HP 12C Financial calculator - Manual (Page 35)

Section 3: Basic Financial Functions 35
File name: hp 12c_user's guide_English_HDPMBF12E44 Page: 35 of 209
Printered Date: 2005/7/29 Dimension: 14.8 cm x 21 cm
The exchange of money in a problem is depicted by vertical arrows. Money you
receive is represented by an arrow pointing up from the point in the time line when
the transaction occurs; money you pay out is represented by an arrow pointing
down.
Suppose you deposited (paid out) $1,000 into an account that pays 6% annual
interest and is compounded monthly, and you subsequently deposited an
additional $50 at the end of each month for the next 2 years. The cash flow
diagram describing the problem would look like this:
The arrow pointing up at the right of the diagram indicates that money is received
at the end of the transaction. Every completed cash flow diagram must include at
least one cash flow in each direction. Note that cash flows corresponding to the
accrual of interest are not represented by arrows in the cash flow diagram.
The quantities in the problem that correspond to the first five keys on the top row of
the keyboard are now readily apparent from the cash flow diagram.
z n is the number of compounding periods. This quantity can be expressed in
years, months, days, or any other time unit, as long as the interest rate is
expressed in terms of the same basic compounding period. In the problem
illustrated in the cash flow diagram above, n = 2 Ч 12.