This document provides instructions on how to use a financial calculator to solve time value of money problems. It contains 5 learning objectives that describe how to use a calculator to find the present value of a single sum, present value of an annuity, monthly payments for an auto loan, and maximum mortgage loan amount. It includes 4 illustrations showing the calculator inputs and outputs for these different time value of money calculations.

1. Prepared by
Coby Harmon
University of California, Santa Barbara
Westmont College
H-1

2. Appendix
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.
H-2

3. Using Financial Calculators
N
= number of periods
I
= interest rate per period
PV
Illustration H-1
Financial calculator keys
= present value
PMT = payment
FV
H-3
= future value
LO 1 Use a financial calculator to solve time value of money problems.

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

5. 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.

6. 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.

7. 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.

8. Copyright
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