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Let's go over a few basic functions to get you started.

The 2ND key is typically used for financial calculations.

The BGN function sets the amounts at the beginning of each period,

as opposed to the end of each period.

The CE/C key clears the on-screen data, but

it doesn't delete any numerical values that have been entered.

The CLR TVM function cancels all the numerical values and

resets the calculator's default financial values.

It is important to clear your calculator before

performing each calculation by pressing 2ND and CLR TVM keys.

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Please remember three steps before you start.

First, clear the calculator's memory by pressing the 2nd and CLR TVM keys.

This prevents previously stored data from interfering in your calculations.

Second, make sure you are entering either negative amounts for outflows or

positive amounts for inflows.

This allows for the calculator to convert them into present or future value.

Third, when you enter an interest rate expressed as 0.08 simply enter 8.

Now let's look at how to solve the Time Value problems using the financial

calculator.

To solve Time Value problems,

notice there are five time value money keys in the third row.

N stands for Number of Periods.

I/Y stands for Effective Interest Rate.

PV stands for Present Value.

PMT stands for Payment Each Year.

And FV stands for Future Value.

Now suppose you are calculating the future value of $100 invested at 10% for

five years.

Let's start with three steps.

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Enter 100 followed by negative side and press PV, the present value button.

Now, enter 10 then press IY, which stands for the interest rate, and

finally enter the number of period by entering 5 and pressing N button.

All the given values have now been entered, so we can solve for

future value by pressing the CPT button, which in this case, is future value, FV.

You should get 161.05.

Note, if you got -161.05,

you forgot to put a negative sign in front of the present value.

All present value and future value problems follow the same steps.

Next, let's work with annuities to solve a future value.

Suppose you plan to contribute $1,000 every year

into a Registered Retirement Savings Plan that is expected to earn 6%.

If you retire in 20 years, how much will you have saved?

Let's begin by clearing the memory by pressing the 2ND and CLR TVM keys.

Now enter the data 20 followed by pressing the N button

specifies the number of periods.

Now enter 6, and press IY button, which specifies the interest rate.

Finally, enter -1,000, because it is a cash outflow, and press PMT button.

To solve the problem, press the CPT key, followed by the FV key.

You will get the answer $37,106.30, which is what you will have

20 years from now if you contribute $1,000 every year earning 6% interest rate.

Now let's learn what are likely two of the most widely used financial functions.

The Net Present Value or NPV, and the internal rate of return, or IRR.

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C02 is cash flow for year two,

where F02 is the frequency of C02 and so on.

Suppose you invest $3000,

which will generate the following end of year cash flows.

CF0 is -3000.

C01 is 1000.

F01 is 2, because you get 1000 after both year one and

year two, and then your C02 is 2000, and F02 is 1.

Assume that interest rate is 10%.

To find the Net Present Value, or NPV, use these simple steps.

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First, Press CF key and enter 3,000 followed by negative

sign as your C of 0 value and press Enter and the down arrow.

Second, enter 1000 as your first year cash inflow, press Enter and the down arrow.

Third, enter 2 for frequency and press Enter and the down arrow.

Fourth, enter 2000 as your second cash inflow, press Enter and down arrow.

Fifth, press Enter 1 for frequency, 2,

F02 and press Enter and down arrow.

Six, enter the interest rate by pressing NPV and enter 10,

not 0.10, and press Enter and the down arrow.

Seven, and finally, press compute, or the CPT key.

You will get a net present value equal to $238.17.

If you don't clear any values just yet and press the IRR key and

then the CPT key, you will get an IRR equal to 13.94%.

The last example that we will calculate is the Future Value of an Annuity

using an ordinary annuity and an annuity due.

ABC company purchased equipment providing an annual savings of

$20,000 over 10 years.

Assume the interest rate is 10%.

What is the present value of the savings using an ordinary annuity and

an annuity due?

First set your calculator to defaults by pressing the 2nd,

followed by the +/- sign and press ENTER.

Now enter 10, press N for number of periods, enter 10 and

press I/Y key to set the interest rate to 10%.

Enter payment of 20,000 followed by the negative sign.

And to solve, press CPT followed by PV.

Your answer should be $122,891.34.

Now let's calculate the same problem using an annuity due.

Press 2nd, followed by PMT, followed by 2nd, and

ENTER to change your calculator mode to beginning of period payments.

Now press 2nd and CPT key and then CPT key followed by PV key to

calculate the present value of the savings.

You will get $135,180.48.

Now you know how to solve the time value of money, future value of annuities,

net present value, internal rate of return, and ordinary and

annuity due problems using a financial calculator.