by Coby Harmon University of California, Santa Barbara

Westmont College

H Using Financial Calculators

Learning Objectives

After studying this chapter, you should be able to:

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

Appendix

H-3 LO 1 Use a financial calculator to solve time value of money problems.

Illustration H-1

Financial calculator keys

N = number of periods

I = interest rate per period

PV = present value

PMT = payment

FV = future value

Using Financial Calculators

Present Value of a Single Sum

Illustration H-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

H-5 LO 1 Use a financial calculator to solve time value of money problems.

Present Value of an Annuity

Illustration H-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%

Useful Applications for Financial Calculators

Illustration H-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

H-7 LO 1 Use a financial calculator to solve time value of money problems.

Useful Applications for Financial Calculators

Mortgage Loan Amount

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?

Illustration H-5

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