Prepared by

Coby Harmon
University of California, Santa Barbara
Westmont College

H-1
 Appendix
Using Financial
H Calculators
Learning Objectives
After studying this chapter, you should be able to:

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

H-2
 Using Financial Calculators

Illustration H-1
Financial calculator keys
N = number of periods
I = interest rate per period
PV = present value
PMT = payment
FV = future value

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

 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.
Illustration H-2
Calculator solution for
present value of a single sum

H-4 LO 1 Use a financial calculator to solve time value of money problems.

 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%. Illustration H-3
Calculator solution for
present value of an annuity

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

Useful Applications for Financial Calculators

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.
Illustration H-4

H-6 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

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

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H-8