T.V.M Solver Book Report

The T.V.M. solver is based on the concept that an investor would rather receive a fixed amount of money today, opposed to getting that same amount of money on a future date. Basically the time value of money represents the interest you would earn on a payment received today, if held, earning interest, until that future date.

To open the T.V.M. solver on your calculator you simply need to prees [APPS], [ENTER], [ENTER] which will bring you to a screen with the following variables:
N: Number of compounding periods. Type this in as number of years times number of compounding periods per year.
I%: Interest rate. Type this in as a rate, NOT as a decimal.
PV: Previous Value. This is the starting value of the account. If it’s a loan, the amount will be positive, the amount you owe. If it’s a savings account, the amount will be negative, the amount you (take out of your pocket and) put in. If you don’t start the savings account with a deposit, this value will be zero.
PMT: Payment amount. Since this is coming out of your pocket, it’s negative. If you’ve started a savings account with a deposit, and don’t plan to make regular deposits, this will be zero.
FV: Future value. For savings, this will be the value after a given number of compounding periods. For a loan, this should be 0.
P/Y: Payments per year. This number should be the same as the next item, unless specified otherwise in the problem.
C/Y: Compounding periods per year. See above.
PMT: END BEGIN: Will the payments be due at the beginning or end of
the month.
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EXAMPLE
1.) Now, suppose you are taking out a 5-year loan on $25000 at 6% annual interest compounded monthly and you want to know the monthly payment. Fill in the values on the TVM Solver screen as shown:
(Enter N as 5 years * 12 compounding periods per year)
N=60
I%=6
PV=25000
PMT=
FV=0
P/Y=12
C/Y=12
PMT=END

2.) Now, move the cursor to PMT, press the green ALPHA key, then ENTER.
Your payment will show up as a negative number (since it’s coming out of your
pocket):
N=60
I%=6
PV=25000
PMT=-483.32003...
FV=0
P/Y=12
C/Y=12
PMT=END
3.) Suppose you know you can afford a $250 per month payment on a 60 month loan at 6% annual interest compounded monthly. You can enter N as 60, since
they didn’t give you a number of years. Fill out the TVM Solver screen as
shown:
N=60
I%=6
PV=0
PMT=-250
FV=0
P/Y=12
C/Y=12
PMT=END
4.) To find how much you can afford to borrow, move the cursor to PV, press the
green ALPHA key, then ENTER. The amount you can afford to borrow is
shown:
N=60
I%=6
PV=12931.39019
PMT=-250
FV=0
P/Y=12
C/Y=12
PMT=END