Financial Calculators

							Financial
Calculators
  ILX Lightwave
  May 14, 2003
                  1
Marsha A. Goetting
Ph.D., CFP ®, CFCS
    Professor & Extension
      Family Economics
          Specialist
         Department of
    Agricultural Economics
         & Economics         2
How many of
you have used a
financial
calculator?????   3
Everyone can learn to use
a financial calculator




                       4
Purpose
Experience How
Financial Calculator
Can Help You Make
Deci$ion$ About
Your Finances      5
Savings & Investments




                   6
Credit



         7
House Buying



           8
Car Purchase



           9
College Education




                10
Retirement Planning




                 11
  Financial Calculator
Texas Instruments
 BA-35 Solar Business
 Analyst
 Cost about $20 at
 most discount stores
                        12
 Introduction
Getting
Acquainted with
your Financial
Calculator
                  13
     Turn on               CE/C
       Fix
2nd    CPT    MODE AC/ON


x 12    12
 N     %i      PV   PMT     FV

                             14
  Financial Mode
 If   FIN is not lower left corner
 Press
   CPT         MODE       AC/ON



Fin                           0.  15
   Decimal Function
              Fix

 Press 2nd   CPT   2


 2nd
 FIN                0.00
                        16
    Clearing Screen/Display

   Press CE/C key once

 Clears Display
 Corrects Incorrect Entries
 Clears word “Error”

                               17
 Clearing Financial Registers
              CMR
                key
Press 2nd CE/C CE/C
 Clears numbers in
 registers & display
    N   %i   PV   PMT    FV

                           18
 Finance Keys
N
      Number of Periods
%i
      Interest Rate
PMT
      Payment Amount
                       19
 Finance Keys
PV
      Present Value
FV    Future Value
CPT   Compute key
                      20
Lump Sum Savings




               21
Finance Key
PV   Present Value
Value of the
$avings you have
today              22
How much will
$10,000 grow to?

   PV


                   23
   Future Value $10,000
Clear   registers 2nd CE/C CE/C
Enter PV        10,000 PV
Enter # Periods      20 N
Enter % Rate        3 %i
CPT FV           18,061.11  24
  Future Value $15,000
Clear   registers 2nd CE/C CE/C
Enter PV        15,000 PV
Enter # Periods       5N
Enter % Rate      6.25 %i
CPT FV           20,311.22  25
  Future Value $50,000
Clear   registers 2nd CE/C CE/C
Enter PV         50,000 PV
Enter # Periods       40 N
Enter % Rate         5 %i
CPT FV     351,999.44wait   26
 What if ?????
You want to know what
the amount will grow to
in 15 years instead of
40….just change the
  N                       27
 Future Value 15 years

Clear   registers 2nd CE/C CE/C
Enter PV      50,000 PV
Enter # Periods    15 N
Enter % Rate      5 %i
CPT FV       103,946.41       28
 The difference
40 yrs = $351,999.43
15 yrs = $103,946.41

$248,053.02
                        29
Lump Sum Savings




               30
Solving for Future
Value of Annual
Regular Deposits


                     31
CDs, IRAs, Passbook




                      32
  Payments (Deposits)
Enter deposit  amount
 as a negative value
2,000   +/- PMT
Screen: -2,000.00   33
 IRA (single person)
$2,000 per year
for 26 years
What  amount
will be in his IRA?   34
 IRA (single person)
Clear   registers 2nd CE/C CE/C
Enter   PMT     2,000 +/- PMT
Enter # Periods      26 N
Enter % Rate        5 %i
CPT FV         102,226.91   35
 IRA (married couple)
$2,000 each per year for
 25 years
What   amount
 will be in
  their IRAs?           36
 IRA--Married Couple
Clear   registers 2nd CE/C CE/C
Enter   PMT 4,000 +/- PMT
Enter # Periods   25 N
Enter % Rate    11 %i
CPT FV 457,653.23(hold)      37
 What if ?????
Interestrate is only
 4% instead of
 11%….just change
 the amount in % i
                        38
 IRA--Married 4%
Clear   registers 2nd CE/C CE/C
Enter   PMT 4,000 +/- PMT
Enter # Periods    25 N
Enter % Rate      4 %i
CPT FV        166,583.63     39
    The difference
11%   = $457,653.23
   4% = $166,583.63

