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© Steven J. Willis 2006 1
FINANCIAL CALCULATORS FOR
LAWYERS
Lesson FourCalculator Terminology
FINANCIAL CALCULATORS FOR
LAWYERS
Lesson FourCalculator Terminology
© Steven J. Willis 2006 2
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Mode– Payments per Year (P/Yr)
© Steven J. Willis 2006 3
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Mode– Payments per Year (P/Yr)
© Steven J. Willis 2006 4
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Mode– Payments per Year (P/Yr)
© Steven J. Willis 2006 5
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Mode– Payments per Year (P/Yr)
© Steven J. Willis 2006 6
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Mode– Payments per Year (P/Yr)
© Steven J. Willis 2006 7
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Mode– Payments per Year (P/Yr)
© Steven J. Willis 2006 8
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Payments per Year (P/Yr)– Mode
© Steven J. Willis 2006 9
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Payments per Year (P/Yr)– Mode
© Steven J. Willis 2006 10
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Payments per Year (P/Yr)– Mode
For our purposes you will always know the mode.
For our purposes you will always know the mode.
© Steven J. Willis 2006 11
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Payments per Year (P/Yr)– Mode
For our purposes you will always know the mode.
For our purposes you will always know the mode.
You will always know (or need to estimate) five of
these six functions.
You will always know (or need to estimate) five of
these six functions.
© Steven J. Willis 2006 12
Calculator Terminology
• Financial calculators have seven basic function keys– Present Value (PV)– Future Value (FV)– Payment (Pmt)– Interest (I) or (I/yr)– Number of Periods (N)– Payments per Year (P/Yr)– Mode
For our purposes you will always know the mode.
For our purposes you will always know the mode.
You will always know (or need to estimate) five of
these six functions.
You will always know (or need to estimate) five of
these six functions.
The calculator will solve for the missing
function.
The calculator will solve for the missing
function.
© Steven J. Willis 2006 13
Calculator Terminology
That is the point of the financial
calculator
That is the point of the financial
calculator
© Steven J. Willis 2006 14
Calculator Terminology
That is the point of the financial
calculator
That is the point of the financial
calculator
To solve for a missing function.
To solve for a missing function.
© Steven J. Willis 2006 15
Calculator Terminology
If you only know four of the six functions, you
must nevertheless estimate, logically
deduce, or “make up” one of the two missing
functions.
If you only know four of the six functions, you
must nevertheless estimate, logically
deduce, or “make up” one of the two missing
functions.
© Steven J. Willis 2006 16
Calculator Terminology
If you only know four of the six functions, you
must nevertheless estimate, logically
deduce, or “make up” one of the two missing
functions.
If you only know four of the six functions, you
must nevertheless estimate, logically
deduce, or “make up” one of the two missing
functions.
No calculator will solve for two
missing functions.
No calculator will solve for two
missing functions.
© Steven J. Willis 2006 17
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
© Steven J. Willis 2006 18
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
© Steven J. Willis 2006 19
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
© Steven J. Willis 2006 20
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
© Steven J. Willis 2006 21
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
© Steven J. Willis 2006 22
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
You may tell the calculator the
time period (N)– perhaps 30 or 15 years – and it will
tell you the needed payment
(Pmt).
You may tell the calculator the
time period (N)– perhaps 30 or 15 years – and it will
tell you the needed payment
(Pmt).
© Steven J. Willis 2006 23
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
•you cannot solve for both the time period and the payment amount.
Or, you may tell the calculator
that you want to pay $1,500
monthly (Pmt), and it will tell you how long that will
take (N).
Or, you may tell the calculator
that you want to pay $1,500
monthly (Pmt), and it will tell you how long that will
take (N).
You may tell the calculator the time
period – perhaps 30 or 15 years – and it
will tell you the needed payment.
You may tell the calculator the time
period – perhaps 30 or 15 years – and it
will tell you the needed payment.
© Steven J. Willis 2006 24
Calculator Terminology
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
• But, you cannot solve for both the time period and the payment amount.
For example:
If you know
• how much you borrowed for your home loan (PV)
• the interest rate (I/yr)
•that you intend to pay it off to zero (FV)
•that you want monthly payments (P/yr)
• But, you cannot solve for both the time period and the payment amount.
