Financial Functions on the TI-84 Plus Calculator

The TI-84 Plus calculator, a ubiquitous tool in mathematics education, also packs a surprisingly robust set of financial functions. These functions allow students and professionals to quickly solve common financial problems without relying on dedicated financial calculators or complex spreadsheets.

To access the financial functions, press the APPS button, then select 1: Finance... and press ENTER. You'll see a menu with options like "TVM Solver...", "tvm_Pmt", "tvm_I%", and others. The most commonly used is the "TVM Solver..." which stands for Time Value of Money solver.

Understanding the TVM Solver

The TVM Solver requires you to input five variables to calculate the sixth:

• N: Number of compounding periods. This is usually the number of years multiplied by the number of times interest is compounded per year.
• I%: Annual interest rate as a percentage (not a decimal).
• PV: Present Value, the initial value of the investment or loan. Use a negative sign if it's a cash outflow (you're paying money).
• PMT: Payment amount per period. Also use a negative sign if it's a payment you're making.
• FV: Future Value, the value of the investment or loan at the end of the period.
• P/Y: Payments per year.
• C/Y: Compounding periods per year. Usually, P/Y and C/Y are the same.
• PMT: END BEGIN Choose whether payments are made at the end (default) or the beginning of the period.

To use the TVM Solver, enter the values for all but one of the variables. Then, position the cursor on the unknown variable and press ALPHA and then SOLVE (which is the ENTER key). The calculator will then compute and display the answer. Remember to be consistent with the sign conventions for cash inflows and outflows.

Example Applications

Loan Payments: Imagine you're taking out a $20,000 car loan at 5% annual interest for 5 years, with monthly payments. You would enter: N = 60 (5 years * 12 payments/year), I% = 5, PV = 20000, FV = 0, P/Y = 12, C/Y = 12. Then, place the cursor on PMT and press ALPHA SOLVE to calculate the monthly payment.

Retirement Savings: Suppose you want to have $1,000,000 in 40 years, earning 7% annual interest, compounded annually. You currently have $10,000 saved. What annual payment is needed? You would enter: N = 40, I% = 7, PV = -10000, FV = 1000000, P/Y = 1, C/Y = 1. Place the cursor on PMT and press ALPHA SOLVE to calculate the required annual payment.

Other Financial Functions

The TI-84 Plus also offers functions like `tvm_Pmt()`, `tvm_I()`, etc., which directly calculate a specific TVM variable. For example, `tvm_Pmt(N, I%, PV, FV)` directly calculates the payment amount. However, the TVM Solver is generally preferred as it provides a more visual and organized interface.

While not a replacement for specialized financial software, the TI-84 Plus's financial functions provide a convenient and accessible way to handle basic time value of money calculations. Understanding how to use these functions empowers you to make informed financial decisions.