Using Templates | Description | Variables | Amortization | Menus | Examples
Description
This template is for Time Value of Money (TVM) calculations. Time value of money is the process of earning compound interest over a period of time. Compound interest problems assume that the interest earned also earns interest. Computations such as loans, leases, mortgages, annuities, and savings accounts are examples of compound interest problems.
In time value problems, positive and negative numbers have different meanings: positive numbers are inflows of cash (cash received) while negative numbers are outflows (cash paid). A car loan, for instance, may have a positive present value (because money was received from the loan company) but will have a negative payment amount, since this is money that will be paid back to the loan company. See the Template Understanding Cash Flows section for a pictoral explanation of inflows and outflows.
Variables
- Pmt Timing: payment timing. Payments occur at the beginning or end of the period. Payments made at the beginning of the period are called Annuity Due. Most leases are this kind. A payment made at the end of the period is called an Ordinary Annuity. Most loans are this kind.
- Present Val: present value.
- Future Val: future value.
- Payment: payment amount per period.
- Intrst/Yr%: interest per year as a percentage. For example, 8.25% interest should be entered as "8.25".
- Periods: number of total periods. This number is the number of years and months times the periods per year. For example, if the loan is 4 years with 12 payments per year (monthly payments), periods should be 48 (4 x 12).
- Periods/Yr: number of payment periods per year. For example, if payments are made quarterly, periods per year should be 4.
- Cmpnds/Yr: number of interest compounding periods per year. Most of the time, compounding periods per year should equal payment periods per year. For example, if payments are made monthly and interest is compounded monthly, compounding periods per year and periods per year should both be 12.
Menus
- xP/Y: quick set button for the number of periods. This button multiplies the value in periods by the value in periods per year. For example, to convert 10 years at 12 periods per year to periods, enter 10 in periods, 12 in periods per year, and select the xP/Y menu.
- ÷P/Y: quick set button for the number of periods. This button divides the value in periods by the value in periods per year. For example, if periods is 60 with periods per year equal to 12, discovering that it is equal to five years can be done easily by selecting the ÷P/Y menu.
- Amortization: access to the amortization screen. If no data is entered in the TVM template, the amortization screen will not appear.
Examples
Car Loan with Amortization
Retirement Annuity
Savings Account
Mortgage
Balloon Payment
Canadian Mortgage
Bi-Weekly Mortgage Payments
APR of a Loan with Fees
Lease with Advanced Payments
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