$291,069.63
                       40
 Roth IRA
After-tax dollars
Accumulations can be
 withdrawn tax-free if:
 age 59 1/2
 held for 5 years
                          41
 Roth IRA
$3,000   per year for 40
years
What  amount
will be in
the Roth IRA?           42
 Roth IRA
Clear   registers 2nd CE/C CE/C
Enter   PMT 3,000 +/- PMT
Enter # Periods   40 N
Enter % Rate      5 %i
CPT FV        $362,399.32     43
 Roth IRA
$3,000   per year for 20
years.
What  amount
will be in
the Roth IRA?           44
 Roth IRA
Clear   registers 2nd CE/C CE/C
Enter   PMT 3,000 +/- PMT
Enter # Periods   20 N
Enter % Rate     6 %i
CPT FV        $110,356.77     45
Summary: Annual Regular
Deposits




                          46
 New Problem:
How  much will we
have in the future
if we add annually
to our present
savings?             47
Beginning Balance: Add
Annually




                         48
    Annual Deposits with
    Beginning Balance $10,000
Clear     registers 2nd CE/C CE/C
 Enter   PV (Beg. Bal.) 10,000 PV
 Enter PMT       2,000 +/- PMT
 Enter % Rate             5 %i
 Enter # Periods            7N
   CPT FV 30,355.02 (hold)      49
 What if ?????
Interest rate is only 3%
 instead of 5%
Just change the interest
 rate
            %i
                            50
  Annual Deposits with
  Beginning Balance $10,000
Clear     registers 2nd CE/C CE/C
 Enter   PV (Beg. Bal.) 10,000 PV
 Enter PMT       2,000 +/- PMT
 Enter % Rate            3 %i
 Enter # Periods            7N
CPT FV                 27,623.6651
 Difference % rate
5% = $30,355.02
3% = $27,623.66

  $2,731.36
                   52
   Education Fund--$1,000
   Add annually $2,500
Clear registers 2nd CE/C CE/C
 Enter PV (Beg. Bal.) 1,000 PV

Enter PMT 2,500 +/- PMT
Enter % Rate            6.5 %i
Enter # Periods           18 N
 CPT FV               84,131.82
                               53
    Retirement Fund--$15,000
    Add annually $1,200
Clear   registers 2nd CE/C CE/C
 Enter PV (Beg. Bal.) 15,000 PV

Enter PMT 1,200 +/- PMT
Enter % Rate           8.5 %i
Enter # Periods           25 N
   CPT FV          209,702.79 54
Summary: Solved for Future
Value when have Beginning
Balance & Add Annually




                             55
Monthly Savings




                  56
 Convert 2 items
Interest
  Rate % i
# of Periods   N

                    57
 Annual Interest Rate
    % Annual
18.5
Percentage Rate
Convert   to
monthly            58
 Monthly Interest Rate

Divide   interest rate
by 12
  18.5  12 = 1.54
  Then press %i
                      59
 # of Periods-Monthly
Multiply  number
 of years by 12
 6 years x 12 = 72
 Then press N      60
Grandparents
       Save   $5
        each
        month for
        18 years
                61
   $5 per month
Clear   registers 2nd CE/C CE/C
Enter   PMT       5 +/- PMT
# Periods    18 x 12 = 216 N
% Rate    5.5 12 = 0.46 %i
CPT FV               1,838.35
                             62
Aunts & Uncles $60




                     63
   $60 per month
Clear   registers 2nd CE/C CE/C
Enter   PMT      60 +/- PMT
# Periods    18 x 12 = 216 N
% Rate    6.5 12 = 0.54 %i
CPT FV             24,500.3364
Save $100
      Each
      month
      for 30
      years    65
     $100 each month
Clear   registers 2nd CE/C CE/C
Enter   PMT      100 +/- PMT
#   Periods 30 x 12 = 360 N
%      5.5  12 = 0.46 %i
     Rate
CPT FV           91,361.19   66
Saving for down payment




                     67
  Monthly Savings
Clear   registers 2nd CE/C CE/C
Enter   PMT    600 +/- PMT
# Periods    5 x 12 = 60 N
 % Rate   9.5  12 = 0.79 %i
CPT FV            45,853.35 68
Add to Retirement Fund
Monthly




