🔍
Time Value of Money Calculations on the BA II Plus Calculator - YouTube
Channel: Joshua Emmanuel
[0]
Welcome to this Time Value of Money calculations
tutorial using the BA II Plus calculator,
[5]
compiled by Andrew Rossman.
[8]
In this tutorial we will only be using these
”Time Value of Money” keys.
[13]
That is, we will not be changing P/Y and C/Y
values.
[18]
P/Y and C/Y will be left at their default
values 1.
[22]
So if you plan on changing them, please see
other videos posted on this channel.
[27]
We will enter incoming payments as positive
and outgoing payments as negative.
[34]
You can change the decimals to your desired
number of decimal places by pressing 2nd FORMAT.
[42]
You can choose 9 to display all decimals but
I will leave it at 2.
[47]
Press enter, and then 2nd quit.
[51]
Before solving any problem, Press 2nd CLR
TVM to clear these TVM entries
[60]
You can always check the value stored in the
TVM entries by pressing the Recall button
[66]
and then the TVM key.
[69]
For example, RCL PV shows 0, and RCL PMT also
shows 0 because I cleared the TVM entries.
[81]
So let’s look at the first example:
Solving for Payment.
[87]
Laura takes a 15-year, $500 000 mortgage,
on a new condo.
[92]
At an interest rate of 4% (that is compounded
monthly), what is the monthly payment?
[98]
So we begin by pressing 2nd CLR TVM to clear
previously done work.
[106]
Since we have monthly payments for 15 years,
there will be 15x 12 payments which equals
[112]
180 payments in total.
[114]
So we input 180 N
For the interest rate, we divide the 4% by
[122]
12 by pressing 4 divided by 12 equals 0.33
and then press I/Y.
[132]
Note that there are more decimal places not
displayed by the calculator because it is
[137]
set to 2 decimal places.
[139]
Although the remaining decimals are not displayed,
they will still be used in the computations.
[146]
Note that it will be incorrect to just type
0.33 and press I/Y.
[152]
You will be missing the remaining decimal
places not displayed by the calculator.
[158]
For Present value we enter 500,000 Present
Value
[167]
Since we will have 0 balance at the end of
15 years, we enter 0 Future Value
[175]
And then CPT Payment.
[178]
And that gives $3,698.44
Note that the value is negative because we
[184]
input the present value as positive.
[188]
The next example shows how to solve for Present
Value.
[192]
Helene is planning ahead for her daughter
Paula’s college tuition.
[196]
Paula begins college in 5 years and will need
$80,000.
[200]
How much would Helene have to invest today
at 6% compounded annually to have $80,000
[207]
in 5 years?
[209]
This is a compound interest problem where
the present value is required.
[213]
We begin by clearing TVM entries by pressing
2nd CLR TVM.
[219]
Since the duration is 5 years and interest
is compounded annually, we input 5 for N by
[226]
pressing 5 N.
For 6% interest rate, we press 6 I/Y
[234]
Since there are no recurring payments we input
0 PMT.
[240]
For the future value, we enter 80,000 FV.
[246]
And then compute PV
Which gives 59,780.65.
[257]
Next let’s solve for future value.
[260]
Josh has an investment account with $50,000.
[264]
If Josh earns 6% per year and contributes
$400 each month, how much will his investments
[271]
be worth in 10 years?
[273]
Note here that interest is compounded per
year.
[276]
Therefore, interest will not be applied to
the $400 monthly payments until after 1 year.
[283]
That is, until the payments add up to 12 x
400 which is $4800.
[289]
In essence, we actually have 10 conversion
periods over the 10 years.
[294]
So we input 10 N
For interest rate we input 6 I/Y
[305]
We input 50,000 PV
And 4800 PMT.
[316]
We then compute future value which gives 152,810.20
Next we solve for time.
[326]
Example 4 – Solving for Time
Steven has $25,000 in credit card debt.
[332]
His credit card charges 2% in monthly interest
and Steven pays $1,000 each month toward the
[339]
balance.
[340]
If Steven doesn’t make any further purchases,
how many months will it take to fully repay
[345]
his debt.
[346]
At 2% monthly interest rate, let’s input
2 I/Y.
[353]
25,000 PV for the debt amount
Since the payment is made to reduce the debt,
[361]
we input it as a negative value:
1,000 negative, and then PMT
[370]
Since the debt will be fully repaid, we input
0 for the future value: 0 FV.
[377]
And then compute N which gives 35 months.
[381]
Next we solve for interest rate
[383]
Martin’s savings account has $25,000 today.
[387]
In 5 years, the account is worth $32,000.
[392]
What is the annual interest rate?
[395]
Since interest is compounded annually for
5 years, we input 5 N.
[401]
We’ll have to input the 25000 present value
as negative because it is an outflow.
[407]
So we enter 25 000, negative, PV.
[417]
We enter 0 PMT as there are no periodic payments.
[422]
For future value we enter 3200 FV
And then compute interest rate I/Y which gives
[433]
5.06%.
[435]
And that concludes this tutorial.
[438]
Thanks for watching.
Most Recent Videos:
You can go back to the homepage right here: Homepage