Student Question: TVM Prior Completion Form Download

Student Question:

I'm in your online class and I was reading your syllabus about the TVM tutorial. I have already completed this and I see you have a link on your syllabus to a PDF of the TVM completion form. The link was not working. I was wondering if you could e-mail me the completion form as I could not find it anywhere on the UTA website.

Response:

First, you need to make sure you have Adobe reader installed on your computer.

Can you "right click" on the link to the pdf then save the file to your desktop (then open it from you desktop)? Try this because the link works from my computer.

Finally, if you are near campus, you can always pick-up a hard copy of the form at the Department of Finance and Real Estate (room 434 Business) during business hours.

TVM Tutorial Deadline

The TVM tutorial deadline is this Saturday. If you haven't already, you may submit the TVM Tutorial at the beginning of the exam. Please remember, that you must have the TVM cover/signature page and all sections or we cannot accept your submission.

Student Question: Begin Mode

QUESTION:
Hi, my question is if this asked for the pmts at the end of the the year would you ADD N+1 TO GET THE ANSWER?

7. JLP Enterprises, Inc. owns a small shopping center and it has just signed a fiver-year, triple-net lease for an out parcel with an auto parts retailer that requires annual rent payments of $12,500 at the beginning of each year. If the landlord’s discount rate on this lease is 9 percent per year, what is the present value of the lease?

ANSWER:
Remember, you can always draw a time-line to help you visualize what is going on.

If the cash flows start at the beginning of the compounding period then you have two choices: 1) set you calculator to BEGIN or BEG mode (but remember to set it back to END mode because for most problems, the cash flows occur at the end of the period), or 2) calculate the answer in normal END mode and multiple your answer by 1 plus the interest rate per period (1 + i) (this will effectively start the compounding immediately). Your choice in approaches (but do NOT do both!).

Student Question (TVM)

QUESTION:

for the excerise on pg 326 of the book. Finding AO60 = 94,379.29

ok first I do, f fin to clear it out

then 7.25 g I to put in monthly interest

300 n for the periodic payment schedule

681.19 PMT

then I hit PV

and get $94,242.3258


ANSWER:

James,

The difference is caused by the round of the PMT. The actual payment is 682.1763. With 300 payments, the rounding can make a significant difference. jah

TVM Tutorial Question

Student Question:

Mr. Hansz,

Will you please explain to me the TVM tutorial. Is it an online assignment or is it a class meeting? I have printed out the pink prior completion form and need to know, who exactly needs to sign it. Please let me know ASAP.

Answer:
Andrea,

You purchase the TVM Tutorial at the campus bookstore. You work through a series of 13 spreadsheets. Print out each section when you are done and turn the hard copy in along with the TVM Certification page.

Student Question: TVM Tutorial

If I drop the online version and still complete the tutorial will it be valid when I take the face-to-face version [in Spring 09]?

REPLY
No. Unfortunately not. You have to complete the course to get credit for the TVM. This is necessary because the Department will reference this course to see if you passed the course before they give you credit for the TVM in another course (FINA 3313 or another section of REAE 3325). Sorry!

Student Question: TVM Tutorial

I listened to the Review Packet audio clips. Can I possibly still finish the TVM tutorial and get credit for that? I've already finished half of it. Thank you for your help.

REPLY
The TVM Tutorial deadline isn't until later in the semester. I encourage you to complete (or do as much as you can) of the TVM tutorial because TVM is an important topic on EXAM 1. JAH

Student Question: END vs BEGIN Mode

For some reason my mind just went completely blank on how to enter compound interest in the financial calculator. On Problem Set #2, #2 I was thinking that I needed to find the nominal interest rate but then that didn't sound right. I was putting in the effective rate of 12% and the number 12 to get a nominal rate of 11.38655 which I didn't think was right.

Occasionally, we might need to change our calculators to BEGIN mode when cash flows occur at the beginning of a period. Again, you need to refer to your calculator manual to set it to BEGIN mode. Some calculators display a BEGIN or BEG on the screen to indicate BEGIN mode.

However, it you do set it to BEGIN mode, make sure you reset your calculator to END mode. It would be a disaster to go to the first exam and forget that your calculator is set on BEGIN mode.

REPLY
Problem Set 2 number 2

2. An investor can buy a tract of farmland today that he believes will sell for $50,000.00 in eight
years. His required rate of return for this type of investment is 12% per annum compounded
monthly. How much should he pay for the land today? (assume that there are no taxes or other
periodic costs involved)

N=96 (8 x 12)
I%=12/12
PV=? solving for
PMT=0 or empty
FV=50,000

To solve this problem we simply need to divide the interest rate by the compounding periods per year. If N (the number of periods) is in months then I% needs to be in the same units (months in this case). N and I% always have to match up. If N is in years, then I% is in years. If N is in months, I% has to be in months.

The above assumes that your calculator is set to 1 payment per year. If you set you calculator to 12 payments per year, then the calculator will divided what ever you enter into I% (12 in this case) by 12. That is the only thing that the payment per year function does. It just divides I%.

BEGIN MODE VS END MODE
You do want to make sure that your calculator is on END mode normally. By far, most problems will indicate that cash flows occur at the end of the period. You need to figure out how to set your calculator to END mode because each calculator is different. When you take the calculator out of the box, I am 99.9% sure that is set to END mode by default. Some calculators might even display 'END' on the screen.

Occasionally, we might need to change our calculators to BEGIN mode when cash flows occur at the beginning of a period. Again, you need to refer to your calculator manual to set it to BEGIN mode. Some calculators display a BEGIN or BEG on the screen to indicate BEGIN mode.

However, if you do set it to BEGIN mode, make sure you reset your calculator to END mode. It would be a disaster to go to the first exam and forget that your calculator is set on BEGIN mode.

It is good that you are working these things out now (before Saturday!).

Student Question: TVM related --> I or I%

Dear Dr. Hansz,

I am having a problem on one of the study questions at the end of chapter 14. The study question is number 10. Your answer that you have provided is $1,184.72 the answer I am coming up with is $380.67. I input the following information into my calculator:

PV = $135,000 N = 360 (12 x 30) I = 0.0083 (0.10 / 12) FV = 0. Could you please help me understand what I am doing wrong, I would greatly appreciate it.

Thank You,

Shannon

Andrew Hansz

Shannon, I don't have the problem in front of me but I think I might see the ...

Sep 14 (1 day ago)

Andrew HanszLoading...

Sep 14 (1 day ago)

Reply

Shannon,

I don't have the problem in front of me but I think I might see the problem in your answer below. Your calculator needs the interest rate (I) as a percentage (10%/12). Your answer indicates that you entered the interest rate a decimal (.10/12). Just enter I as 10/12.

Could you please try this and get back to me so I know that this was in fact the issue? Thank you, Dr. Hansz

Dr. Hansz, I tried what you suggested and it did work, thank you. But, I have one question about that, why would you leave the 10% as a whole number when dividing by 12 instead of changing the 10% into the decimal form first. Shannon

Shannon,

It is just the TI and HP calculator convention. It might even show I% on your calculator key. Basically, the calculator is automatically changing it to a decimal format for you.

May I post this question the class blog? I have a feeling someone else might have a similar issue. Now is the time to figure these things out!

Cheers,

Dr. Hansz