USINGTHESHARPEL738FINANCIALCALCULATOR

Basicfinancialexampleswithfinancialcalculatorsteps

PreparedbyColinCSmith2010

Someimportantthingstoconsider

1.
ThesenotescoverbasicfinancialcalculationsusingtheSHARPEL738financialcalculator.Thenotesdonotdeal
withtheunderlyingtheoryand/orformulae.Studentsshouldideallyhaveaworkingknowledgeoftheundelying
theory.

2.
Atbestthesenotesaredesignedtogetyoustarted.Theydonotclaimtobeacomprehensiveguidetotheuseof
yourcalculator.Consultyourusermanualformoreinformationandfurtherexamples.

3.
Thelogicusedinapproachingtheseexampleswillbesimilartothelogicusedwhenperformingmanual
calculationstheinterestrateisconvertedtoaperiodicinterestrate(i/m)andthenumberofyearswillbe
convertedtocompoundingperiods(nxm).

4.
Financialcalculatorshavefunctionalitynotavailabletothehumanbrainandthemultifunctionalityoffinancial
calculatorsisnotdemonstratedinthesenotes.Ifyouusedifferentfunctionalityandgetthesameanswer
congratulationsyouareanadvancedfinancialcalculatoruser.Ifyouusedifferentfunctionalityanddonotget
thesameanswerfollowourbasicstepsandreadyourmanualtolearnmore.

INDEX

GettingStarted

LumpsumsPresentValuesandFuturevalues

LumpsumsInterestRatesandPeriods,andNominalandEffectiveInterestRates

AnnuitiesOrdinaryannuitiesandannuitiesdue

AmortisationCalculatingtheannualamountofinterestpaidandcapitalrepaid

BondvaluationCalculatingthevalueofannual,semiannualcompoundedbondsandcalculating
theyieldtomaturity

NetPresentValueandInternalRateofReturn

Page

56

79

10

11

GETTINGSTARTED
Thereareafewthingsyouneedtodobeforewecanstartwiththecalculations.

FUNCTIONSETUP

TheSHARPEL738isalreadysetupasafinancialcalculatorsoitisnotnecessarytosetaparticularmode.

SETTINGPAYMENTSPERPERIOD

Inthesenotes,weusethesamelogicusedwith
SHARPEL738FinancialCalculator
manualcalculationsandsetourpaymentstoone
KEYS
DISPLAY
paymentperperiod.
2ndFP/Y1ENT
1.00

d ON/C
1.00

DECIMALPLACES

Tosetyourcalculatortotheconventionaltwo
SHARPEL738FinancialCalculator
decimalplacesorfourdecimalplaces.
KEYS
DISPLAY

SETUP002
0.00
SETUP004
0.0000

DECIMALPOINT

TheSHARPEL738isalreadysetupusingapointasthedecimalindicator.

CLEARINGPREVIOUSWORK

Everytransactioninthisdocumentwillcommence
SHARPEL738FinancialCalculator
withthefollowingkeystrokes.CAisthefunctionto
KEYS
DISPLAY
clearalltheinternalregistersofthecalculator.
2ndFCA
0.0000

SETTINGFORPAYMENTSATBEGINNINGOFTHEPERIOD

Ifyouareworkingwithanannuitydueyoumustset
SHARPEL738
yourcalculatortopeformcaluationsfromthe
KEYS
DISPLAY
beginningoftheperiod.Ifyouaredoinglumpsum
Ifitdoesdisplay
BGN0.00
calculationsorordinaryannuitieschecktoseethat
2ndFBGN

yourcalculatoriscorrectlysetanddoesnotdispay
Removesthis
0.00
BGN

ColinCSmith2010

LUMPSUMSFUTUREVALUESANDPRESENTVALUES
*seegettingstarted

1.
SimpleFutureValue(FV)

YouborrowR5,000fromafriendat8%p.a.interest
tobecompoundedannually.Capitalandinterestis
repayablein5yearstime.Howmuchwillyourepay?

