Present Value

• Loan questions are Present Value questions• This is when the lump sum of money exists

NOW.• You need to read the question and decide on

when the lump sum will exist.• Then you need to write down the variables.• Which ever one you are missing – is the one

you have to find.

• Typical questions involve loans, calculating how long a lump sum will last or superannuation payouts.

• You use the graphic calculator to solve the questions.

• Be careful of entering the data in the correct areas – often multiple changes occur within a question – so you need to make sure that you don’t skip steps.

• Be sure that you READ the question to make sure it is a Present Value question.

• Use the flow chart.

N =

I% =

PV =

Pmt =

FV =

P/Y =

C/Y =

2 x 12

4

?

-800

0

12

12

Solution : $18422.60

It mentions compounding – must be some sort of compound question.

It mentions a series of payments – so it must be an annuity.

The lump sum exists NOW – PV finding Payment

It mentions compounding – must be some sort of compound question.

It mentions a series of payments – so it must be an annuity.

The lump sum exists NOW – PV finding N – how long will it last.

It mentions compounding – must be some sort of compound question.

It mentions a series of payments – so it must be an annuity.

The lump sum exists NOW – PV finding I%