Picturing Financial Problems
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Figure 4 Cash flow diagram (Borrower’s perspective)
One of the values for PV, PMT, FV can be zero. For example, following is a cash flow diagram
(from the saver’s perspective) for a savings account with a single deposit and a single
withdrawal five years later. Interest compounds monthly. In this example, PMT is zero.
Figure 5 Cash flow diagram (Saving perspective)
Time value of money calculations are described in the next chapter titled, Time Value of
Money Calculations.
Recognizing a Cash Flow Problem
A financial problem that does not have regular, uniform payments (sometimes called uneven
cash flows) is a cash flow problem rather than a TVM problem.
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