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Unformatted text preview: before you have
enough money for the down payment and
27 Number of Periods – Example 2
Continued How much do you need to have in the future? Down payment = .1(150,000) = 15,000 Closing costs = .05(150,000 – 15,000) = 6,750 Total needed = 15,000 + 6,750 = 21,750
Compute the number of periods
Using the formula t = ln(21,750 / 15,000) / ln(1.075) = 5.14 years Per a financial calculator: PV = -15,000, FV = 21,750, I/Y = 7.5, CPT N = 5.14 years
28 Quick Quiz – Part IV When might you want to compute the
When number of periods?
number Suppose you want to buy some new
furniture for your family room. You
currently have $500 and the furniture you
want costs $600. If you can earn 6%, how
long will you have to wait if you don’t add
any additional money?
29 Spreadsheet Example Use the following formulas for TVM calculations FV(rate,nper,pmt,pv)
NPER(rate,pmt,pv,fv) The formula icon is very useful when you can’t
remember the exact formula
Click on the Excel icon to open a spreadsheet containing
four different examples.
30 Work the Web Example Many financial calculators are available online
Click on the web surfer to go to Investopedia’s
web site and work the following example:
web You need $50,000 in 10 years. If you can earn 6%
interest, how much do you need to invest today?
You should get $27,919.74 31
31 Table 5.4 32
32 5 Formulas
End of Chapter 33...
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