 
Calculating the Future Value of a Current Lump Sum
The basic steps in calculating the
future value of a current lump sum are as
follows:
 Enter the Payments/Year
 Enter the rest of the information you know
 Solve for the unknown.
Let's try it with a problem
Consider that you invest $1000 in a CD earning 8% annual interest for 3
years. What would your CD be worth at the end of the three years?
First, let's see what we know
 We know that the CD worth $1000 today. That indicates that the present
value (PV) of that CD is $1000.
 We know that the
number of years (xP/YR) is 3.
 We know that the annual interest rate is 8% (8 is the I/YR).
 Finally, we may assume that the periods per year is one since we are
not told it is monthly, quarterly, etc. (If the payments per year would have
been, for example, monthly, the problem would have read, ". . . earning 8%
annual interest, compounded monthly.")
Now let's compute the problem
 Enter the Payments/Year.
You first must type in the appropriate number (eg. monthly would be 12, quarterly would be 4, etc.), then push
the orange
SHIFT key
,
then the P/YR key.
In our problem, first we must enter the appropriate payments per year by pushing 1, then
push the orange
SHIFT key
,
then the P/YR key
.
 Enter the rest of the information you know.
The order of the next three steps is not important, but I recommend that
you follow across the financial tour of your calculator from left to right.
 If
you do, then the next step would be to enter in the proper number of
years. You first type the appropriate number, then push
the orange
SHIFT key
,
then the xP/YR
key.
In our problem, next we will enter the number of years by pushing 3, then
the orange
SHIFT key
,
then the xP/YR
key.
 Now, enter the appropriate interest rate per year. This is done by entering
the appropriate annual interest rate as a whole number, not as a decimal
(the calculator will convert it to decimal automatically), then pressing the
I/YR
key.
In our problem, now we will enter the interest rate per year by
pushing 8 and then pressing the I/YR
key.
 Next, enter the lump sum amount
you are beginning with, then press
the PV
key.
In our problem, next we enter the Present Value by pressing 1000, then the
key (to show that this is paid to the bank), and then the PV
key.
 Solve for the unknown.
Finally, all that is necessary is push the FV
key to compute the answer.
Correct Answer
The display then shows 1,259.71 if the display was set to show two
decimal places. Note that the answer is positive.
This indicates that the direction of the cash flow is in. (This is logical
since we pay $1000 now in order to receive $1,259.71 in the future.
Would you like to review the mathematics of this
calculation?
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Copyright © 2005 Dr. Jerry D. Belloit
