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08-28-2018 01:23 AM
So I’m taking accounting and I’m calculating the PV of $9,000,000. I’m practicing calculating with my bII + I just purchased recently. The book has solved it for me as an example. But my calculation is slightly off. The term of this loan is 4 years with a 12% interest rate and I’m solving for PV. The books answer is $5,719,680. The answer I get when calculating is $5,719,662.70. If I use the books PV chart and calculate I get the correct answer but that defeats the purpose of my purchasing this calculator. Is there anything that can be done?
Solved! Go to Solution.
08-28-2018 08:45 AM
You mention "The term of this loan is 4 years", but you provide no information about a payment. So is this really a loan, or something else? It may seem like I'm being picky, but small details like this are important when attempting to solve financial problems with any calculator. Even minor variances in how things are written can make a distinct difference in the methods and settings used to calculate financial problems.
Sometimes the decisions made in financial situations are a result of comparing the relative values of different types of scenarios, which may be what you are looking at here. It's impossible to know for sure simply based on your description, but the numbers in your post seem to approximate a scenario where the following parameters apply:
1) Something has an exact value of 9,000,000.00 at its maturity date
2) The annual interest rate is exactly 12.0000%, compounded annually (not simple interest, not monthly, not semi-annually, not daily, etc.)
3) A term of exactly 4 years applies
4) You want to know the value at the beginning of that 4-year term
If the above assumptions are correct, the actual result on all of the calculators I've got handy is:
That result may of course be rounded to fewer digits in the display, depending on the calculator's display settings and inherent accuracy capabilities. The negative sign is particularly important, as it indicates that a value had to flow in the opposite direction when compared to the FV (which is usually the case).
It's easy to verify that the above result is correct for this kind of problem without even using a financial calculator:
9000000/(1.12^4) = 5719662.70564
It's possible that the use of tables is the source of any discrepancies, as they are always rounded to a set number of digits and thus usually provide fewer digits of accuracy in final results. It's also possible that the actual problem description has some other assumptions built-in that aren't detailed in your original question. Without more detail, it's difficult to guess why any text would assume that $5,719,680 is the final result.
The good news is that there's nothing wrong with your 10bII+. It appears to be giving the proper answer, but perhaps to a different question than was intended.
08-28-2018 11:12 AM