How a Financial
Calculator Can Help
Teens Make Deci$ion$
about Financing a
Vehicle
2002
Marsha A. Goetting
Ph.D., CFP®, CFCS
Professor & Extension Family
Economics Specialist
Department of Agricultural
Economics & Economics
Have you wondered?
• What the monthly payment
would be on your dream
car?
Have you wondered?
• How much you would save
in interest charges by
increasing your payments
amount?
Workshop
• You are going to learn how to
solve these & similar problems
quickly & easily by using a
financial calculator
Financial Calculator
• Texas Instruments
BA-35 Solar Business
Analyst
• Cost: about $20 at most
discount stores
Introduction
•Getting
Acquainted with
your Financial
Calculator
Turn on CE/C
Fix
2nd CPT MODE AC/ON
X 12 12
N %i PV PMT FV
Financial Mode
• If FIN is not lower left
corner
• CPT
Press MODE AC/ON
Fin 0.
Decimal Function
Fix
• Press 2nd CPT 2
2nd
FIN 0.00
Clearing Screen/Display
• Press CE/C key once
• Clears Display
• Corrects Incorrect Entries
• Clears word “Error”
Clearing Financial
Registers CMR
• Press 2nd CE/C CE/C
key
Clears numbers in
registers & display
N %i PV PMT FV
Finance Keys
N
Number of Periods
%i
Interest Rate
PMT
Payment Amount
Finance Keys
PV
Present Value
FV Future Value
CPT Compute key
Loans
• Calculate payment amount
for car loan when we know:
• Amount borrowed
• Interest rate
• Length of loan
Dream Car
• Finance
$21,000
• APR 6%
• 5 year loan
Car
• Clear registers 2nd CE/C CE/C
• Loan Amount 21,000 PV
• Periods 5 x 12 = 60 N
• % Rate 6 12 = 0.50 %i
• CPT PMT 405.99 (don’t clear)
Calculate Interest
•How much
interest paid in 5
years?
Interest Paid
• $405.99 payment
• x 60 # periods
$24,359.33 paid
- 21,000.00 car cost
Interest Paid
•$3,359.33
interest
paid over 5 years
Cheaper Wheels
• Finance
$15,500
• APR 5.8%
• 5 year loan
Cheaper Wheels
• Clear registers 2nd CE/C CE/C
• Loan amount 15,500 PV
• Periods 5 x 12 = 60 N
• % Rate 5.8 12 = 0.50 %i
• CPT PMT 298.22 (don’t clear)
Calculate Interest
• How much interest
paid in 5 years?
Interest Paid
• $298.22 payment
• x 60 # periods
$17,893.14 paid
- 15,500.00 car cost
Interest Paid
•$2,393.14
interest paid
over 5 years
Affordable Payments
• Anthony
• Monthly payment $200
•How expensive of a car
can he AFFORD?
If…
• 5 year loan
• Interest Rate
•4.5%
Affordable Car???
• Clear registers 2nd CE/C CE/C
• Payment $200 PMT
• Periods 5 x 12 = 60 N
• % Rate 4.5 12 = 0.38 %i
• CPT PV 10,727.88
Summary = $200 PMT
• 5 year loan
• 4.5 Interest rate
• Affordable Loan =
• $10,727.88
Affordable Payments
• Susie = $300 monthly
• How expensive of a car
can she AFFORD?
Affordable Car???
• Clear registers 2nd CE/C CE/C
• Payment $300 PMT
• Periods 5 x 12 = 60 N
• % Rate 6.5 12 = 0.54 %i
• CPT PV 15,332.60
Summary = $300 PMT
• 5 year loan
• 6.5 Interest rate
• Affordable Loan =
•$15,332.60
How Long to Pay Off?
• Tracy
•Afford $180 payments
•Cost of car $15,430
•Interest rate 7.2%
Car $15,430
• Clear registers 2nd CE/C CE/C
• Credit balance 15,430 PV
• % Rate 7.2 12 = 0.60 %i
• Payment 180 PMT
• CPT N 120.73 months
• 12 = 10.06 years
Who would finance?
• Dealer--No
• Corporation--No
• Mom & Day--Maybe
Alternatives:
• Save for bigger
down payment
• Find less expensive car
• Get another job
How Long to Pay Off?
• Ryan
• Afford $230 payments
• Cost of car $19,500
• Interest rate 6.6%
Car $19,500
• Clear registers 2nd CE/C CE/C
• Credit balance 19,500 PV
• % Rate 6.6 12 = 0.55 %i
• Payment 230 PMT
• CPT N 114.48 months
• 12 = 9.54 years
Who would finance?
• Dealer--No
• Corporation--No
• Mom & Day--Maybe
How a Financial
Calculator Can Help
Teens Make Deci$ion$
about Financing a
Vehicle
2002