# Financial Calculators

Document Sample

```					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
Savings & Investments

6
Credit

7

8
Car Purchase

9
College Education

10
Retirement Planning

11
Financial Calculator
Texas Instruments
Analyst
most discount stores
12
Introduction
Getting
Acquainted with
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
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
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
to our present
savings?             47
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%
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
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
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

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
Monthly

69
Retirement Fund--\$15,000
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 ?????
\$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 ?????
\$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%
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
Deci\$ion\$  154
Marsha A. Goetting
Ph.D., CFP ®, CFCS
Professor & Extension
Family Economics
Specialist
Department of
Agricultural Economics
& Economics     155

```
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