KEYS

SHARPEL738FinancialCalculator
DISPLAY
*MustnotdisplayBGN
0.0000

2ndF CA

5,000+/ PV
8I/Y
5N
COMPFV

5,000.00
8.00
5.00
7,346.64

2.

FutureValue(FV)withfrequentcompounding

YouhavesavedR10,000andinvestthisinafixed
depositwithabankat10.5%compoundedquarterly
for4years.Howwillyoureceivein4yearstime?

KEYS

SHARPEL738FinancialCalculator
DISPLAY
*MustnotdisplayBGN

2ndFCA
10,000+/ PV
10.54I/Y
4x4N
COMPFV

0.00
10,000.00
2.63
16.00
15,137.38

3.

SimplePresentValue(PV)

Youhavejustturned20yearsofageandyourlate
UncleScroogebequeathedyouanamountofR5,000
th
payableonyour25 birthday.Yourfatheroffersto
giveyouthepresentvaluetodayincash.Atan
interestrateof10%p.a.compoundedannuallyhow
muchmustyourfathergiveyoutoday?Whatisthe
presentvalueofthebequest?

Theveamountreflectswhatshouldbepaidtoday.

4.

KEYS

SHARPEL738FinancialCalculator
DISPLAY
*MustnotdisplayBGN

2ndFCA
5,000FV
10I/Y
5N
COMPPV

0.00
5,000.00
10.00
5.00
3,104.61

PresentValue(PV)withfrequentcompounding

UncleGeorgeismoregenerousandleavesyoua
substantialinheritance.Youwanttosetasideand
amounttobuyyourdreamcarwhenyoucomplete
yourtraineecontractin5yearstime.Estimatesare
thatthedreamcarwillcostR220,000atthattime.
Abankisofferingyoua5yearfixeddepositat
11.5%compoundedmonthlyfor5years.Howmuch
shouldyouinvesttoday?

Theveamountreflectswhatshouldbepaidtoday.

KEYS

SHARPEL738FinancialCalculator
DISPLAY
*MustnotdisplayBGN

2ndFCA
220,000FV
11.512I/Y
5x12N
COMPPV

0.00
220,000.00
0.96
60.00
124,134.45

ColinCSmith2010

LUMPSUMSINTERESTRATEANDPERIODS,ANDNOMINALANDEFFECTIVEINTERESTRATES
Thesecalculationsarequitechallenginginanequationformatbutmucheasierwithafinancialcalculator.
*seegettingstarted

5.
Calculatingtheinterestrate

An amount of R400,000 is invested in a savings

SHARPEL738FinancialCalculator
account that compounds interest monthly. After
KEYS
DISPLAY
oneyearthebalanceintheaccountisR464301.81.
*MustnotdisplayBGN
Calculate the nominal interest rate (i.e. the quoted
2ndFCA
0.00
rateorAPR).
464,301.81FV
464,301.81

400,000+/PV
400,000.00
TheR400,000isshownasaveasthisisthecash
1x12N
12.00
outflowrequirednow.
1.25
COMPI/Y
15
X12

6.
Calculatingtheperiods

AnamountofR100,000wasinvestedinanaccount
SHARPEL738FinancialCalculator
that accumulates interest at a rate of 14% per
KEYS
DISPLAY
annum,compoundedquarterly.Thebalanceinthe
*MustnotdisplayBGN
account, immediately after the latest quarters
2ndFCA
0.00
interest credit is R173,398.60. How long ago was
173,398.60 FV
173,398.60
theamountinvested?
100,000+/PV
100,000.00

144I/Y
3.50
Rememberthatbecauseyouhavecompounded
16.00
COMPN
morethanonceayear(nxmintheformula)Nis

notyearsbutperiods.Sotheansweris164=4

years.