You may tell the calculator the time
period – perhaps 30 or 15 year – and it
will tell you the needed payment.
You may tell the calculator the time
period – perhaps 30 or 15 year – and it
will tell you the needed payment.
Or, you may tell the calculator that you want to pay $1,500 monthly, and it will
tell you how long that will take.
Or, you may tell the calculator that you want to pay $1,500 monthly, and it will
tell you how long that will take.
© Steven J. Willis 2006 25
Calculator Terminology
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
© Steven J. Willis 2006 26
Calculator Terminology
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
N for number of periods.
© Steven J. Willis 2006 27
Calculator Terminology
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
I/YR for nominal interest per year.
© Steven J. Willis 2006 28
Calculator Terminology
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
PV for present value.
© Steven J. Willis 2006 29
Calculator Terminology
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
PMT for payment.
© Steven J. Willis 2006 30
Calculator Terminology
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
FV for Future Value.
© Steven J. Willis 2006 31
Calculator Terminology
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
On a handheld calculator – such as an HP10BII –
the six functions are found along the top row
of keys.
P/YR for payments per year (or periods per
year).
© Steven J. Willis 2006 32
Calculator Terminology
On the Electronic Calculators used in this Course or
on the CD, all function keys are always displayed
clearly.
On the Electronic Calculators used in this Course or
on the CD, all function keys are always displayed
clearly.
© Steven J. Willis 2006 33
Calculator Terminology
The Six critical function keys
always appear.
The Six critical function keys
always appear.
© Steven J. Willis 2006 34
Calculator Terminology
Also, several other important, but less critical function keys
always appear.
Also, several other important, but less critical function keys
always appear.
© Steven J. Willis 2006 35
Calculator Terminology
On the Electronic Calculators used in this Course or
on the CD, all function keys are always displayed
clearly.
On the Electronic Calculators used in this Course or
on the CD, all function keys are always displayed
clearly.
Also, the values for each function always appear.
Also, the values for each function always appear.
© Steven J. Willis 2006 36
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
© Steven J. Willis 2006 37
Calculator Terminology
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
PV for present value.
© Steven J. Willis 2006 38
Calculator Terminology
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
© Steven J. Willis 2006 39
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
© Steven J. Willis 2006 40
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
© Steven J. Willis 2006 41
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
© Steven J. Willis 2006 42
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
© Steven J. Willis 2006 43
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
© Steven J. Willis 2006 44
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
© Steven J. Willis 2006 45
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
If you know the future value and the interest rate and time period, then you
solve for the present value.
If you know the future value and the interest rate and time period, then you
solve for the present value.
© Steven J. Willis 2006 46
Calculator Terminology
• Present Value
– This function inputs or solves for the value today of either
• A sum in the future• A series of payments in the future.
If you know the future value and the interest rate and time period, then you
solve for the present value.
If you know the future value and the interest rate and time period, then you
solve for the present value.
If you know the present value, then you must be
solving for another function, such as the
future value or the series of withdrawal payments
that the present value can generate.
If you know the present value, then you must be
solving for another function, such as the
future value or the series of withdrawal payments
that the present value can generate.
© Steven J. Willis 2006 47
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
© Steven J. Willis 2006 48
Calculator Terminology
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
FV for Future Value.
© Steven J. Willis 2006 49
Calculator Terminology
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
© Steven J. Willis 2006 50
Calculator Terminology
• Future Value
– This function inputs solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
© Steven J. Willis 2006 51
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
© Steven J. Willis 2006 52
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
© Steven J. Willis 2006 53
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
© Steven J. Willis 2006 54
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
© Steven J. Willis 2006 55
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
© Steven J. Willis 2006 56
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
If you know the present value and the interest rate and time period, then you solve for the future value.
If you know the present value and the interest rate and time period, then you solve for the future value.
© Steven J. Willis 2006 57
Calculator Terminology
• Future Value
– This function inputs or solves for the value at some date in the future of either
• A current sum• A series of payments in the future, ending
before the future date.
If you know the present value and the interest rate and time period, then you solve for the future value.
If you know the present value and the interest rate and time period, then you solve for the future value.
If you know the future value, then you must be
solving for another function, such as the present value or the
series of deposit payments needed to
generate the future value.
If you know the future value, then you must be
solving for another function, such as the present value or the
series of deposit payments needed to
generate the future value.
