1. H-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College

2. H-2 H Using Financial Calculators Learning Objectives After studying this chapter, you should be able to: [1] Use a financial calculator to solve time value of money problems. Appendix

3. H-3 LO 1 Use a financial calculator to solve time value of money problems. Illustration H-1 Financial calculator keys N = number of periods I = interest rate per period PV = present value PMT = payment FV = future value Using Financial Calculators

4. H-4 LO 1 Use a financial calculator to solve time value of money problems. Present Value of a Single Sum Illustration H-2 Calculator solution for present value of a single sum Illustration: Assume that you want to know the present value of $84,253 to be received in five years, discounted at 11% compounded annually.

5. H-5 LO 1 Use a financial calculator to solve time value of money problems. Present Value of an Annuity Illustration H-3 Calculator solution for present value of an annuity Illustration: Assume that you are asked to determine the present value of rental receipts of $6,000 each to be received at the end of each of the next five years, when discounted at 12%.

6. H-6 LO 1 Use a financial calculator to solve time value of money problems. Useful Applications for Financial Calculators Illustration H-4 Auto Loan Illustration: The loan has a 9.5% nominal annual interest rate, compounded monthly. The price of the car is $6,000, and you want to determine the monthly payments, assuming that the payments start one month after the purchase.

7. H-7 LO 1 Use a financial calculator to solve time value of money problems. Useful Applications for Financial Calculators Mortgage Loan Amount Illustration: You decide that the maximum mortgage payment you can afford is $700 per month. The annual interest rate is 8.4%. If you get a mortgage that requires you to make monthly payments over a 15-year period, what is the maximum purchase price you can afford? Illustration H-5

8. H-8 “Copyright © 2013 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.” Copyright