Financial Calculator

You can compute the future value (FV), periodic payment (PMT) (weekly, monthly, annually, etc.), number of compounding periods (N), interest rate (I/Y), and (Present Value) with this financial calculator. It uses a 5-key system to calculate the time value of money. Each of the tabs below shows a different parameter to be analyzed.

In introductory finance classes, much time is devoted to computing the time value of money, requiring four or five variables. The students calculate the present value (PV), future value (FV), interest rate (I/Y), and the number of periods (N). Periodic Payment (PMT) is an optional element that you may include.

The Time Value of Money (TVM)

Imagine that someone owes you $500. Would you rather get this money in a lump sum now or in four installments over a year? What if you had to wait for the entire payment rather than receive it all at once? Would you think that the payment delay costs you something?

You will probably want all the money quickly under the “time value of money” concept. The “time value of money” notion asserts that a dollar held today is more valuable than a dollar promised in the future. You can use it for lots of different personal purposes.

Money put in a savings account earns a little dividend as a reward for being kept on deposit at the bank. The financial institution pays a small fee to have that money on hand. As a result, the bank will pay a premium for long-term deposits and fixed-term commitments.

The term “future value” in finance refers to the enhanced monetary value at the end of an interest-bearing period.

How much money can you save if you put $100 (PV) into an investment account that pays 10% annually? One year from now, how much money will there be? How much is $110? (FV). This $110 represents the sum of the original $100 plus $10 in interest or $110 in total.

One hundred dollars invested at a 10% annual interest rate will be worth $110 in one year, so investing $100 now will be worth $110 in one year.

A dollar invested at an interest rate r for some time will grow to the sum of (1 + r). R is 10% in this case, which means the investment increases to:

1 + 0.10 = 1.10

Per dollar invested, you get $1.10 back. The outcome, or FV, is as follows because $100 was invested in this case:

$100 × 1.10 = $110

The initial investment of $100 has now grown to $110. After two years, if the interest rate is the same, what will the FV be if the money is kept in the savings account?

$110 × 0.10 = $11

The interest of $11 will be earned in the second year, bringing the total to:

$110 + $11 = $121

If the interest rate remains constant at 10% per year, $100 will be worth $121 in two years.

PV is also what the FV will be worth if a discount rate is applied. It has the same meaning as an interest rate but is used backward in time (rather than forward). $121 FV with a 10% discount rate has a PV of $100 after two compounding periods (N).

Money-wise, there are several components to this $121 FV.

• The first $100 of the initial principal, or its Present Value, is included in this calculation (PV)
• The second component is $10 in interest gained in year one.
• The third portion of the remaining $10 interest from the second year.
• The fourth component is $1, representing interest collected in the second year on interest paid in the first: ($10 × 0.10 = $1).

PMT

An inflow or outflow of funds at the end of each period of a financial stream is called PMT (periodic payment). Consider a $1,000-a-month rental property that generates recurring cash flow. It’s reasonable for investors to ponder how much $1,000 per month in cash flow is worth. It’s unclear whether they should spend so much money on a rental property without proof.

What about a $100-a-year business? What about the $30,000 down payment and the $1,000 monthly mortgage payment? Our Finance Calculator can help analyze these scenarios by including the PMT function.

Enter the correct information if payments are made at the start or end of compounding periods. It has a significant impact on the total amount of interest paid.

Finance Classes

It is hard for a business student to complete finance classes without a financial calculator. You can do most financial calculations manually, but professors often allow students to use financial calculators during exams. However, manual computations are not as crucial as learning economic principles and applying them with useful calculation tools.

As long as you have a smartphone nearby, you’ll always have access to our online financial calculator when doing classwork or homework.

The Importance of the Financial Calculator

We've built most of our Financial Calculators around this Financial Calculator. You can perceive it as the equivalent of the steam engine, which was eventually used to propel railroad locomotives, steamships, factories, and road vehicles.

Suppose you want a Mortgage Calculator, Credit Card Payoff Calculator, Auto Loan Calculator or any other financial calculator. In that case, you will need to understand the "time value of money" concept. The Investment Calculator is just a rebranding of the Financial Calculator, but the inner essence is the same.