26
Section
1:
Using
|
SOLVE
|
Effectively
Applications
The
following applications illustrate
how you can use |
SOLVE
j
to
simplify
a
calculation
that
would normally
be
difficult—finding
an
interest
rate
that
can't
be
calculated directly. Other applications
that
use the |
SOLVE
|
function
are
given
in
sections
3 and 4.
Annuities
and
Compound Amounts
This
program solves
a
variety
of
financial problems involving
money,
time,
and
interest.
For
these problems,
you
normally know
the
values
of
three
or
four
of the
following variables
and
need
to
find
the
value
of
another:
The
number
of
compounding periods. (For example,
a 30
year loan with monthly payments
has n =12 X 30
=
360.)
The
interest
rate
per
compounding period expressed
as a
percent.
(To
calculate
i,
divide
the
annual percentage
rate
by
the
number
of
compounding periods
in a
year.
That
is,
12%
annual interest compounded monthly equals
1%
periodic
interest.)
PV The
present
value
of a
series
of
future
cash
flows
or the
initial
cash
flow.
PMT
The
periodic
payment
amount.
FV The
future
value.
That
is, the
final
cash
flow
(balloon
payment
or
remaining balance)
or the
compounded value
of
a
series
of
prior
cash
flows.
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