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Compare Different Methods Used To Solve TVM Problems

Many of the problems we solve are what we refer to as time-value-of-money (TVM) problems, such as finding what a sum of money will grow to, or calculating a monthly payment for a car loan.Four different approaches are presented:

In           We use Calculators that can be used
Ch 10&11 Formulas Any calculator that has an exponent (power) key, like ^ or yx
Ch 12,13,17 Financial calculators HP 10B, HP 10BII, HP 10BII+, HP 12C,  HP 17B, TI BAII PLUS, LeWorld Financial.  Also, these graphing calculators will work: TI 83 PLUS, TI 84 PLUS,  HP 39gs, Casio 9750G PLUS.
Appendix E Excel Any calculator and Excel spreadsheet
ET 10B Tables Any calculator

Here are a few pros and cons of each method:


Using formulas is a fairly straightforward process, although using some of the formulas takes a fair amount of time, and it is easy to make a mistake along the way. Also, there is not a formula that will calculate an interest rate when a periodic payment is involved.

Tables are very easy to use and give quick results. But the answer is only as precise as the table values (many tables do not show values with an ample number of decimal places). Tables for an unusual interest rate (such as 6.9%) or term (such as 156 months) are not available in most publications, so a precise solution is often not possible with tables. Another drawback is the need to carry a set of tables around. And a big drawback: tables are not designed to solve for i (interest rate) and n (number of periods). Because of the serious limitations of tables, tables are NOT  used in the real world. Because of that, we have decided  to not include Compound Interest Tables in the text. However, because tables are used in some texts and courses(such as Accounting and Management), some instructors may prefer to at least expose their students to tables. So, we have included an Enrichment Topic (Enrichment Topic 10B) that shows the highlights of using tables. Enrichment Topics are provided on the Instructor Resource Materials CD.

Financial calculators
Using financial calculators gives quick, accurate results to all types of TVM problems. And financial calculators are easy to take anywhere. One drawback: We must buy a calculator (starting at about $35). Another possible drawback: Some people get used to pushing buttons and forget the need for common sense (Garbage In, Garbage Out).

As mentioned above, some graphing calculators can be used to solve TVM problems, although it should be noted that keystrokes for graphing calculators can be quite tedious for many of the applications. Keystrokes for the 7 financial calculators, 4 graphing calculators, and a few other popular calculators are shown on our website; to see keystrokes, click here.

Excel can be used to solve a variety of TVM problems. Using Excel is not ideal for amortization problems because Excel does not provide an amortization program that gives accurate results. We must have access to a computer that has an Excel spreadsheet program installed.