A. Every time you begin a new calculation, remember to clear the previous worksheet.
1. To clear TVM worksheet
2nd [CLR TVM]
2nd [Quit]
2. To clear CF worksheet
2nd [CLR WORK]
2nd [Quit]
B. Decimal Place Settings
The BA II Plus displays two decimal places by default. You can change how many decimal places the calculator displays.
To set the number of decimal places to four
|
Press |
Display |
|
2nd [format] 4 enter |
DEC= 4.0000 |
|
2nd [quit] |
0.0000 |
C. Variables
There are six operational variables, which you can enter in any sequence. You can check the value of any of the first five variables during a calculation by pressing RCL and the variable key.
|
Variable |
Meaning |
|
N |
Total number of payments periods |
|
I/Y |
Annual interest rate |
|
PV |
Present Value |
|
FV |
Future Value |
|
PMT |
Payment amount |
|
? |
Down arrow on calculator |
II. Time-Value-of-Money
(TVM): TI-BA II PLUS
A. Payment and Compounding Setting (P/Y; C/Y)
The BA II Plus defaults to 12 payments per year (P/Y) and 12 compounding periods per year (C/Y). You can change one or both of the settings to any number.
To set both the P/Y and C/Y to 1
|
Press |
Display |
|
2nd [P/Y] 1 enter |
P/Y= 1.00 |
|
2nd [P/Y] ? 1 enter |
C/Y= 1.00 |
|
2nd [Quit] |
0.0000 |
The above example shows annual compounding.
To set the P/Y to 12 and the C/Y to 4
|
Press |
Display |
|
2nd [P/Y] 12 enter |
P/Y= 12.00 |
|
2nd [P/Y] ? 4 enter |
C/Y= 4.00 |
|
2nd [Quit] |
0.0000 |
B.
Examples
1. Present Value of a single
sum.
You want to receive $100,000 in five years. How much would you have to invest today at 6% compounded annually?
· set the BA II Plus to 1 for P/Y and C/Y
· Clear the TVM worksheet:
2nd [CLR TVM]
2nd [Quit]
|
Press |
Display |
|
100,000 FV |
FV= 100,000.00 |
|
5 N |
N= 5.00 |
|
6 I/Y |
I/Y= 6.00 |
|
CPT PV |
PV= -74,725.82 |
2. Future Value of a single sum.
You invest $10,000 today at 6% compounded annually. How much will you get at the end of five years?
· set the BA II Plus to 1 for P/Y and C/Y
· Clear the TVM worksheet:
2nd [CLR TVM]
2nd [Quit]
|
Press |
Display |
|
10,000 +/- PV |
PV= -10,000.00 |
|
5 N |
N= 5.00 |
|
6 I/Y |
I/Y= 6.00 |
|
CPT FV |
FV= 13,382.26 |
3. Compute the interest compounded annually.
Suppose PV=$20,000, FV=$30,000, N=5 years
Question: Whats the annual interest rate?
· set the BA II Plus to 1 for P/Y and C/Y
· Clear the TVM worksheet:
2nd [CLR TVM]
2nd [Quit]
|
Press |
Display |
|
20,000 +/- PV |
PV= -20,000.00 |
|
30,000 FV |
FV= 30,000.00 |
|
5 N |
N= 5.00 |
|
CPT I/Y |
I/Y= 8.45 |
4. To calculate annual income.
Assuming you will live 20 years after retiring at age 60 and will earn 8% on your investments. What will be your annually income from $1,000,000.00?
· set the BA II Plus to 1 for P/Y and C/Y
· Clear the TVM worksheet:
2nd [CLR TVM]
2nd [Quit]
|
Press |
Display |
|
|
1,000,000 +/- PV |
PV= -1,000,000.00 |
This is a negative number |
|
20 N |
N= 20.00 |
|
|
8 I/Y |
I/Y= 8.00 |
Compounded annually |
|
CPT PMT |
PMT= 101,852.21 |
|
If you saved $1,000,000 by age 60, you could retire and receive $101,852.21 per year for 20 years.
5. To
calculate monthly income.
If you are 25 years old, and want to retire at age 60 with $1,000,000.00, how much do you need to save each month? In this example, your savings account pays 6% interest, compounded monthly.
· Set the BA II Plus to 12 for P/Y and C/Y.
