Finance app 135
Performing TVM calculations
1. Launch the Finance App as indicated at the
beginning of this section. It is recommended you reset
the Finance app as shown before beginning a TVM
problem.
2. With a variable highlighted, type in the known values
starting with N, and press
E
or to store the
desired value. To manually navigate to a desired
field, press the arrow keys.
3. Type in a different value for P/YR as required. The
default value is 12, i.e., monthly payments.
4. With the End field highlighted, press the Check menu
key to uncheck this option for payments made
at the beginning of each period or leave it checked
for payments made at the end of each period.
5. Use the arrow keys to highlight the unknown variable
and press .
Example-mortgage
with balloon
payment
Suppose you have taken out a 30-year, $150,000 house
mortgage at 6.5% annual interest. You expect to sell the
house in 10 years, repaying the loan in a balloon
payment. Find the size of the balloon payment, the value
of the mortgage after 10 years of payment.
Solution The following cash flow diagram illustrates the case of the
mortgage with balloon payment:
FV The future value of the transaction: the
amount of the final cash flow or the
compounded value of the series of
previous cash flows. For a loan, this is the
size of the final balloon payment (beyond
any regular payment due). For an
investment this is the cash value of an
investment at the end of the investment
period.
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