Overview
TVM worksheet can effectively handle models with constant cash flows. Below are the five variables and their definitions respectively.
| Variable | Definition |
|---|---|
| N | Number of periods |
| I/Y | Annual Interest Rate |
| PV | Present Value |
| PMT | Payment |
| FV | Future Value |
Example 1
What is the FV of $100 after 5 years given annual interest rate of 11%?
Steps:
2ND AC (Clear TVM worksheet)
100 PV 5 N 11 I/Y CPT FV
Result: -168.5058155
Note the negative sign means a cash outflow as we assume initially a cash inflow of $100.
Example 2
How much would you pay for a bond that gives you $1000 in 10 years and annual coupon of $100, given that interest rate is 12.5%?
Steps:
2ND AC (Clear TVM worksheet)
1000 FV 10 N 12.5 I/Y
100 PMT CPT PV
Result: -861.5892295
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