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# Time Value of Money TutorialsTVM Calculations

## How Much to Save or Invest to Reach a GoalTutorial 17

This tutorial illustrates how to use the Ultimate Financial Calculator to answer the question, "How much do I have to invest each period to reach my goal?"

Time value of money calculations, at their simplest, involve five variables:

1. Starting Amount - called present value or PV
2. The cash flow amount - payment, savings or investment amount
3. Ending Amount - called future value or FV
4. Interest Rate
5. Term - length of time between PV & FV or the number of cash flows

The Ultimate Financial Calculator can easily solve for any of the five variables. This tutorial discusses how to solve for the cash flow amount. The concepts learned here can be applied to any cash flow calculation, be it a payment cash flow or a savings or investment cash flow.

This example applies to our online Ultimate Financial Calculator. The C-Value! program for Windows works in a similar way and has a few more features including the ability to save your work.

All users should work through the first tutorial to understand basic concepts about the calculator.

Background: Let's try something novel. Assume you want to pay cash for your next car, the price will be \$32,600 and you anticipate needing the car four years from now. Further, you currently have \$4,000 on hand.

To create a cash flow schedule that will achieve your goal when the necessary periodic investment amount is unknown, follow these steps.

1. Set "Schedule Type" to "Savings"
• Or click the [Clear] button to clear any previous entries.
• The top two rows of the grid will not be empty
• Delete the 2nd row by selecting it and clicking on the [Delete] button
2. Set "Rounding" to "Open balance — no adjustment" by clicking on {Settings} {Rounding Options}
3. In the header section, make the following settings:
1. For "Calculate Method" select "Normal".
2. Set "Initial Compounding" to "Daily".
3. Enter 4.5 for the "Initial Interest Rate".
1. In row one of the cash flow input area, create a "Deposit" series
1. Set the "Date" to July 16, 2016
2. Set the "Amount" to 4,000.00 (this is the cash on hand)
3. Set the "# Periods" to 1
• Note: Since the number of periods is 1, you will not be able to set a frequency. If a frequency is set, it will be cleared when you leave the row
1. Click on the second row of the cash flow input area. Select "Deposit" for the "Series"
1. Enter the "Date" as August 1, 2016
2. Enter the "Amount" as "Unknown"
3. Use the [Tab] key to move to "# Periods". Set it to 48
4. Set the "Frequency" to "Monthly"
1. Create a 3rd series. Set it to "Withdrawal"
1. Enter the "Date" as August 1, 2020
2. Enter the "Amount" as "\$32,600.00"
3. Set the "# Periods" to 1
• Your calculator should now look like this: