Principles of Managerial Finance

152 PART 2 Important Financial Concepts

1%

1

Period

Interest Rate

2

3

10

20

50

2% 10% 20%

X.XXX

50%

N — Number of periods

I — Interest rate per period

PV — Present value

PMT — Amount of payment (used only for annuities)

FV — Future value

CPT — Compute key used to initiate financial calculation

once all values are input

N

I

PMT

FV

PV

CPT

FIGURE 4.3

Financial Tables
Layout and use
of a financial table

FIGURE 4.4

Calculator Keys
Important financial keys
on the typical calculator

Financial Calculators

Financial calculators also can be used for time value computations. Generally,

financial calculatorsinclude numerous preprogrammed financial routines. This

chapter and those that follow show the keystrokes for calculating interest factors

and making other financial computations. For convenience, we use the impor-

tant financial keys, labeled in a fashion consistent with most major financial

calculators.

We focus primarily on the keys pictured and defined in Figure 4.4. We typi-

cally use four of the first five keys shown in the left column, along with the com-

pute (CPT) key. One of the four keys represents the unknown value being calcu-

lated. (Occasionally, all five of the keys are used, with one representing the

unknown value.) The keystrokes on some of the more sophisticated calculators

are menu-driven: After you select the appropriate routine, the calculator prompts

you to input each value; on these calculators, a compute key is not needed to

obtain a solution. Regardless, any calculator with the basic future and present

value functions can be used in lieu of financial tables. The keystrokes for other

financial calculators are explained in the reference guides that accompany them.

Once you understand the basic underlying concepts, you probably will want

to use a calculator to streamline routine financial calculations. With a little prac-