The Present Value of a Lump Sum (Using The Texas Instruments BA II plus

          I use the Texas Instrument BAII Plus calculator to solve such problems. It is important to note that unless the interest rate is negative the present value will always be less than the future value. Let suppose that you just had a little boy and in 18 years you are planning on sending him to college. You know that you’ll need $100,000 to pay for his tuition, room and board and books. You assume you’ll average interest rate will be 8% per year. The question you would like to have an answer for is how much do you need to invest today as a lump sum to have the needed funds for your son.

So, let’s enter what we know.

You know you have 18 years

You’ll get 8% interest.

You want to have $400,000.

To find the present value enter

Thus, we take the following steps.

Enter 18 then press N

8 and the press I/Y

Then input 400,000 then press FV

Note you’ve entered the 100,000 as a positive number because it is what you’ll receive in 18 years.

After you’ve done these things enter CPT and then PV.

You will need to invest $100,099.61 today to meet your goal.

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