10bii calculating wrong answer

[TWal]

When calculating TMV, in order to get FV I enter:

N=12

I/YR=5

PV=+/-100

PMT=0

I should be getting a flat 105.

Instead I am getting 105.12. Why?

[David_M · Accepted solution]

The given values, along with an assumed 12 periods per year (P/YR), will give you a result of 105.12 (105.116189788 in full precision).  This is because you are specifying that the annual interest rate of 5% is actually compounded monthly with the combination of N=12 and P/YR=12.

Your expectation of 105 for the result implies a simple interest situation as opposed to compounded interest.  Although you don't really need to use the TVM functionality to obtain that result, you can still achieve this by changing both N and P/YR to 1 and solving for FV again.