2
Answer: $18,169.30. You will notice that the calculator displays the answer as a negative
number. The calculator solves problems by making the entered values equal zero. If you
think of the time line, one of the cash flows has to be negative. No one will give you
$10,000 today and $18,169.30 in 8 years. One of the cash flows must be negative. If you
think of this problem as a bank deposit then the initial cash flow is negative. Therefore,
type in: 10,000 +/- <PV> {this makes the initial cash flow negative}, 7.75 <I/Y>, 8 <N>,
<CPT> <FV>. You will notice that the answer is now a positive $18,169.30. This makes
sense since your cash flows are -$10,000 at time 0 and a +$18,169.30 at time 8. If you
analyze the problem from the bank’s point of view, the cash flows are +$10,000 at time 0
and -$18,169.30 at time 8.
A second question often asked here is the order of entering the values from the problem.
The BA II Plus does not require the values be entered in any particular order. For
instance, you could enter 7.75 <I/Y>, 8 <N>, 10,000 <PV> and then <CPT> <FV> and
you will still get the correct answer.
Present Value of a Lump Sum
You need to have $50,000 in ten years to go on an around the world cruise. How much do
you need to deposit today if you can earn 9.75%?
To solve, enter 50,000 <FV>, 9.75 <I/Y>, 10 <N> and then <CPT> <PV>
Answer: $19,720.81 {Did you remember to hit <2nd> <CLR TVM> first?}
Finding the Interest Rate
You invested $10,000 five years ago. You currently have $18,810 in you account. What
was your rate of return?
To solve, enter 10,000 +/- <PV>, 5 <N> and 18,810 <FV>, then <CPT> <I/Y>
Answer: 13.47%. Remember that one of the values must be negative. The answer will be
the same regardless of which one you enter as a negative.
Finding the Number of Periods
You earn 6.6% APR compounded monthly on your savings account. If you deposit
$3,000 today, how long will it take until you have $7,000 in your account?
To solve, enter 3,000 <PV>, 7,000 +/- <FV> and 6.6 ÷ 12 = <I/Y>, then <CPT> <N>.
Answer: 154.5 months, or 12.9 years. Note that you do not have to solve for the monthly
interest rate, clear it out of the calculator and then re-enter it.