HP HP-18C - Cash Flow Diagrams and Signs of Numbers

Cash Flow Diagrams and Signs of Numbers
It is helpful to illustrate TVM calculations with cash flow diagrams .
Cash flow diagrams are time lines divided into equal segments of time
called payment periods or compounding periods. Arrows show the cash
flows.
Money received is a positive number, and the arrow points up .
Money paid out is a negative number, and the arrow points down .
Figure 4-2
shows a typical TVM cash flow diagram .
Figure 4·2. A Cash Flow Diagram Showing Payments at the End
of Each Period
Money received is a
positive number
PMT
Equal payments
PMT PMT
PMT
Time
---. r-----4------+----~------+_--~
Money paid out is a
negative number
Present Value
(PV)
2
3
4
5
Equal periods
FV
PMT
In figure 4-2, the payments occur at the end of each period. Figure 4-3
shows payments occurring at the beginning of each period.
58 4: Time Value of Money