HAND-HELD CALCULATORS

I. Background: TI – BA II Plus

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: What’s 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
III. Cash Flow Analysis (CF): TI - BA II Plus

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
2—5 2 5,000 for each year
6 3 4,000

Next you’ll 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 ] nd
“2 ” [CLR CF0= 0.00 You must be in a worksheet
WORK] 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.

IV. HP - 10B
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.
To set P/YR to 1: Press 1 ? [P/Y]

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: What’s 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
2—5 2 5,000 for each year
6 3 4,000

Next you’ll 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
7,000 “+/-“ “CFj” Initial cash flow
3,000 “CFj” Cash flow for first year
5,000 “CFj”
4 ? [Nj] Frequency of C02 is 4, which represents cash flows for years two
through five
4,000 “CFj” Cash flow for sixth year
20 “I/YR” Annual interest rate
? [NPV] 7,625.99
? [IRR/YR] 55.63
If there is no initial cash flow, then the CF0 = 0. The following steps are the same.

E. Decimal Place Settings

The HP-10B 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 ? [DISP] 4