· Clear the TVM worksheet.
|
Press |
Display |
|
|
1,000,000 FV |
FV= 1,000,000.00 |
|
|
420 N |
N= 420.00 |
12 monthly payments for 35 years |
|
6 I/Y |
I/Y= 6.00 |
|
|
CPT PMT |
PMT= -701.90 |
|
Assume you have an investment of $7,000 that is projected to generate a 20% return. Over the next six periods, the investment will generate the cash flows shown below:
|
Year |
Cash Flow NO. |
Cash Flow Estimate |
|
1 |
1 |
3,000 |
|
25 |
2 |
5,000 for each year |
|
6 |
3 |
4,000 |
Next youll access and clear the cash flow worksheet, enter the data, compute the IRR, and compute the NPV using an interest rate per period ( I ) of 20%.
|
Press |
Display |
|
|
[CF ] 2nd [CLR WORK] |
CF0= 0.00 |
You must be in a worksheet before you can clear it |
|
7000 +/- enter |
CF0 = -7,000.00 |
Initial cash flow |
|
? 3,000 enter |
C01= 3,000.00 |
Cash flow for first year |
|
? |
F01= 1.00 |
Frequency of C01 is 1 |
|
? 5,000 enter |
C02= 5,000.00 |
|
|
? 4 enter |
F02= 4.00 |
Frequency of C02 is 4, which represents cash flows for years two through five |
|
? 4,000 enter |
C03= 4,000.00 |
Cash flow for sixth year |
|
? |
F03= 1.00 |
Frequency of C03 is 1 |
To compute the IRR (Internal Rate of Return)
|
Press |
Display |
|
|
IRR |
IRR= 0.00 |
Look for the word compute in small letters at the top of the display |
|
CPT |
IRR= 55.63 |
Look for an asterisk (*) in the display |
When the word Compute appears in the display, it means the only function you can perform is to compute the value of IRR. The * indicates a computed answer.
To compute the NPV, using a 20% interest rate
|
Press |
Display |
|
|
NPV |
I= 0.00 |
Look for the word enter in small letters at the top of the display |
|
20 enter |
I= 20.00 |
|
|
? CPT |
NPV= 7,625.99 |
Compute the NPV |
When the word Enter appears in the display, it means you can enter a different interest rate. If you enter a different interest rate and press ? CPT, the computed NPV reflects the change.
If there is no initial cash flow, then the CF0 = 0. The following steps are the same.
Before beginning a new problem, clear the display and financial registers by pressing
? [CLEAR ALL]
A.
Variables
There are six variables, which you can enter in any sequence.
|
Variable |
Meaning |
|
N |
Total number of payments periods |
|
I/YR |
Annual interest rate |
|
PV |
Present Value |
|
FV |
Future Value |
|
PMT |
Payment amount |
|
? |
Down arrow on calculator |
B. Compounding Frequency Setting (P/YR)
The
HP-10B defaults to 12 compounding periods per year (P/YR). You can change the
settings to any number.
C. Examples
1. Present Value of a single sum.
You want to receive $100,000 in five years. How much would you have to invest today at 6% compounded annually?
· set the compounding frequency to 1 by pressing: 1 ? [P/Y]
· Clear the TVM worksheet
|
Press |
|
100,000 FV |
|
5 N |
|
6 I/YR |
|
PV |
Result: PV= -74,725.82
2. Future Value of a single sum.
You invest $10,000 today at 6% compounded annually. How much will you get at the end of five years?
· set the compounding frequency to 1 by pressing: 1 ? [P/Y]
· Clear the TVM worksheet
|
Press |
|
10,000 +/- PV |
|
5 N |
|
6 I/YR |
|
FV |
Result: FV=13,382.26
3. Compute the interest compounded annually.
Suppose PV=$20,000, FV=$30,000, N=5 years
Question: Whats the annual interest rate?
· set the compounding frequency to 1 by pressing: 1 ? [P/Y]
· Clear the TVM worksheet
|
Press |
|
20,000 +/- PV |
|
30,000 FV |
|
5 N |
|
I/YR |
Result: I/YR=8.45
4. To calculate annual income.
Assuming you will live 20 years after retiring at age 60 and will earn 8% on your investments. What will be your annually income from $1,000,000.00?
· set the compounding frequency to 1
· Clear the TVM worksheet
|
Press |
|
1,000,000 +/- PV |
|
20 N |
|
8 I/YR |
|
|
|
PMT |
Result: PMT=101,852.21
If you saved $1,000,000 by age 60, you could retire and receive $101,852.21 per year for 20 years.
5. To calculate monthly income.
If you are 25 years old, and want to retire at age 60 with $1,000,000.00, how much do you need to save each month? In this example, your savings account pays 6% interest, compounded monthly.
· set the compounding frequency to 1
· Clear the TVM worksheet
|
Press |
|
|
1,000,000 FV |
|
|
420 N |
12 monthly payments for 35 years |
|
6 I/YR |
|
|
PMT |
|
Result: PMT= -701.90
D.
Cash Flow Analysis (CF)
Assume you have an investment of $7,000 that is projected to generate a 20% return. Over the next six periods, the investment will generate the cash flows shown below:
|
Year |
Cash Flow No. |
Cash Flow Estimate |
|
1 |
1 |
3,000 |
|
25 |
2 |
5,000 for each year |
|
6 |
3 |
4,000 |
Next youll access and clear the cash flow worksheet, enter the data, co