From: Mark Ross (markr13_at_comcast.net)
Date: Thu Sep 26 2002 - 17:21:32 PDT
While I have no experience with the newton formulas, on a business
calculator, it works very simply. There are five numbers that can be
entered or calculated:
N = Number of payments
%i = Interest rate per period
PMT = The amount of the payment
PV = Present value
FV = Future value
If you know any 3 of these, you can calculate the other two. You seem to
be doing the process correctly, that is you must divide the annual
interest rate by 12 to get the monthly interest and multiply the number
of payments by 12 to get the total # of payments for a monthly income
stream. The payment is just that, the amount paid for a given period.
Future value is the value of this income stream at the end of the payment
period. Lets use a mortgage payment stream as an example.
I get a 30 year mortgage on a $100,000 house at an annual fixed interest
rate of 7%. The calculations look like this:
N = 30 X 12 = 360 monthly payments
%i = 7/12 (or, 0.07/12 depending on how the calculations are handled) =
0.58%/month
PV = $100,000
I feed these three into the calculator and I get back:
PMT = -$665.30/month. Note the negative is a negative cash flow.
FV = $811,649.77 is the future value of the loan after 30 years.
>There is a program in newton formulas called net
>present value.
>
>Conceptually I understand the idea. If I have a stream
>of future income, it has a discounted value if I were
>to have that same income stream as a lump sum -
>conceptually it is "just" the time value of money.
>.............
>
>So lets presume 12% interest automatically divided by
>the newton into 1% monthly interest, over 10 years,
>automatically multiplied by the newton to 120 months
>and monthly income of 1000.
>
>We now have three remaining fields - the mystery zone
>- present value
>Which is what I am wanting to calculate! At least so I
>think - o.k. let's leave that blank.
>
>This leaves two fields:
>Future Value
>
>and
>
>Payment
>O.k. now this _could mean what the person will recieve
>as a lump sum compensation. Or it could mean what they
>would recieve monthly as income during the time! So I
>am confused here...
>
>And future value?
>
>So these last three fields are confusing me! And
>worse, I thoroughly understand the concept! And the
>kick in the snout - the machine will return negative
>values!
>
>Well I am stumped! Any help would be greatly appreciated!
>
>=====
Mark Ross
markr13_at_comcast.net
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