Tvm Calculations: Another Example - HP NW280-200X User Manual

TVM calculations: Another example

Finance app
The nominal annual interest rate (or
I%YR
investment rate). This rate is divided by the
number of payments per year (P/YR) to
compute the nominal interest rate per
compounding period. This is the interest
rate actually used in TVM calculations.
The present value of the initial cash flow.
PV
To a lender or borrower, PV is the amount
of the loan; to an investor, PV is the initial
investment. PV always occurs at the
beginning of the first period.
The number of payments made in a year.
P/YR
The periodic payment amount. The
PMT
payments are the same amount each
period and the TVM calculation assumes
that no payments are skipped. Payments
can occur at the beginning or the end of
each compounding period—an option
you control by un-checking or checking
the End option.
The number of compounding periods in a
C/YR
year.
The future value of the transaction: the
FV
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 its value at the end of the
investment period.
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—that is,
the value of the mortgage after 10 years of payment.
The following cash flow diagram illustrates the case of a
mortgage with balloon payment:
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