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6
Time Value of Money Calculations
Using the TVM Application
The time value of money (TVM) application is used for compound interest calculations that
involve regular, uniform cash flows – called payments. Once the values are entered you can
vary one value at a time, without entering all the values again.
To use TVM, several prerequisites must be met:
•
The amount of each payment must be the same. If the payment amounts vary, use the procedures
described in chapter 8 titled, Cash Flow Calculations.
•
Payments must occur at regular intervals.
•
The payment period must coincide with the interest compounding period. If it does not, convert the
interest rate using the
section titled, Interest Rate Conversions.
•
There must be at least one positive and one negative cash flow.
The TVM Keys
When entering data for TVM calculations, results are calculated based on data entered into
specific memory registers. When pressed, the keys used for these operations:
•
store data.
•
enter known data for variables used during calculations.
•
calculate unknown variables based on stored data.
Table 6-1 Keys for performing TVM calculations
Keys
Ù
Ò
Ï
Ì
É
\Í
\Ú
\Ó
\Ð
,
Stores or Calculates
Number of payments or compounding periods.
Annual nominal interest rate.
Present value of future cash flows. PV is usually an initial investment or
loan amount and always occurs at the beginning of the first period.
Amount of periodic payments. All payments are equal, and none are
skipped; payments can occur at the beginning or end of each period.
Future value. FV is either a final cash flow or compounded value of a
series of previous cash flows. FV occurs at the end of the last period.
Stores the number of periods per year. The default is 12. Reset only
when you wish to change it.
Optional shortcut for storing N: number in display is multiplied by the
value in P/YR and the result is stored in N.
\Í
, and
keys described below in the
Time Value of Money Calculations
61
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