Chapter 14: Applications
253
Getting Started: Computing Compound Interest
At what annual interest rate, compounded monthly, will 1,250 accumulate to 2,000 in 7 years?
Note:
Because there are no payments when you solve compound interest problems,
PMT
must be
set to
0
and
P/Y
must be
set to
1
.
1. Press
Œ Í
to select
1:Finance
from the
APPLICATIONS
menu.
2. Press
Í
to select
1:TVM Solver
from the
CALC
VARS
menu. The TVM Solver is displayed.
3. Enter the data:
N=
7
PV=
M
1250
PMT=
0
FV=
2000
P/Y=
1
C/Y=
12
4. Move the curstor to
æ
and press
ƒ \
.
Y
You need to look for an interest rate of 6.73% to grow
1250 to 2000 in 7 years.
Using the TVM Solver
Using the TVM Solver
The TVM Solver displays the time-value-of-money (TVM) variables. Given four variable values,
the TVM Solver solves for the fifth variable.
The
FINANCE VARS
menu section describes the five TVM variables (
Ú
,
æ
,
PV
,
PMT
, and
FV
) and
P/Y
and
C/Y
.
PMT: END BEGIN
in the TVM Solver corresponds to the
FINANCE CALC
menu items
Pmt_End
(payment at the end of each period) and
Pmt_Bgn
(payment at the beginning of each period).
To solve for an unknown
TVM
variable, follow these steps.
1. Press
Œ Í Í
to display the TVM Solver. The screen below shows the default
values with the fixed-decimal mode set to two decimal places.