Calculators and computers have made many calculations easy. You can
use an ordinary hand calculator, a very powerful computer, or anything in
betweeen once you understand the concepts. You should also understand the behavior or the model, and the usual names of the variations in common use.
Unless you are using a printed copy of this note you have access to a PC, and the links below.
These NOTES include:
Some Time ValueExamples including links to
sample calculations by various tools.
Note that you can do simple calculations in the data entry boxes of
these functions. The most common primitives and symbols are:
multiplication *, e.g. changing years to months 6 * 12
division /, e.g. changing a nominal annual rate to an effective
short period rate such as 8.5% daily would be 8.5 / 365
These notes use mostly Lotus 123, or EXCEL spread sheet
examples. Note: Most spread sheet
calculators have similar behaviors.
A hand calculator which has a memory. Ideally the calculator
should have yx, +/-, and 1/x keys. (specialized business
analysis calculators with built in time value functions have been available
for many years). If your calculator has an yx (X raised to power n)
function it simplifies the calculations. The
compound interest formulas are as shown on this link.
APL- A long established high level computer language that has a
mathematical ancestry. Start demoAPL workspace tv2
; Note: Use 9 x 11 font size and expand the window for easy use.
Many text books about this and similar subjects contain tables of
compound interest factors. Such tables are really not needed if a
calculator with yx is available. The basis for the tables is
versions of (1 + i)n.
A table of powers of (1 + i) is easily computed with an low level four
function calculator. The table starts at time 0, then includes time 1, time 2,
and so on until the number of periods is sufficient for your purposes.
If your application is discounting, i.e. finding the present value of
one or more future values make the table of the powers of 1 / (1 + i)
n, i.e. (1+i)-n. If the application is estimating
Future Values from present Values,
then make the table of (1+i)n. For general use you can make a table
that includes both powers of -n and n.