HP 20b Business Consultant Financial Calculator User Manual download pdf (Page 35)

Time Value of Money

3 Time Value of Money

The examples in the following sections are calculated with the Mode menu preferences in their

default settings, unless otherwise noted. For more information about basic features and setting

preferences, see Chapter 1, Basic Features.

Time Value of Money (TVM) Keys

Cash flow diagrams are useful tools for analyzing financial situations, as they help you

identify the TVM functions needed to resolve your problem. A cash flow diagram is a drawing

with a set of vertical arrows arranged on a horizontal line. The horizontal line represents the

period of time from the beginning of the financing to the end. The vertical arrows represent

the money or cash flows at certain times throughout the period. The arrows' length is

proportional to the cash flow amount each arrow represents; a longer arrow indicates a larger

amount, a shorter arrow, a smaller amount. Each arrow's position on the line represents the

time at which the cash flow occurs. The orientation of the arrow, up or down, represents the

"direction" of the cash flow: up for money received, down for money paid out. See Figure 1.

Figure 1 Cash Flow Diagram Example with Corresponding TVM Keys

The TVM functions of the calculator can solve problems with at least one cash flow, and

problems in which all the cash flows, except the first and last, are of the same value. To solve

other types of cash flows, refer to Chapter 4, Canadian Mortgages: TVM Canada, or Chapter

5, Cash Flows.

(PV) Loan amount-

money received is

positive

(FV) Final loan

value

(if any)

PMT

(PMT) Amount paid out in

equal payments at regular

intervals

Q (P/YR) Payments per year

(N) Number of payments

or compounding periods

(Beg) (End) For payments occurring at the

beginning or end of the compounding period

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HP 20b Business Consultant Financial Calculator User Manual Page 35