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Over the years, I have received many questions about financial calculators. I will compile a list of the most frequently asked questions here.

Q: When using the NPV and IRR functions, can you explain the optional {cash flow counts} part?

A: Sure. That feature is there to save some data entry in certain circumstances, and it serves an identical purpose to the frequency prompt in many other financial calculators. If some of your cash flows repeat, then you can include the "cash flow counts" array. Let me give you an example:

What is the present value of the following series of cash flows if the discount rate is 8% per year?

100, 200, 200, 200, 300.

Normally, you might solve this problem using the NPV function as follows:

NPV(8,0,{100,200,200,200,300})

but notice that you had to type "200" three times in a row. Using the "cash flow counts" array we can do it like this:

NPV(8,0,{100,200,300},{1,3,1})

Either way, you will find that the present value is $774.01. However, the second method saves a little bit of typing and is less likely to lead to data entry errors. It doesn't really save much time in this simple example, but in other problems it can. Be aware that if you use the "cash flow counts" array, you must enter a frequency for each of the cash flows — even those that don't repeat.

Q: The TI-83 (and other) manual tells me to use lists in the NPV and IRR functions. Why don't you use them?

I'm a rebel! Seriously, I just think that it is quicker and easier to create on-the-fly arrays rather than use lists. For most of what I do, I'm not going to reuse a list more than once or twice anyway. When I do want to reuse it, I can usually use the editing functions to quickly get it done.

Q: Why am I getting an error when I use the NPV and/or IRR functions?

Well, that depends. Most often, the errors that I see in class are caused by somebody not being careful about separating each variable in the function by commas. Every comma that you see (above) is absolutely required. Another frequent cause of errors is neglecting to make the initial outlay a negative number. You have to obey the cash flow sign convention whether you are using the TVM Solver or the functions.

Q: How do I calculate the number of days between two dates using the TI 83?

A: The TI 83 and 83 Plus support two date formats, MM.DDYY or DDMM.YY. You calculate the difference between two days by using the dbd (days between dates) function from the Finance menu. For example, to find the number of days between 25 July 2007 and 31 December 2007 you would type:

dbd(08.2507,12.3107) if you are using MM.DDYY

or

dbd(2508.07,3112.07) if you are using DDMM.YY

Either way, you will find that there are 128 days between those two dates.

Note that the TI 83 does not allow you to specify a day count basis (e.g., 30/360 or actual/360). The basis is always actual/actual.

Q: How do I find roots other than square roots using the TI-83 Plus?

In finance it seems that we are forever calculating various roots (cube root, fourth root, 365th root, etc). Fortunately, this is pretty simple to do if you can remember a simple mathematical rule:

nth root formula

So, to calculate the 5th root of 100, we simply raise 100 to the 1/5th power. To do this on the TI-83 Plus type: 100^(1/5) ENTER. In this example, the 5th root of 100 equals 2.51189. Note that the parentheses are important, otherwise you would raise 100 to the 1st power and then divide by 5 and you would get 20 as the answer. Using this technique you can calculate any root.

Q: My calculator only has a key to calculate natural logarithms. How do I calculate logarithms to other bases (say, base 10)?

A: Most often, in finance, we use natural logarithms (base e), usually abbreviated as Ln(x). However, sometimes we need to use other bases. Converting from base e to any other base can be done with the following formula (I'm converting to base 10):

logarithm base conversion formula

So, just calculate the natural log of your number (use the LN key), and then divide it by the natural log of the new base. For example, Log10(3) = Ln(3)/Ln(10) = 0.478. Note that the TI-83 Plus does have a LOG key for calculating base 10 logarithms. Still, if you need another base the above formula will work — just change the 10 to your selected base.

Q: How can I clear the memory of all variables and lists?

A: Unlike a complete reset (see below) this is pretty safe to do, though be careful not to delete any lists or variables that you need to save. To clear all memory in a TI 83 or TI 83 Plus:

  1. Press 2nd MEM (that is the second function of the + key)
  2. Select 2
  3. Select 1 (All)
  4. Scroll through the list and delete anything that isn't important.

Q: How can I completely reset my TI 83 or TI 83 Plus back to the factory default settings?

A: Be careful with this as it will remove any programs that you may have stored in the calculator. With that disclaimer stated, here's how to reset it:

  1. Press 2nd MEM (that is the second function of the + key)
  2. Choose 7 (Reset)
  3. Scroll right so that ALL is selected
  4. Press 1
  5. Press 2 (Reset, and read the warnings)

 

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