                         69
   Retirement Fund--$15,000
   Add monthly-- $100
Clear registers 2nd CE/C CE/C
 Enter PV (Beg. Bal.)   15,000 PV
Enter PMT             100 +/- PMT
%  Rate       5 12 = 0.42 %i
# Periods      25 x 12 = 300 N
 CPT FV              111,770.33
                               70
     Future Value Savings
   Lump Sum Savings
   Annual Savings
   Monthly Savings
   Beginning balance & add yearly
     or monthly
                                71
Alternatives


Bank               Credit
                   Union
       Savings &
         Loan


                            72
Which pays more?
 5.80% compounded
      quarterly
 5.75 % cp monthly
 5.50% cp daily

                      73
 Converting
Annual  Percentage
 Rate (APR) to
Annual Effective
 Yield (AEY)
                      74
  EFF Key                CE/C
      Fix
2nd   CPT   MODE AC/ON

      EFF
RCL    1      2    3
                           75
5.8 compounded quarterly
Clear      2nd CE/C CE/C
Enter   interest rate   5.8
Press              2nd EFF
                          1
Enter # cp 4
Press     =             5.93
                                76
5.75 compounded monthly
Clear      2nd CE/C CE/C
Enter   interest rate  5.75
Press              2nd EFF
                           1
Enter # cp 12
Press      =            5.90   77
5.5 compounded daily
Clear        2nd CE/C CE/C
Enter   interest rate    5.5
Press               2nd EFF
                          1
Enter # cp 365
Press      =            5.65 78
 Which account pays most?

5.8 % cp quarterly = 5.93
5.75 % cp monthly = 5.90
5.5 % cp daily     = 5.65

                        79
   Annual Deposits with
   Beginning Balance $10,000
Clear     registers 2nd CE/C CE/C
 Enter   PV (Beg. Bal.)  10,000 PV
 Enter PMT            2,000 +/- PMT
 Enter %    Rate            5.93 %i
 Enter #   Periods           20 N
CPT FV          104,670.38 (hold)   80
  Annual Deposits with
  Beginning Balance $10,000
Clear     registers       2nd CE/C CE/C
 Enter   PV (Beg. Bal.)   10,000 PV
 Enter PMT            2,000 +/- PMT
 Enter %  Rate              5.65 %i
 Enter # Periods                20 N
CPT FV                     100,880.77
                                     81
 Difference 20 yrs
5.93 = $104,670.38
5.65 = $100,880.77

 $3,389.61
                      82
Credit



         83
Credit Card
   Average balance
$1,825 bank
    credit card
    18% APR
                      84
Credit Card
   Pay $28
    minimum payment
How long to
pay off??????     85
$28 monthly payment
   21 years
   16 years
   11 years
    5 years      86
Interest Paid
 $5,325
 $3,460
 $2,377
 $ 956         87
     Credit Card $1,825
Clear  registers 2nd CE/C CE/C
Credit balance        1,825 PV
 % Rate        18  12 = 1.5 %i
Payment                28 PMT
CPT N             255.38 months
   12 = 21.28 yrs (Don’t clear)
                                88
Compute interest paid

     Press again:
     CPT N 255.38
      # of monthly
      payments
                    89
 Interest Paid
  255.38 months
  x $28 payments
 $ 7,150.55 paid back
-$ 1,825.00 loan    90
 Interest Paid
$5.3255.55
paid in
interest over
21.28 years      91
 Credit Cards
Donna’s   Balance
 $6,500
APR 19%
$130 payments
                     92
   How long to pay off?
Clear  registers 2nd CE/C CE/C
Loan Amount           6,500 PV
Payment                130 PMT
 % Rate   19 12 = 1.58 %i
      CPT N (months)       99.85
  12 = 8.32 years (don’t clear)
                             93
Compute interest paid

     Press again:
     CPT N 99.85
      # of monthly
      payments
                    94
  Interest Paid
 99.85 months
x $130 payments
$ 12,980.86 paid back
- 6,500.00 credit balance
                       95
   Interest Paid
$6,480.86
interest paid
by Donna over
8.32 yrs.          96
Increase payment

     Old   payment
      $130

     New   payment
      $230
                      97
    How long to pay off?
Clear  registers 2nd CE/C CE/C
Loan Amount           6,500 PV
Payment                230 PMT
 % Rate   19 12 = 1.58 %i
      CPT N (months)       37.76
  12 = 3.15 years           98
Compute interest paid