7.
Calculatingtheeffectiverate

Calculatetheeffectiverateof13%perannum
SHARPEL738FinancialCalculator
compoundedmonthly.
KEYS
DISPLAY

*MustnotdisplayBGN

2ndF CA

Thisreflectsthecompoundingperiodsperyear(min
12(x,y)
0.00
theformula)andcanbechangedtoanyfrequency.
13 2ndFEFF
13.80

8.
Calculatingthenominalorannualpercentagerate(APR)

Calculatethenominalrate(APR)of14.9342%per
SHARPEL738FinancialCalculator
annumcompoundingmonthly.
KEYS
DISPLAY

*MustnotdisplayBGN

2ndF CA

Thisreflectsthecompoundingperiodsperyear(min
12(x,y)
0.0000
theformula)andcanbechangedtoanyfrequency.
12.68 2ndFAPR
14.00

ColinCSmith2010

ANNUITIESORDINARY,DUE,FUTUREVALUE,PRESENTVALUE
*seegettingstarted

9.
SimpleFutureValueofanOrdinaryAnnuity(FVA)

AssumeyouputR1,000intoasavingsaccountatthe
endofeveryyearfor10yearsat9.5%interest
compoundedannually.Howmuchwillyouhavein
theaccountafter10years?

KEYS

SHARPEL738FinancialCalculator
DISPLAY
*MustnotdisplayBGN

2ndFCA
1,000+/ PMT
9.5I/Y
10N
0PV
COMPFV

0.00

1,000.00
9.50
10.00
0.00
15,560.29

10.
SimpleFutureValueofanAnnuityDue(FVAdue)

AssumeyouputR1,000intoasavingsaccountatthe
beginningofeveryyearfor10yearsat9.5%interest
compoundedannually.Howmuchwillyouhavein
theaccountafter10years?

KEYS

SHARPEL738FinancialCalculator
DISPLAY
*MustdisplayBGN

2ndFCA
2ndFBGN/END
1,000+/ PMT
9.5I/Y
10N
0PV
COMPFV

0.00
BGN0.00

1,000.00
9.50
10.00
0.00
17,038.52

11.
PresentValueofanAnnuityDue(PVAdue)

Anoverseasbenefactorhasofferedtosponsornew
CareCentreforAidsOrphansinCapeTownandthey
havepledgedtoprovidetheequivalentofR25,000
permonthforthenextfouryearspaymentsstarting
immediately.Thebenefactorwillmakeasingle
investmentlumpsuminvestmentintoabank
accountpaying9.5%interest.Howlargewillthis
initialinvestmentbe?

SHARPEL738FinancialCalculator
KEYS

DISPLAY
*MustdisplayBGN

2ndFCA
2ndFBGN/END
2ndFP/Y1ENT
d ON/C
25,000+/ PMT
9.512I/Y
4x12N
0FV
COMPPV

0.00
BGN0.00
1.00
0.00
25,000.00
0.79
48.00
0.00
1,002,976.54

ColinCSmith2010

ANNUITIESORDINARY,DUE,FUTUREVALUE,PRESENTVALUE
12.
Calculatingthepayment(PMT)foranormalfinancialtransactionAnnuityDue

You buy a new car today for R120 000 and

SHARPEL738FinancialCalculator
obtainfinancefor80%ofthepurchaseprice
KEYS
DISPLAY
(R96,000)overfouryears.Thebankquotes
*MustdisplayBGN
you a finance rate of 12% per annum
2ndFCA
0.00
(nominal rate). Instalments are payable
2ndFBGN/END
BGN0.00
monthly in advance. Calculate the monthly
2ndFP/Y1ENT
1.00
instalment.
d ON/C
0.00

96,000+/ PV
25,000.00
1212=I/Y
1.0
4x12=N
48.00
0.00
0FV
COMPPMT
2,503.02

Youcanalsosolvefortheinterestrateandforthenumberofperiodsusingthesamefunctions.

