Introduction to Financial Calculations

DreamCalc Pro offers an extensive range of financial functions which work in the same way as those found on professional financial calculators. If you are familiar with financial calculators, you will find the features in DreamCalc easy and transparent to use. If you work with cash-flow data, you will find DreamCalc even easier, as it provides a Numeric Data List Window which allows you to conveniently enter cash-flows and helps to integrate your work with your favourite spreadsheet application.

dreamcalc financial keys
DreamCalc's Financial Keys

To use the financial function keys, you must ensure that they are enabled; this can be done using the 'Specialized Functions' option under the 'View' menu.

Hint : When using the financial keys, you may wish to set the precision mode to 2 fixed digit precision. You can do this from the 'Modes' menu and then by selecting the 'Precision' option.

Overview of Functions

Time Value of Money

You can quickly perform compounding interest calculations using the Time Value of Money (TVM) functions:

Number of Payments [n]
Interest (%) [i]
Present Value [PV]
Payment Amount [PMT]
Future Value [FV]

Given input values for any four of the above items, the calculator can determine the fifth unknown value. You enter the appropriate input values into the corresponding 'registers' and simply press the remaining TVM button to calculate the unknown. There is an example below, with further examples shown in the Example Calculations page. Please take note of the calculator's cash-flow sign convention, which is also explained below.

The [PRINT] function sends the contents of the above TVM registers to the Paper Roll Window. [CLREG] clears the financial TVM registers.

Additional Financial Functions

You can also:

Calculate amortized payment amounts using [AMORT].
Determine Net Present Value and Internal Rate of Return with the [NPV] and [IRR] functions.
Perform straight-line, sum of years digits and declining balance depreciation using [SL], [SOYD] and [DB].
Calculate simple interest with [INT].
Exchange between your national and a foreign currency with [NT~FN] and [FN~NT] .
Quickly calculate tax with [TAX+] and [TAX-] .

See the financial functions section for function-by-function information.

Cash-Flow Sign Convention

When entering or displaying cash amounts, DreamCalc adheres to the sign convention that money received is positive, while money paid out is negative.

Use the [+/-] key to change sign, in the same way you would use [CHS] on some other popular calculators.

Payment Mode

Payments can be made either at the beginning of a compounding period (payments in advance or annuities due) or at the end of the period (payments in arrears or ordinary annuities). Use the [BEG/END] button to toggle between the BEGIN (in advance) setting and END (in arrears) setting.

Clearing Financial Registers

The [CLREG] function on the [AC] button clears the financial registers, but does not clear the cash-flow list.

Entering Cash-Flow Amounts

The [CF0] button clears the data in the cash-flow list and enters the current value as the first amount. Use [CFj] to add consecutive values. The [Nj] button can be used to add multiple entries of the same value.

For example, key in the following:

{1000} [+/-] [CF0]
{800} [CFj]
{500} [CFj]
{3} [Nj]

The cash-flow list will now contain the amounts: -1000, 800, 500, 500, 500.

Note that with DreamCalc, pressing the [Nj] button simply adds n-1 copies of the last value to the cash-flow list.

You may prefer, however, to use the Numeric Data List Window to enter cash-flow values as it will be much quicker and easier.

An Introductory Example

Suppose that you have $2,000 today and can invest this amount at 12% APR over the next 5 years with quarterly compounding interest. Determine the value of the investment after 5 years.

{2,000} [+/-] [PV] (stores -1,000 in the PV register)
{5} [×] {4} [=] 20 [n] (stores 5 years worth of quarterly periods in the n register)
{12} [÷] {4} [=] 3 [i] (stores the quarterly interest rate in i register)
{0} [PMT] (no other payments)
[FV] gives result $3612.22

Calculating Effective Annual Rate

In the United Kingdom, the calculation of the APR differs from that in the United States. In the United States, APR can be calculated by simply multiplying the periodic interest rate by the number of periods, as with the example shown above. In the United Kingdom, however, APR is calculated by converting the periodic interest rate to an Effective Annual Rate.

To convert a periodic interest rate to an Effective Annual Rate, use the following conversion:

{periodic rate} [i]
{no. of periods in year} [n]
{100} [+/-] [PV]
{0} [PMT]
[FV] [-] {100} [=]

For example, if interest is compounded at 0.5% per month, the Effective Annual Rate is as follows:

{0.5} [i]
{12} [n]
{100} [+/-] [PV]
{0} [PMT]
[FV] [-] {100} [=] gives result 6.17%

Special Notes

There are some subtle differences between DreamCalc Pro and other financial calculators worthy of note:

Financial calculators often use Reverse Polish Notation (RPN) input, whereas DreamCalc is strictly an algebraic calculator. In general, however, this will not affect the operation of financial functions, but you will have to enter formula in algebraic order. See the example above.
The [X<>Y] key on DreamCalc exchanges the current value with that in a static 'Y' register. It is used primarily in DreamCalc to access the second value from functions which return two results simultaneously, such as [INT]. The Y register does not form part of the calculation stack, as it does with some calculators, such as the HP12C. So, for example, you cannot use [X<>Y] to transform the input sequence 3 + 4 into 4 + 3. The Y register retains its value until either, you exchange it with another, or you press [CLREG] which clears the financial TVM registers.
DreamCalc Pro treats the number of payments register n separately from the number of entries in the cash-flow list. TVM compound interest calculations take input from the value in the n register, while those concerning discounted cash-flows, such as IRR and NPV, take the number of entries in the cash-flow list to be the number of payments.
The cash-flow list is separate from statistical data lists.

See some examples of financial calculations.