Calculator

Financial Calculator
v1.0 30-Jun-2007

Number of payments N 12
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Interest rate per annum % INT 10.00
Present value PV -1,000.00
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Payment PMT 0.00
Future value FV 0.00

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Payment Toggle Begin/End Begin
Payment Frequency Quarterly

N INT PV PMT FV

Answer: Payment (PMT) $ 95.11

© Systematic Finance plc : Tel +44 (0)1483 532929

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ReadMe Notes v1.0 30-Jun-2007

This application works like a hand held pocket financial calculator such as Hewlett Packard HP12C or 18C - only
much faster and with a printed output!

The calculator deals with single amount cash flow calculations taking into account the ‘time-value’ of money.
You can usually reduce all problems to their individual cash flows and an invaluable aid is a cash flow diagram.
This is simply a pictorial representation of the timing and direction of the financial transactions.

The horizontal line is time, divided into equal compounding periods. The exchange of money is depicted by vertical
arrows. Money you receive (positive) is represented by an arrow pointing upwards, money you pay out (negative)
is represented by a line facing downwards.

Suppose you lent 1,000 over three years with quarterly payments in advance at a rate of 14% and you wanted to
know the repayment per quarter where payments are to be made at the start of each quarter. The diagram would
look like this:

Cash IN Subsequent Cash 12 * ?? Final Cash=0

Cash OUT Initial Cash Flow = 1,000 Negative

The answer is 99.98 per period for the 12 periods which equates to a rate of 14% per annum.

Note: Every completed cash flow must have at least one flow in each direction otherwise there is no solution and
the model will error. Using the cash flow convention, you should enter cash out as negative, and cash received as
positive. Remember always to think about a problem using a cash flow diagram and then observe the convention
otherwise you may get errors or unexpected results.

The elements of the cash flows are usually denoted by these abbreviations:
N Number of periodic payments (in the above case 12 as it is 3 years with quarterly payments)
INT Interest rate per period.
PV Present value is the initial cash flow or present value of the future cash flows. Above this is 1,000.
PMT Payment is the periodic payment or repayment.
FV Future value is the final cash flow or the compounded value of a series of prior cash flows.

Note: The interest rate is divided by the number of payments per annum. An annual rate of 10% would become
2.5% per quarterly compounding period. The interest rate per period and the type of N have to be compatible.

Payment mode: periodic payments can occur at the beginning or end of each period. The result varies due to the
compounding effect and time of payment.

Below the model displays the answer to the above problem. The entries are:

N 12
Payment Interval 3 (equates to quarterly rentals, 1=Monthly, 6 = Bi-annual, 12 = Annual)
INT 0% per annum
PV -1,000
PMT 99.98
FV 0
Advance/Arrears 1 (1 = Advance, 0 = Arrears. This sets automatically for multiple rentals)

Press the ‘Calculate’ button or press F9. The system displays the interest rate per annum as 13.9963%.

This model is suited for calculating rentals, loan repayments or bond values. When there is only one payment
stream, you can use the model to find the missing variable. It solves the variable where you enter zero.

© Systematic Finance plc : Tel +44 (0)1483 532929

ReadMe : Page