© Steven J. Willis 2006 58
Calculator Terminology
• Payment
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 59
Calculator Terminology
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
PMT for payment.
© Steven J. Willis 2006 60
Calculator Terminology
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
© Steven J. Willis 2006 61
Calculator Terminology
• Payment
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 62
Calculator Terminology
• Payment
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 63
Calculator Terminology
• Payment
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 64
Calculator Terminology
• Payment
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 65
Calculator Terminology
• Payment
– This function inputs or solves for the value of a regular deposit or withdrawal
If you know the present or future value and the
interest rate and time period, then you solve for the payment amount that the present sum would generate or the needed deposit to result in the
future value.
If you know the present or future value and the
interest rate and time period, then you solve for the payment amount that the present sum would generate or the needed deposit to result in the
future value.
© Steven J. Willis 2006 66
Calculator Terminology
• Payment
– This function inputs or solves for the value of a regular deposit or withdrawal
If you know the present or future value and the
interest rate and time period, then you solve for the payment amount that the present sum would generate or the needed deposit to result in the
future value.
If you know the present or future value and the
interest rate and time period, then you solve for the payment amount that the present sum would generate or the needed deposit to result in the
future value.
If you know the payment value, then you must be
solving for another function, such as the
present or future value of the series of deposits.
If you know the payment value, then you must be
solving for another function, such as the
present or future value of the series of deposits.
© Steven J. Willis 2006 67
Calculator Terminology
• Interest
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 68
Calculator Terminology
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
I/YR for Interest per year.
© Steven J. Willis 2006 69
Calculator Terminology
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
© Steven J. Willis 2006 70
Calculator Terminology
• Interest
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 71
Calculator Terminology
• Interest
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 72
Calculator Terminology
• Interest
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 73
Calculator Terminology
• Interest
– This function inputs or solves for the nominal annual interest rate
© Steven J. Willis 2006 74
Calculator Terminology
• Interest
– This function inputs or solves for the nominal annual interest rate
If you know the present and future value, the
payment amount and the time and frequency
period, then you solve for the interest rate.
If you know the present and future value, the
payment amount and the time and frequency
period, then you solve for the interest rate.
© Steven J. Willis 2006 75
Calculator Terminology
• Interest
– This function inputs or solves for the nominal annual interest rate
If you know the interest rate, then you must be
solving for another function, such as the
present or future value of the series of deposits.
If you know the interest rate, then you must be
solving for another function, such as the
present or future value of the series of deposits.
If you know the present and future value, the
payment amount and the time and frequency
period, then you solve for the interest rate.
If you know the present and future value, the
payment amount and the time and frequency
period, then you solve for the interest rate.
© Steven J. Willis 2006 76
Calculator Terminology
• Interest
– This function inputs or solves for the nominal annual interest rate
In Lesson Five, we will focus on interest rate terminology. We will
distinguish nominal rates from periodic rates, from effective rates,
and from an annual percentage rate.
In Lesson Five, we will focus on interest rate terminology. We will
distinguish nominal rates from periodic rates, from effective rates,
and from an annual percentage rate.
© Steven J. Willis 2006 77
Calculator Terminology
• Number of Periods
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 78
Calculator Terminology
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
N for number of Periods.
© Steven J. Willis 2006 79
Calculator Terminology
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
© Steven J. Willis 2006 80
Calculator Terminology
• Number of Periods
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 81
Calculator Terminology
• Number of Periods
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 82
Calculator Terminology
• Number of Periods
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 83
Calculator Terminology
• Number of Periods
– This function inputs or solves for the total number of periods
© Steven J. Willis 2006 84
Calculator Terminology
• Number of Periods
– This function inputs or solves for the total number of periods
If you know the present and future value, the
payment amount and the frequency and interest rate, then you solve for the number of periods.
If you know the present and future value, the
payment amount and the frequency and interest rate, then you solve for the number of periods.
© Steven J. Willis 2006 85
Calculator Terminology
• Number of Periods
– This function inputs or solves for the total number of periods
If you know the number of periods, then you must be
solving for another function, such as the
present or future value of the series of deposits or
for the interest rate.
If you know the number of periods, then you must be
solving for another function, such as the
present or future value of the series of deposits or
for the interest rate.