13.
CalculatingtheinterestrateforanormalfinancialtransactionAnnuityDue

A bank offers you a personal loan of

SHARPEL738FinancialCalculator
R20,000 repayable in 24 easy instalments
KEYS
DISPLAY
ofR1,050permonthstartingimmediately.
*MustdisplayBGN
Whatnominalinterestrate(APR)isbeing
2ndFCA
0.00
charged?
2ndFBGN/END
BGN0.00
2ndFP/Y1ENT
d ON/C
20,000 PV
0FV
1,050+/PMT
24N
COMPPMT
X12

1.00
0.00
24,000.00
0.00
1,050.00
24.00
2.12
25.48

Additionalnotes:

PleasealsoseetheBondValuationsectionforsimilartransactions.

Wherewehaveirregularcashflowpayments,wecannotusetheannuityfunctionalityandinsteadcanusetheNET
PRESENTVALUEandINTERNALRATEOFRETURNfunctions.

ColinCSmith2010

AMORTISATION
*seegettingstarted

N.B.
ENSURETHATYOUCORRECTLYIDENTIFYYOURPAYMENTSASANORDINARYANNUITYORANANNUITYDUE
ANDSETYOURCALCULATORACCORDINGLY.

14.1
Calculatingtheintalment/payment(PMT)foranormalfinancialtransactionAnnuityDuewithamortisation

AcompanytakesaloanofR100,000loanrepayable
SHARPEL738FinancialCalculator
inequalmonthinstalments,atthebeginningofthe
KEYS
DISPLAY
month,overaperiodoftwoyearsterm,aninterest
*MustdisplayBGN
rateof12%peryearisquotedbythebank(thisis
2ndFCA
0.00
thenominalorAnnualPercentageRateAPR.
2ndFBGN/END
BGN0.00

2ndFP/Y1ENT
1.00

d ON/C
0.00

100,0000.00
100,000PV

0.00
0FV

1212I/Y
1.00

2x12N
24.00

COMPPMT
4,660.74
Thisisyourmonthlyinstalment.

14.2
THEAMORTISATIONSCHEDULEANNUITYDUE

Wecouldderivetheinterestpaymentsbypreparingamanualamortisationschedule(verytimeconsuming)oronebelow
usingMicrosoftExcel(notallowedinexaminations).

Inanannuityduetheentirefirstpaymentisappliedtocapital

Year1 interest
R8,385.86

Year2 interest
R3,471.88

Month
today
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

Instalment

R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74
R4,660.74

Interest

953.39
916.32
878.87
841.06
802.86
764.28
725.32
685.96
646.21
606.07
565.52
524.57
483.21
441.43
399.24
356.62
313.58
270.11
226.21
181.86
137.07
91.83
46.15

Capitalpaidoff

4,660.74
3,707.35
3,744.42
3,781.87
3,819.68
3,857.88
3,896.46
3,935.42
3,974.78
4,014.53
4,054.67
4,095.22
4,136.17
4,177.53
4,219.31
4,261.50
4,304.12
4,347.16
4,390.63
4,434.53
4,478.88
4,523.67
4,568.91
4,614.59

CapitalBalance
100,000.00
95,339.26
91,631.91
87,887.49
84,105.63
80,285.94
76,428.06
72,531.60
68,596.18
64,621.40
60,606.87
56,552.20
52,456.99
48,320.82
44,143.28
39,923.98
35,662.48
31,358.36
27,011.20
22,620.58
18,186.04
13,707.16
9,183.49
4,614.59
0.00

Year1 capital
R47,543.02

Year2 capital
R52,457.00

ColinCSmith2010

AMORTISATION

14.3

Amortisingthepaymentsusingafinancialcalculatortocalculatetheamountofcapitalandinterestpaidand
thebalanceattheendofeachyear

Thisstepfollowsdirectlyonyourcalculationoftheinstalmentabove.

