![]() ![]() Setting up your calculator involves clearing its memory registers (again, see the bottom panel of Figure 1.2). Second, develop the habit of setting up your calculator before every TVM problem. Figure 1.2 shows you how to set the number of payments per year for the HP 10B (or HP 10bII+) and TI BA II Plus calculators. In almost all of the examples in this text we will assume that your calculator is set to just one payment per year. First, ensure that your calculator is set to the correct number of payments per year for the problem you are solving. There are at least two cautions to remember when doing TVM calculations on a financial calculator. Almost all time value of money problems we do in this text will be “3 find 4” games. Given the use of a calculator or computer, solving for any of the four variables in the equation with a financial calculator becomes what we will call a “3 find 4” game. While this equation is only one of several equations we will review, you will soon see that most TVM calculations are single equations and contain four variables. Since there is only one equation, there can be only one unknown. How many variables do you see? There are four variables: FV, PV, i, and n. Using the calculator greatly simplifies the time value of money calculation process. (Note: We also include Excel functions in this topic.) For most college finance classes, this comes in the form of a financial calculator. Hence, you will need some calculation assistance for most TVM calculations. For most of us, this surpasses our mental-math capabilities. This means that we will have to solve problems with a sum raised to the 360th power. ![]() For instance, there are 360 time periods in the typical 30-year mortgage (more on this later). ![]() While the mathematical equations show us how to think about time value calculations, the process of using the formulas can become very cumbersome. Calculators: The Beginning Finance Student’s Best Friend ![]()
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