Signs of Cash Flows

In cash flow diagrams, money invested is shown as negative and money withdrawn is shown as positive. Cash flowing out is negative, cash flowing in is positive.

For example, from the lender’s perspective, cash flows to customers for loans are represented as negative. Likewise, when a lender receives money from customers, cash flows are represented as positive. In contrast, from the borrower’s perspective, cash borrowed is positive while cash paid back is negative.

Periods and Cash Flows

In addition to the sign convention (cash flowing out is negative, cash flowing in is positive) on cash flow diagrams, there are several more considerations:

•The time line is divided into equal time intervals. The most common period is a month, but days, quarters, and annual periods are also common. The period is normally defined in a contract and must be known before you can begin calculating.

•To solve a financial problem with the HP 10bII+, all cash flows must occur at either the beginning or end of a period.

•If more than one cash flow occurs at the same place on the cash flow diagram, they are added together or netted. For example, a negative cash flow of -250.00 and a positive cash flow of 750.00 occurring at the same time on the cash flow diagram are entered as a 500.00 cash flow (750 - 250 = 500).

•A valid financial transaction must have at least one positive and one negative cash flow.

Simple and Compound Interest

Financial calculations are based on the fact that money earns interest over time. There are two types of interest:

•Simple interest

•Compound interest

The basis for Time Value of Money and cash flow calculations is compound interest.

Simple Interest

In simple-interest contracts, interest is a percent of the original principal. The interest and principal are due at the end of the contract. For example, say you loan 500 to a friend for a year, and you want to be repaid with 10% simple interest. At the end of the year, your friend

owes you 550.00 (50 is 10% of 500). Simple interest calculations are done using the §

key on your HP 10bII+. An example of a simple interest calculation can be found in chapter 6 under the section titled, Interest Rate Conversions.

56 Picturing Financial Problems

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HP 10bII+ Financial manual Signs of Cash Flows, Periods and Cash Flows, Simple and Compound Interest, Simple Interest
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10bII+ Financial specifications

The HP 10bII+ Financial Calculator is a versatile and powerful tool designed to meet the needs of finance students, professionals, and anyone involved in financial planning and analysis. Known for its compactness and user-friendly interface, this calculator incorporates a range of features specifically tailored for financial calculations, making it an essential gadget for banking, real estate, and investment analysis.

At the heart of the HP 10bII+ is its ability to perform a wide variety of financial functions, including time value of money calculations, cash flow analysis, bond pricing, and depreciation. Its built-in functions facilitate the computation of interest rates, present and future values, net present value (NPV), internal rate of return (IRR), and annuities. This array of functionalities allows users to tackle complex financial problems with ease.

One of the standout technologies in the HP 10bII+ is its RPN (Reverse Polish Notation) input system, which allows for efficient data entry and calculation. Users can perform consecutive calculations without the need for parentheses, streamlining the process significantly. Alternatively, the calculator can also function with a standard algebraic input, catering to different user preferences.

The design of the HP 10bII+ is sleek and compact, making it highly portable and easy to handle. With a large, easy-to-read display, it ensures that users can view their calculations clearly, even in low-light environments. The keys are well-spaced and tactile, allowing for a comfortable typing experience during intensive calculations.

The calculator also offers a range of memory functions, enabling users to store and recall important values easily. This is particularly useful for financial professionals who must deal with multiple calculations and refer back to previous results frequently.

Additionally, the HP 10bII+ is powered by two AAA batteries, providing a long battery life that ensures reliability during extended use. It also features an automatic shut-off function, which conserves battery life when the calculator is not in use.

In summary, the HP 10bII+ Financial Calculator is a high-performance device that combines essential financial functions with user-friendly design and robust technology. Whether for educational purposes or professional finance work, its capabilities make it an invaluable asset for anyone dealing with financial calculations and decision-making.
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