If you know the present and future value, the
payment amount and the frequency and interest rate, then you solve for the number of periods.
If you know the present and future value, the
payment amount and the frequency and interest rate, then you solve for the number of periods.
© Steven J. Willis 2006 86
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 87
Calculator Terminology
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
On a handheld calculator – such as an HP10BII –
this function key is found along the top row of keys.
P/YR for number of Periods or Payments
per year.
© Steven J. Willis 2006 88
Calculator Terminology
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
© Steven J. Willis 2006 89
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 90
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 91
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 92
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
© Steven J. Willis 2006 93
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
Another way of defining
this is as the compounding
period.
Another way of defining
this is as the compounding
period.
© Steven J. Willis 2006 94
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
Another way of defining
this is as the compounding
period.
Another way of defining
this is as the compounding
period.
The Nominal Annual Interest
Rate compounds at this frequency.
The Nominal Annual Interest
Rate compounds at this frequency.
© Steven J. Willis 2006 95
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
We can call this “Payments per year” or
“Periods per year.”
We can call this “Payments per year” or
“Periods per year.”
© Steven J. Willis 2006 96
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
We can call this “Payments per year” or
“Periods per year.”
We can call this “Payments per year” or
“Periods per year.”
They will always be the same. Lesson Five will explain the following Law of Finance:
They will always be the same. Lesson Five will explain the following Law of Finance:
© Steven J. Willis 2006 97
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
We can call this “Payments per year” or
“Periods per year.”
We can call this “Payments per year” or
“Periods per year.”
They will always be the same. Lesson Five will explain the following Law of Finance:
The compounding period (periods per year) and the payment period (payments per year) must
either be identical or be 1.
They will always be the same. Lesson Five will explain the following Law of Finance:
The compounding period (periods per year) and the payment period (payments per year) must
either be identical or be 1.
© Steven J. Willis 2006 98
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
If you know the present and future value, the
payment amount, the total time period and interest rate, then you solve for
the number of periods per year.
If you know the present and future value, the
payment amount, the total time period and interest rate, then you solve for
the number of periods per year.
© Steven J. Willis 2006 99
Calculator Terminology
• Payments Per Year (or periods per year)
– This function inputs or solves for the total number of periods or payments per year
If you know the number of periods per year, then
you must be solving for another function, such as
the present or future value of the series of
deposits or for the interest rate.
If you know the number of periods per year, then
you must be solving for another function, such as
the present or future value of the series of
deposits or for the interest rate.
If you know the present and future value, the
payment amount, the total time period and interest rate, then you solve for
the number of periods per year.
If you know the present and future value, the
payment amount, the total time period and interest rate, then you solve for
the number of periods per year.
© Steven J. Willis 2006 100
Calculator Terminology
• Mode
– This function inputs or solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 101
Calculator Terminology
On a handheld calculator – such as an HP10BII –
this function key is found on the second row of
keys.
On a handheld calculator – such as an HP10BII –
this function key is found on the second row of
keys.
BEG/END for mode.
© Steven J. Willis 2006 102
Calculator Terminology
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
On the Electronic Calculators used in this Course or on the CD, this function keys is
always displayed, along
with its value.
© Steven J. Willis 2006 103
Calculator Terminology
• Mode
– This function defines the timing of the initial payment in a solves for the value of a regular deposit or withdrawal
© Steven J. Willis 2006 104
Calculator Terminology
• Mode
– This function defines the timing of the initial payment in a
• Sinking Fund
© Steven J. Willis 2006 105
Calculator Terminology
• Mode
– This function defines the timing of the initial payment in a
• Sinking Fund• Annuity
© Steven J. Willis 2006 106
Calculator Terminology
• Mode
– This function defines the timing of the initial payment in a
• Sinking Fund• Annuity
Begin Mode occurs when the first payment is at the beginning of
each period.
Begin Mode occurs when the first payment is at the beginning of
each period.
© Steven J. Willis 2006 107
Calculator Terminology
• Mode
– This function defines the timing of the initial payment in a
• Sinking Fund• Annuity
Begin Mode occurs when the first payment is at the beginning of
each period.
Begin Mode occurs when the first payment is at the beginning of
each period.
End Mode occurs when the first payment
is at the end of each period.
End Mode occurs when the first payment
is at the end of each period.