Business Formula

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					FIN3013

 Lab #4
Group Exercise
Divide into groups of four students
Discuss the graphs you created in Assignment #3
   What four companies were analyzed?
   How did each perform relative to the S&P500
   What similarities do you notice about the four graphs?
   What differences do you notice?
   Do you have any questions about the assignment or
    results?


                     UTSA College of Business
                          FIN3013Lab
Percentage Returns
In Assignment #3, % return was calculated as
(P2-P1)/ P1
Notice how this relates to the basic time value of
money formula:
   Future Value = Present Value(1+i)
   FV/PV = 1 + i
   (FV/PV) – 1 = i
   (FV/PV) – (PV/PV) = i
   (FV-PV)/PV = i
   (P2-P1)/ P1 = return
                    UTSA College of Business
                         FIN3013Lab
Using the HP10B-II Calculator
5 Basic Keys
 PV = present value
 FV = future value

 N = number of time periods

 I/YR = interest rate or growth rate

 PMT    = payment


                 UTSA College of Business
                      FIN3013Lab
Example Problem #1
Claudia bought a share of stock for $52 at
the beginning of the year. At the end of the
year she was able to sell the stock for $61.
What was her rate of return?




               UTSA College of Business
                    FIN3013Lab
Example Problem #2
Larry places $1,000 in a savings account
earning 8% interest. How much will be in
the savings account after 3 years?




              UTSA College of Business
                   FIN3013Lab
Example Problem #3
What is the present value of $10,000
received 6 years from now if the interest
rate is 4.5%?




               UTSA College of Business
                    FIN3013Lab
Example Problem #4
You place $1,000 in a savings account that
earns 7% interest. How long will it be
before there is $2500 in the account?




              UTSA College of Business
                   FIN3013Lab
Example Problem #5
Solving for FV

Alan places $100 in an account each month
for 25 years. He earns 6% interest,
compounded monthly. How much will he
have at the end of 25 years?




              UTSA College of Business
                   FIN3013Lab
Example Problem #6
Solving for PMT

Iris borrows $18,000 to purchase a car.
Glendale Bank makes her a 5-year car loan
with a 7% interest rate. What will her
monthly car payments be?




              UTSA College of Business
                   FIN3013Lab
Example Problem #7
Solving for PV

As part of a legal settlement, Mercury
Medical agrees to pay Patricia $10,000 a
year for the next 20 years. At a 9% interest
rate, what is the present value of this
agreement?




               UTSA College of Business
                    FIN3013Lab
Example Problem #8
Solving for I/YR

Raymond has placed $20 in his savings
account every month for the past 18 years.
If he earned 5% interest, compounded
monthly on his account, how much does he
have in the account?




              UTSA College of Business
                   FIN3013Lab
Example Problem #9
Solving for N

Sarah is placing $500 each quarter into a
special savings account that earns 6%
interest, compounded quarterly. When she
has $10,000 in the account, she will use the
money for a down payment on a new car.
How long will it be before Sarah has
accumulated $10,000?

               UTSA College of Business
                    FIN3013Lab
Example Problem #10
Multiple Cash Flows

Clarksville just hired a new city manager.
The new city manager will receive an
immediate signing bonus of $20,000. The
one year contract also states that in addition
to a month salary of $8,000 the manager
will receive $5,000 in three months to cover
moving and relocation expenses. Using an
8% discount rate, what is the present value
of this one year contract?
               UTSA College of Business
                    FIN3013Lab
Example Problem #11
EAR

Guadalupe State Bank is offering a savings
account that pays 6% interest, compounded
monthly. What is the EAR on this account?




              UTSA College of Business
                   FIN3013Lab
For Assignment #4
Work TVM problems




           UTSA College of Business
                FIN3013Lab

				
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