     Press again:
     CPT N 37.76
      # of monthly
      payments
                    99
  Interest Paid
 37.76 months
x $230 payments
$ 8,685.58 paid back
- 6,500.00 credit balance
                        100
   Interest Paid
$2,185.58
interest paid
by Donna over
3.15 yrs.          101
  The difference
$130 8.32 yrs = $6,490.86
$230 3.15 yrs = $2,185.58


  $4,305.28
                        102
 Central Idea
Payingoff credit card
balance sooner means
higher payments, but
    you pay less INTERE$T

                             103
Dream Home
  Average     price
   $135,000

  Down payment
   $27,000
                  104
Payment Amount?
       Finance
        $108,000
       APR 9.5%
       30 year
        mortgage  105
      Payment?
Clearregisters   2nd CE/C CE/C
Loan Amount        108,000 PV
#         30 x 12 = 360 N
     Periods
% Rate 9.5 12 = 0.79 %i
CPT PMT             908.12 106
Cheaper Home
     Finance
      $66,000
     APR 13%
     30 year
      mortgage  107
     Payment?
Clearregisters 2nd CE/C CE/C
Loan Amount         66,000 PV
#Periods   30 x 12 = 360 N
% Rate  13 12 = 1.08 %i
CPT PMT      730.09 (hold)
                          108
Young Professionals
      What  if we
       pay an extra
       $100 towards
       principal
       each month ?
                 109
      Extra $100
Clear  registers 2nd CE/C CE/C
Loan Amount           66,000 PV
Payment             830.09 PMT
 % Rate       13  12 = 1.08 %i
 Compute   months CPT N 183.37
    12 = 15.28 yrs          110
 Comparison
$730       $830
30   yrs   15.28   yrs

                       111
       Payment Comparison
   $730.09Monthly      $830.09 Monthly
 x 360 # payments      x 183.37 # payments
 $262,833 Paid Back    $152,213 Paid Back
 - $66,000 Loan        -$66,000 Loan

 $196,833 Interest       $86,213 Interest

         $110,620 saved                112
    Credit Examples
   Payments on Mortgage &
        Credit Cards
   Time remaining on loans if
        increase payments
   Calculate monthly interest
        charge               113
Retirement Planning




                 114
Retirement Decisions

How  much
should I save for
retirement?
                   115
Retirement Goal
    $500,000
       By age 65
     40  years
    How much to
     save monthly?  116
  Goal: $500,000
 Clear registers   2nd CE/C CE/C
 Enter FV       500,000 FV
 % Rate   8 12 = 0.67 %i
# Periods  40 x 12 = 480 N
 CPT PMT           - 143.23
                      (don’t clear)
                                  117
  Note the minus
Ifyou save $143.23
 every month, you will
 have $500,000 in 40
 years
                         118
 What if ?????
You  already have
 $18,000 in savings that
 you have designated for
 retirement?
Now you have PV
                       119
    $500,000 ($18,000)
Clear registers 2nd CE/C CE/C
 Enter FV            500,000 FV
Enter PV              18,000 PV
% Rate        8 12 = 0.67 %i
# Periods       40 x 12 = 480 N
CPT PMT            - 18.07 (hold)
                               120
  Note the minus -18.07
If you save $18.07 every
 month, you will have
 $500,000 because you
 started with
 $18,000              121
 What if ?????
You already have
$90,000 in savings
that you have
designated for
retirement?          122
    $500,000 ($90,000)
 Clear   registers     2nd CE/C CE/C

Enter FV               500,000 FV
Enter PV                  90,000 PV
% Rate            8 12 = 0.67 %i
# Periods           40 x 12 = 480 N
               CPT PMT        482.56
                                  123
   Note there is no minus
You   can start
withdrawing $482.46
every month & you will
still have $500,000 in 40
years                   124
    Goal: $300,000
 Retire 20 yrs
 Has $5,000
 How much to
 save monthly?
                  125
     $300,000 ($5,000)
Clear   registers    2nd CE/C CE/C
Enter   FV            300,000 FV
Enter   PV              5,000 PV
 % Rate           8 12 = 0.67 %i
#   Periods        20 x 12 = 240 N
              CPT PMT      - 467.50
                                126
Goal: $100,000
     Retire 10yrs
     Has $15,000
     How  much to
      save monthly?
                  127
     Goal: $100,000
 Clear registers2nd CE/C CE/C
 Enter FV            100,000 FV
 Enter PV             15,000 PV
 % Rate        5 12 = 0.42 %i
#   Periods     10 x 12 = 120 N
              CPT PMT   - 484.89
                             128
Retired Couple
    “How  much can
     we take out of our
     retirement fund
     monthly if we
     want it to last 20
     years?”
                     129
     Retirement Fund $115,000