Weenterthefirstfinancialperiodandthe
SHARPEL738FinancialCalculator

numberofpaymentsmadeinthatperiod
KEYS
DISPLAY

Note:Youcansettheamortisationfunctionfor
AMRT1ENT
1.00
anyperiodbuthereitisfora12monthperiod.
d12ENT
12.00

d
52,456.98 c
Thisisforperiods112
d
47,543.02 d
cBalanceattheendofyear1
d
8,385.86 e
dCapitalpaidinyear1

eInterestpaidinyear1

Forthenext12months(periods1324)

SHARPEL738FinancialCalculator

d13ENT
13.00

d24ENT
24.00
fBalanceattheendofyear2
d
0.02 f
gCapitalpaidinyear2
d
52,457.00 f
hInterestpaidinyear2
d
3,471.88 h

YOUCANCHECKTHESENUMBERSAGAINSTTHEAMORTISATIONSCHEDULEinsection14.2thatwascompletedusing
MicrosoftExcel.

15.1
Calculatingtheintalment/payment(PMT)forafinancialtransactionOrdinaryAnnuitywithamortisation

AcompanytakesaloanofR100,000loanrepayable
SHARPEL738FinancialCalculator
inequalmonthinstalments,attheendofthe
KEYS
DISPLAY
month,overaperiodoftwoyearsterm,aninterest
*MustnotdisplayBGN
rateof12%peryearisquotedbythebank(thisis
2ndFCA
0.00
thenominalorAnnualPercentageRateAPR.
2ndFP/Y1ENT
1.00

d ON/C
0.00

100,0000.00
100,000PV

0.00
0FV

1212I/Y
1.00

2x12N
24.00

COMPPMT
4,707.35
Thisisyourmonthlyinstalment.

ColinCSmith2010

AMORTISATION
15.2.
THEAMORTISATIONSCHEDULEORDINARYANNUITY

Asforthescheduleat14.2thiswaspreparedusingMicrosoftExcel.

Year1 interest
R9,469.73

Year2 interest
R3,506.61

Month
today
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

Instalment

R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35
R4,707.35

Interest

1,000.00
962.93
925.48
887.66
849.47
810.89
771.92
732.57
692.82
652.68
612.13
571.18
529.82
488.04
445.85
403.23
360.19
316.72
272.81
228.47
183.68
138.44
92.75
46.61

Capitalpaidoff

3,707.35
3,744.42
3,781.86
3,819.68
3,857.88
3,896.46
3,935.42
3,974.78
4,014.53
4,054.67
4,095.22
4,136.17
4,177.53
4,219.31
4,261.50
4,304.12
4,347.16
4,390.63
4,434.53
4,478.88
4,523.67
4,568.90
4,614.59
4,660.74

CapitalBalance
100,000.00
96,292.65
92,548.23
88,766.37
84,946.68
81,088.80
77,192.34
73,256.92
69,282.14
65,267.62
61,212.95
57,117.73
52,981.56
48,804.03
44,584.72
40,323.22
36,019.10
31,671.95
27,281.32
22,846.79
18,367.91
13,844.24
9,275.33
4,660.74
0.00

Year1 capital
R47,018.47

Year1 capital
R52,981.59

15.3

Amortisingthepaymentstocalculatetheamountofcapitalandinterestpaidandthebalanceattheendof
eachyear

Thisstepfollowsdirectlyonyourcalculationoftheinstalmentabove.

Weenterthefirstfinancialperiodandthe
SHARPEL738FinancialCalculator
numberofpaymentsmadeinthatperiod.The
KEYS
DISPLAY
amortisationfunctioncanbeforanyperiodbut

hereitisfora12monthperiod.
AMRT1ENT
1.00

d12ENT
12.00
Thisisforperiods112
d
52,981.53
cBalanceattheendofyear1
d
47,018.47
dCapitalpaidinyear1
d
9,469.73
eInterestpaidinyear1

Forthenext12months(periods1324)
SHARPEL738FinancialCalculator

KEYS
DISPLAY

d13ENT
13.00

d24ENT
24.00
fBalanceattheendofyear2
d
0.06
gCapitalpaidinyear2
d
52,981.59
hInterestpaidinyear2
d
3,506.61

YOUCANCHECKTHESENUMBERSAGAINSTTHEAMORTISATIONSCHEDULEABOVE.

