This question can trip people up right from the get go! Abby’s grandmother invested $1,000 on the day she is born, $1,000 is our present value of the investment. How much will the fund be worth when Abby’s grandmother gifts her the fund on her 18 th birthday? The fund is remarkably consistent and earns 2.3% annually. Abby’s grandmother invests $1,000 into a mutual fund for Abby on the day she is born. It is a negative cash flow, so the answer will be negative.ģ. Note that the number will be negative because we are paying that much each month. Now all that’s left is to solve the equation! Press (PT) to find out what your monthly payment needs to be to pay off the mortgage. Remember, with financial calculators we enter interest as a whole number instead of as a decimal like with regular calculators. The blue g key comes to our rescue with this as well. Since the payments have been input on a 12-month cycle, we also need to input the 7.3% interest on a 12-month cycle. Notice that the blue lettering on the bottom of each button corresponds to the function applied when you press the blue g key first. Pressing the blue g key on the calculator before pressing the n key will automatically divide the 30 years into a period of 360 months. As such, we need to input the time frame into the calculator as 12-month periods. However, the question mentions that the interest is compounded monthly. Here is where it can get a bit tricky! The payments are over a span of 30 years, this is our time frame and what we would usually input for the n key. Our goal is to pay off the mortgage completely, so we will want to enter 0 as our future value input. You are offered a mortgage of $105,000, this is the present value of the loan so we want to enter it into the PV input. Let’s start off by entering in the easy known variables for this equation. How much must you pay each month to completely repay the loan in 30 years? You are offered a $105,000 mortgage at an annual interest rate of 7.3% compounded monthly. Now all we have to do is press FV and the calculator will give us our answer!Ģ. He is not making any other payments into the account during the 5 year period so we will leave the PMT field blank and the calculator will automatically assign it a value of 0. He is paying that money to have it invested so we need to enter it as a negative number by pressing the CHS button. This is our Present Value of the investment. Enter the percent as a full round number. If 0.1 is entered into the i register the calculator will solve for 0.1% instead of 10%. This is not how you should enter percentages into the HP 12c, which actually automatically converts percentages for us. From an early age we are taught to enter percentages into calculators as decimals. Fortunately, that error is easy to correct. That said, many students still make a simple error. This calculation is as straightforward as it gets for TVM questions. If his expectations are correct how much will his investment be worth at the end of the 5 th year? He expects it will increase in value at a rate of 10% compounded annually for the next 5 years. Trevor purchased an investment for $25,000. Use these Keystrokes to clear: (F, CLX, F, X>Y).ġ. Before starting each calculation make sure you clear your calculator! This is a very important habit to get into.
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