Clear   registers 2nd CE/C CE/C
Retirement    Fund 115,000 PV
#   Periods12 x 20 = 240 N
% Rate   4 12 = 0.33 %i
       CPT PMT 696.88        130
Single Person
     Retirement
      fund
      $250,000
     Last   30 years
                   131
      $250,000 (30 yrs)
Clear registers 2nd CE/C CE/C
Retirement Fund    250,000 PV
#         12 x 30 = 360 N
     Periods
% Rate    5 12 = 0.42 %i
       CPT PMT 1,342.05   132
IRA
      $50,000
      Supplement
      Social Security

      for 20 years   133
     $50,000 IRA
Clear registers 2nd CE/C CE/C
Retirement Fund     50,000 PV
#   Periods     12 x 20 = 240 N
%    Rate      4 12 = 0.33 %i
              CPT PMT 302.99134
Retired Couple
      “How   long will
      our retirement
      fund ($100,000)
      last if we take
      out $1,200
      monthly?”
                     135
   $100,000 fund
 Clear registers2nd CE/C CE/C
 Retirement Fund    100,000 PV
Payment               1,200 PMT
 % Rate      4  12 = 0.33 %i
 Compute   months CPT N 97.79
12   = 8.15 yrs (don’t clear)   136
   $100,000 fund
 Clear registers2nd CE/C CE/C
 Retirement Fund    100,000 PV
Payment               900 PMT
 % Rate      4  12 = 0.33 %i
 Compute   months CPT N 139.02
12   = 11.58 (don’t clear)   137
   $100,000 fund
 Clear registers2nd CE/C CE/C
 Retirement Fund    100,000 PV
Payment                650 PMT
 % Rate      4  12 = 0.33 %i
 Compute   months CPT N 216.10
12   = 18.01 years         138
    The difference
 $1,200 monthly = 8.15 yrs
 $ 900 monthly = 11.58 yrs
 $ 650 monthly = 18.01 yrs



                          139
Retirement Planning
Summary




                 140
    Retirement
Amount to
save monthly
to achieve
retirement
goals          141
    Retirement
Amount to
  take out monthly
  during retirement
based on life
expectancy            142
Retirement
  How   long
   retirement fund
   will last if take
   out specific
   amount monthly
                   143
Inflation


   1999 2.2%
               144
Inflation
   IfI need $1,500
    per month now
    …. how much
    will I need in 25
    years????      145
 INFLATION

Clear   registers 2nd CE/C CE/C
Enter PV       1,500 PV
Enter # Periods     25 N
Enter % Rate     6.3 %i
CPT FV 6,909.12 (hold)       146
 What if ?????
Inflation isonly 4.2%
 instead of 6.3%.….just
 change the inflation rate
 key
       %i
                         147
  INFLATION EXAMPLE

Clear   registers 2nd CE/C CE/C
Enter PV       1,500 PV
Enter # Periods    25 N
Enter % Rate     4.2 %i
CPT FV          4,195.50     148
  Difference 15 yrs
6.3% = $6,909.12
4.2% = $4,195.50


   $2,713.62
                    149
Inflation
   Ifwe need $2,000
    per month now
    …. how much
    will we need in 15
    years?         150
  INFLATION EXAMPLE

Clear   registers 2nd CE/C CE/C
Enter PV       2,000 PV
Enter # Periods    15 N
Enter % Rate      4 %i
CPT FV          3,601.89      151
Inflation
   IfI need $2,500
    per month now
    …. how much
    will I need in 25
    years?         152
  INFLATION EXAMPLE
Clear   registers 2nd CE/C CE/C
Enter PV        2,500 PV
Enter # Periods      25 N
Enter % Rate      4.25 %i
CPT FV           7,076.88    153
 $$$$$$$$$$$$
How a Financial
Calculator Can
Help You Make
   Deci$ion$  154
Marsha A. Goetting
Ph.D., CFP ®, CFCS
    Professor & Extension
      Family Economics
          Specialist
         Department of
    Agricultural Economics
         & Economics     155