27
Calculating present value
You open an account that earns 5% compounded annually. If
you wish to have $10,000 twenty years from now, what amount
of money should you deposit now?
FV = $10,000
N = 20 years
PV = ? I/Y = 5%
Procedure Key operation Display
Set all the variables to
default values.
.
b
000
Make sure ordinary annuity is set (BGN is not displayed).
Set the number of pay-
ments per year to 1.
.
w
1
Q
P/Y=
100
The number of compounding periods per year is automatically set to 1.
Press
s
to exit the P/Y and C/Y settings.
Enter the total number
of payments.
s
20
N
2—~N
2000
Enter the future value.
10000
t
1————~FV
1000000
Set payment to zero.
0
u
—~PMT
000
Enter the annual inter-
est rate.
5
f
5~I/Y
500
Calculate the present
value.
@
PV=
-376889
Answer: You should deposit $3,768.89 now.
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