ColinCSmith2010

c
d
e

f
f
h

BONDVALUATION
*seegettingstarted

16.
Valueofanannualpaymentbondwithasingleannualpayment

Acompanypurchasesbondson1Januaryofthis
SHARPEL738FinancialCalculator
year.Thenominal/face/couponvalueisR1,000and
KEYS
DISPLAY
theannualnominal/couponinterestrateis10%.The
*MustnotdisplayBGN
bondisredeemableon31December6yearslater.
2ndFCA
0.00
Themarketinterestrateforsimilarbondsis15%.
15 I/Y
15.00
Assumethatthebondpaymentsaremadeannually
6N
6.00
inarrears.Whatpricewouldthecompanypayfor
1,000FV
1,000.00
thebond?(i.e.whatshouldthevaluebeon1
100PMT
100.00
Januaryofthisyear?

COMPPV
810.78

17.
Valueofatypicalgovernmentbondwithsemiannualpayments

Assumesameinformationasfor16aboveexcept
SHARPEL738FinancialCalculator
thatthebondisatypicalgovernmentbondthat
KEYS
DISPLAY
payssemiannuallyinarrears.Whatpricewouldthe
*MustnotdisplayBGN
companypayforthebond?
2ndFCA
0.00

7.50
152I/Y

6x2N
12.00

1,000FV
1,000.00
50PMT
50.00

COMPPV
806.62

18.
Calculatingtheyieldtomaturity

Thisisextremelydifficulttocalculatewhenusingaformulaapproachwithoutafinancialcalculator.

Thenominal/face/couponvalueisR1,000andthe
SHARPEL738FinancialCalculator
annualnominal/couponinterestrateis10%paid
KEYS
DISPLAY
semiannuallyinarrears.Youpurchasedthebondon
*MustnotdisplayBGN
1Januaryofthisyearandthebondisredeemableon
2ndFCA
0.00
31December10yearslateratapremiumof10%.
10x2N
20.00
ThebondispricedatR980on1Januaryofthisyear.
1,000x1.10FV
1,100.00
Whatistheyieldtomaturityon1Januaryofthis
980+/PV
980.00
year?
50PMT
50.00

Thistakesawhileandyourdisplaywillbe
5.45
COMPI/Y
blank.
X2
10.91
Rememberthatthisistheratefor6months.

Toannualisetheconvention(frombondtrading

intheUnitedStates)hasbeentomultiplythis

by2.

ColinCSmith2010

10

NETPRESENTVALUEandINTERNALRATEOFRETURN

*seegettingstarted

19&20. WhatistheNetPresentValueandIRRofthisproject?

Aprojecthasthefollowingcashflows

Year
CashFlow(R)
0
1,000
1
1,700
2
1,500
3
1,800
4
1,900

IftheweightedaveragecostofcapitalWACCis15%
whatistheNetPresentValueofthisproject?

What is the Internal Rate of Return of the

abovecashflows?

SHARPEL738FinancialCalculator
KEYS
DISPLAY
*Mustnotdisplay
BGN

CFi2ndFCA
ON/C
1,000+/DATA
1,700+/DATA
1,500DATA
1,800DATA
1,900DATA
ON/C
2ndFCASH2ndFCA
15 ENT
NPV d COMP

15.00
925.82

2ndFCASH2ndFCA
COMP

31.54

IRR

0.00
0.00
0.00
1.00
2.00
3.00
4.00
0.00

ColinCSmith2010

11