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Time Value of Money Solution Grid

 Self-Paced Overview

The Solution Grid

 

Note

There are a number of approaches to calculating time value of money, and there is nothing wrong with any of them. The Time Value of Money Solution Grid is simply an alternative.

When using the Time Value of Money Solution Grid, the primary objective is to establish an orderly procedure when calculating time value of money, and to follow that procedure diligently. Read the problem, make sure you are clear about what you're being asked to do, and then set up a solution grid.

A solution grid is simply a matrix with columns representing the time value of money components. Set up the grid the same way each time with the TVM components always in the same location, then jot down known values into the appropriate grid cells and solve for the unknown.

Time Value of Money Solution Grid

P/YR
Periods per Year
 
N
Number of Periods
I/YR
Annual Interest Rate
PV
Present Value
PMT
Annuity Payment
FV
Future Value
         

Always follow these steps each time you calculate time value of money.

  • Read the problem thoroughly.
  • Make sure you know what you're being asked to do.
  • Setup a TVM Solution Grid.
  • Completely clear the calculator.
  • Enter information in the same order.
  • Enter cash outflows as a negative value.

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