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Time Value of Money

 Self-Paced Overview

Using a Financial Calculator

Financial calculators may be used to solve time value of money problems. To use a financial calculator, it is necessary to understand the owner's manual. Generally, the following steps should be followed:

  1. Read the problem thoroughly.
  2. Make sure what is being asked in the problem.
  3. Clear the calculator.
  4. Input the known value.
  5. Input the number of compounding periods per year.
  6. Input the annual interest rate.
  7. Input the total number of compounding periods.
  8. Request the unknown.

An important thing to keep in mind is that cash outflows should carry a minus sign.

The examples on the following three pages illustrate the use of a financial calculator in solving time value of money problems. There are many financial calculators available and they all have their strengths. For these examples, the Hewlett Packard 10bII+ is used.

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