Cannot Calculate Lump Sums - Posted by MN~Chicago


#1

Posted by John Behle on January 06, 1999 at 10:14:26:

Under the “Other” menu on the far right of your display, you can change the number of payments to 1 payment per year.

The answer you are getting is based on twelve payments per year and by entering 3, you are telling the calculator 3 months instead of 3 years.

Money compounds annually unless specified otherwise. That is why we have to change the time period to 1 payment per year. Many people will leave it at 12 payments (compounding periods) and enter 36 payments. This will result in a wrong number.

Now, when it comes to discounting, technically, you should calculate a lump sum amount based on annual figures too. The problem is 99.99999% of the world is taught differently and I gave up trying to fight the current.

I did have the fun one day of correcting one of the people that developed the original formulas for the HP calculators. I was bartering some accounts receivable for pre-paid lease payments on his building. He argured about the value and discount. I entered the figures into the HP and as I showed him the answer, I mentioned “You did program this didn’t you?”


#2

Cannot Calculate Lump Sums - Posted by MN~Chicago

Posted by MN~Chicago on January 05, 1999 at 14:30:29:

Whenever I enter lump sum numbers into
my HP 19B, I get an incorrect answer.

From Discounting as Easy as 1, 2, 3…

N=3 I=9 Pmt=0
PV=-7,000

FV Answer= 9,065.20

When I enter those same numbers, my
FV=7,158.68

This is true for every lump sum example.
All other examples work. What is it that
I am doing wrong?

Thanks.