calculation-reference

Time Value of Money Calculations on the BA II Plus

CFA Level I TVM reference for present value, future value, annuities, perpetuities, and BA II Plus inputs.

TL;DR

Time value of money is the base layer for valuation, fixed income, corporate issuers, and portfolio calculations. On the BA II Plus, enter four TVM variables and compute the fifth, keeping cash flow signs consistent.

Formula Reference

Future value

FV = PV x (1 + r)^n

Use for single lump sums compounded over n periods.

Present value

PV = FV / (1 + r)^n

Discount future cash flow back to today.

Ordinary annuity PV

PV = PMT x [1 - (1 + r)^(-n)] / r

Payments occur at the end of each period.

Perpetuity

PV = PMT / r

Use only for level cash flows that continue forever.

BA II Plus Keystrokes

2nd CLR TVM
Enter N
Enter I/Y as a percent, such as 8 for 8 percent
Enter PV as negative for an investment outflow
Enter PMT, or 0 for a lump sum
CPT FV or CPT PV

Worked Example

Problem: Invest $10,000 for 5 years at 8 percent. Find FV.
Keystrokes: 2nd CLR TVM; 5 N; 8 I/Y; 10000 +/- PV; 0 PMT; CPT FV.
Result: FV is about $14,693.28.

Common Mistakes

Not matching the rate period to the number of periods.
Forgetting to enter PMT as 0 in lump-sum problems.
Using the wrong sign for PV or FV.

Related Guides

BA II Plus: Effective Annual Rate Step by Step - Calculate effective annual rate from stated annual rate and compounding frequency.
BA II Plus: NPV Calculation Step by Step - Exact BA II Plus keystrokes for net present value with a worked capital budgeting example.
NPV and IRR Calculations for CFA Level I - Capital budgeting guide for net present value, internal rate of return, and BA II Plus cash flow worksheet inputs.