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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

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posted: | 6/24/2011 |

language: | English |

pages: | 155 |

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