Cash Flow Diagrams - HP 39gII User Manual

Cash flow diagrams

Finance app
TVM transactions can be represented by using cash flow
diagrams. A cash flow diagram is a time line divided into
equal segments representing the compounding periods.
Arrows represent the cash flows, which could be positive
(upward arrows) or negative (downward arrows),
depending on the point of view of the lender or borrower.
The following cash flow diagram shows a loan from a
borrower's point of view:
Present value (PV)
(Loan)
Money
received is
a positive
number
1
Payment
Money
(PMT)
paid out is
a negative
number
The following cash flow diagram shows a loan from the
lender's point of view:
Cash flow diagrams
also specify when
payments occur rela-
tive to the compound-
ing periods.The
diagram to the right
shows lease pay-
ments at the begin-
ning of the period.
This diagram shows
deposits (PMT) into an
account at the end of
each period.
Equal periods
2 3 4 5
Payment Payment Payment
(PMT) (PMT) (PMT)
Equal payments
PV
Capitalized
}
value of
lease
1 2
PMT PMT PMT
1 2 3
PMT PMT
PV
(PMT)
Future value
(FV)
3 4 5
PMT PMT
FV
FV
4 5
PMT PMT PMT
133