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# FIN 311Introduction to Finance

## Lecture: Financial Calculators

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Slide 1

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Financial Calculators

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Slide 2

Financial Calculators

Clear calculator each time
Enter information in same order each
time
Use time value grid when starting to
work problems
Enter cash outflows as negative

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Slide 3

n
n
n
n

## CPT stands for compute

2n d means that you can execute process written in gold above
some keys. From now own, well just call it the color key
To clear time value of money memory
Color Clr TVM
To set periods per year
Color P/Y
# Enter
where # is the number of periods per year
To change from beginning to end of period (for annuities)
Color BGN
Color SET

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## Lecture: Financial Calculators

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Slide 4

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Cautions
n

## Whatever is in each register carries

into next problem unless you replace
data or CLR TVM
n Check P/Y each time when youre
working a series of problems where P/Y
changes
n Youll have to QUIT if you check P/Y
before you work problem

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Slide 5

## Time Value Grid

N

I/YR

PV

PMT

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FV

P/YR

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Slide 6

Future Value
You deposit \$2000 today at 6% interest.
How much will you have in 5 years?

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## Lecture: Financial Calculators

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Slide 7

Future Value
You deposit \$2000 today at 6% interest.
How much will you have in 5 years?
N
5

I/YR
6

PV
PMT FV
2000- 0
?

P/YR
1

\$2675.45

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Slide 8

## Future Value of Annuity

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## You deposit \$300 each year for 15

years at 6%.
How much will you have at the end of
that time?

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Slide 9

## Future Value of Annuity

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## You deposit \$300 each year for 15

years at 6%.
How much will you have at the end of
that time?
N
15

I/YR
6

\$6982.79

PV
0

PMT FV
300- ?

P/YR
1

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## Lecture: Financial Calculators

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Slide 10

Present Value

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## How much would you have to

deposit now to have \$15,000 in 8
years if interest is 7%?

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Slide 11

Present Value

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## How much would you have to

deposit now to have \$15,000 in 8
years if interest is 7%?

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N
8

I/YR
7

PV
?

PMT FV
P/YR
0
15000 1

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\$8730.14

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Slide 12

## Present Value of Annuity

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## Find the present value of a 3 -year \$500

annuity at 4%

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## Lecture: Financial Calculators

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Slide 13

## Present Value of Annuity

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## Find the present value of a 3 -year \$500

annuity at 4%

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N I/YR
3 4

PV
?

PMT FV
500- 0

P/YR
1

\$1387.55

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Slide 14

Intrayear Compounding
Find the present value of a \$400
payment received each six months for
3 years. Interest is 4%, compounded
semiannually.

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Slide 15

Intrayear Compounding
Find the present value of a \$400
payment received each six months for
3 years. Interest is 4%, compounded
semiannually.
N

I/YR

PV

PMT FV

P/YR

400

\$2240.57

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## Lecture: Financial Calculators

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Slide 16

Sample Problems

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## Find the present value of a \$500 payment

received each six months for 4 years.
Interest is 4% compounded semiannually.

## What is the present value of \$5000 to be

received in 6 years if interest is 8%
compounded quarterly?

## What is the future value of \$100 in one

year if interest is 12% compounded
monthly?

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Slide 17

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Solutions
N

I/YR

8
4
24 8
12 12

PV

PMT FV

?
500
?
0
100- 0

P/YR

0
2
5000 4
?
12

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\$3662.74
\$3108.61
\$112.68

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Slide 18

Annuities Due

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## Beginning of year cash flows

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## Set calculator for BEG

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## Example: Find FV of a 4 -year annuity

due of \$400 at 6%.

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I/YR

PV

PMT FV

4
6
0
400- ?

P/YR

BEG

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## Lecture: Financial Calculators

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Slide 19

Interest Rates

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Examples:
If you borrow \$1300 and pay back \$1800 in three
years, what annual rate of interest are you
paying?
If you borrow \$30,000 and pay back in four
equal annual installments of \$9000, what interest
rate are you paying?

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Slide 20

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Solutions
N

I/YR

PV

3
4

?
?

1300 0
1800- 1
30000 9000- 0
1

PMT FV

P/YR

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11.46%
7.71%

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Slide 21

Sample Problems
n

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## If you borrow \$1000 and pay back \$1728 in

three years, what annual rate of interest
are you paying?

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## If you borrow \$20,000 and pay back in four

equal annual installments of \$5640, what
interest rate are you paying?

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## Lecture: Financial Calculators

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Slide 22

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Solutions
N I/YR

PV

3 ?
4 ?

1000 0
1728- 1
20000 5640- 0
1

PMT FV

P/YR

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20%
5%

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Slide 23

Compounding Periods

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## You borrow \$30,000 at 5% and agree to

remit installments of \$7000 every year.
How many years will you do this?

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## How long will it take you to triple your

money at 12%?

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## How long will it take you to triple your

money at 12% compounded
semiannually?

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Slide 24

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Solutions
N I/YR

PV

? 5
? 12
? 12

30000 7000- 0
10
3
10
3

PMT FV

P/YR

1
1
2

4.94
9.69
18.85 or
9.4271 yrs

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## Lecture: Financial Calculators

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Slide 25

Sample Problems

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## You borrow \$50,000 at 6% and agree

to remit installments of \$11,870 every
year. How many years will you do
this?
How long will it take you to triple your
money at 8%?

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Slide 26

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Solutions
N I/YR

PV

? 6
? 8

50000 11870- 0
10
3

PMT FV

P/YR

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1
1

4.999
14.27

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Slide 27

## Solving for Payment

Example:
How much would you have to pay
each year to pay off a 6%, 9 year
loan of \$500,000?

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## Lecture: Financial Calculators

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Slide 28

## Solving for Payment

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Example:

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## How much would you have to pay each

year to pay off a 6%, 9 year loan of
\$500,000?

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N I/YR

PV

PMT FV

P/YR

9 6

500000

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\$73,511

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## What if payments were at the beginning of the year?

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Slide 29

Sample Problems

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## How much would you have to pay each

year to pay off a 5% 7- year loan of
\$300,000?

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Slide 30

Sample Problems

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## How much would you have to pay each

year to pay off a 5% 7- year loan of
\$300,000?
N I/YR

PV

PMT FV

7 5

300000 ?

P/YR

51,846

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## Lecture: Financial Calculators

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Slide 31

Perpetuity

## Cash Flow without a fixed time

horizon
V0 = R/r

R= annual return in \$
r = discount rate

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Slide 32

Sample Problems

## What is the value of a cash flow of \$100

per year if you can earn 7% on similar
investments?
\$100/.07= \$1,428.57
If you have \$50,000 invested and your
annual returns are \$2000 what is your rate
of return?
2000/50000 = 4%

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