BM4.11 – Using the TIBAII Plus Calculator for Compound Interest

Chapter 4, Lesson 11

In this lesson students will:

  • apply the TMV buttons on the TIBAII Plus calculator to a given word problem involving compound interest

The Time Value of Money (TVM) Buttons

While using your calculator, you may have noticed the row of buttons close to the top beginning with N and ending with FV. These are known as the time value of money buttons and we will spend a bit of time learning how to use them for compound interest problems. This lesson is meant to be an introduction to the functionality, and these buttons will be used more extensively in our chapters on annuities.

Let’s begin by looking at the primary TVM buttons and labelling them with some of the terms that we have come to learn in this past chapter.

  1. N – this button refers to the number of compounding periods of the investment. It can be calculated using the formula n=t \times f, as seen in Lesson 4.5. This number should be inputted as a whole number when possible. If a decimal number is received as output, this often means there is a partial payment that is required (more on partial payments as they arise).
  2. I/Y – this button refers to the compound interest rate, or the nominal rate (personally, I think of I/Y as interest per year). This number should be inputted as is without the percentage applied. For example, a rate of 4.5 \% quarterly, would be entered as 4.5 and not as 0.045.
  3. PV – this button refers to the present value, or principle amount, of an investment. Typically money that is leaving us to be placed into an institution, such as an investment, is entered as a negative value. In contrast, a loan would be considered money coming to us, and is entered as a positive value.
  4. PMT – this button can be used to calculate an equivalent payment, provided that you have also inputted information about the beginning or end of the cycle. We will learn how to use the PMT button to make equivalent payments easier in the annuities chapter. We will not use the PMT button in this lesson.
  5. FV – this button refers to the future value of an investment. Typically money that is owed to an institution, such as an repayment of a loan, is entered as a negative value. In contrast, an investment that comes to maturity in the future would be considered a positive entry.

Next, each primary button has a secondary function that can be entered by first hitting the 2ND button. The secondary TVM buttons are summarized next.

  1. xP/Y – this button will multiply a given number by the stored value of P/Y. For example, if you want to calculate N, you can store a value in P/Y, then enter the number of years, then use the xP/Y command to calculate N. Pressing N after you have done this will store the value correctly.
  2. P/Y – this button allows you to enter information about how many equivalent payments per year, and how many compounds per year, there are for the given scenario. To get to C/Y you must use the down arrow in the sub-menu. We will see scenarios in which these numbers will be different in the annuities section. In this lesson we will program these values to be the same whole number.
  3. AMORT – this button can be used to create an amortization table; however, we will not use this button in our course. Our preference will be to work through some basic examples by hand, and using Google Sheets, where applicable.
  4. BGN – this button allows you to switch between equivalent payments that occur at the beginning or end of a payment period. For example a mortgage payment that occurs on the first or last day of the month. We will learn more about this in the annuities chapters and we will not use this function in this lesson.
  5. CLR TVM – this button will clear all the stored information you have entered into the TVM buttons.

Let’s spend a few moments practicing how to use the TVM buttons on the calculator; the video below will guide you through three examples.

%d bloggers like this: