Figure 11 Cash flow diagram (Calculate the number of years)

Since this account has no regular payments (PMT = 0), the payment mode (End or Begin) is irrelevant.

Table 6-8 Calculating the number of years

KeysDisplay Description

]OJ

0.00

Clears TVM memory.

 

 

 

 

J\Í

1.00

Sets P/YR to 1 since interest is

 

compounded annually.

 

 

 

G:::yÏ

 

first deposit.

 

-2,000.00

Stores amount paid out for the

 

 

 

D:::É

3,000.00

Stores the amount you wish to

 

accumulate.

 

 

 

j7GÒ

7.20

Stores annual interest rate.

 

 

 

 

Ù

5.83

Calculates the number of years it

 

takes to reach 3,000.

 

 

 

Since the calculated value of N is between 5 and 6, it will take six years of annual compounding to achieve a balance of at least 3,000. Calculate the actual balance at the end of six years.

68 Time Value of Money Calculations