Solving for the present value of a lump sum is nearly identical to solving for the future value. For example, suppose that we wanted to find out the future value if we left the money invested for 10 years instead of 5. We can change any of the variables in this problem without needing to re-enter all of the data.
Do not change the sign of a number using - (the "minus" key). This would be correct had you borrowed $100 today (cash inflow) and agreed to repay $161.05 (cash outflow) in five years. Had you entered the $100 as a positive number no harm would have been done, but the answer would have been returned as a negative number. In this problem, the $100 was an investment (i.e., a cash outflow) and the future value of $161.05 would be a cash inflow in five years. Cash inflows are entered as positive numbers and cash outflows are entered as negative numbers. This is simply a way of keeping the direction of the cash flow straight. Most financial calculators (and spreadsheets) follow the Cash Flow Sign Convention. Notice that we entered the 100 in the PV key as a negative number.Had you entered 0.10, the future value would have come out to 100.501 - obviously incorrect. This is because the calculator automatically divides any number entered into i by 100. When we entered the interest rate, we input 10 rather than 0.10.The order in which the numbers are entered does not matter.To solve these problems you simply enter the variables that you know in the appropriate keys and then press the other key to get the answer. In this case, we have a 4-variable problem and were given 3 of them (N, i, and PV) and had to solve for the 4th (FV). Of these, you will always be given 3 or 4 and asked to solve for the other. Every time value of money problem has either 4 or 5 variables (corresponding to the 5 basic financial keys).Now to find the future value simply press the FV key. Now all we need to do is enter the numbers into the appropriate keys: 5 into N, 10 into i, -100 into PV.
Press f X> This tutorial will demonstrate how to use the financial functions to handle time value of money problems and make financial math easy. Actually, its very easy if you already know RPN (reverse polish notation - a much better way to enter data into a calculator than the algebraic method that you are probably familiar with). The HP 12C is a fairly easy to use financial calculator that will serve you well in all finance courses. Are you a student? Did you know that Amazon is offering 6 months of Amazon Prime - free two-day shipping, free movies, and other benefits - to students? Click here to learn more#Hp platinum 12c financial calculator how to#
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