Financial Mathematics Text

Thursday, July 25, 2013

Financial Mathematics: Financial Calculators

Actually working out most of these formulas by hand can be time consuming. In some cases, there is not a slick algebraic solution in which case you'll have to use brute force calculations or some approximation technique (to find the interest rate). So here's a quick review of some alternative ways do actually do the calculations.

Physical Calculators

There are a variety of calculators on the market capable of dealing with some types of financial mathematics. As an example Texas Instruments has a few such as the BA II Plus.

But if you already have one of those Texas Instruments graphing calculators, it's quite likely that there is a financial addition that can be downloaded to your calculator. I personally sport an obsolete TI-86 which has a financial package you can download for it. Plus those graphing calculators can be programmed to do a variety of other tasks that the financial package does not account for.

Java(Script) Based Calculators

If you're too cheap (or simply too lazy), there are a variety of java(script) based calculators that are capable of performing just as well as the physical ones. The key is to track them down (and hope they're coded correctly.)

For example, bankrate has a variety of calculators designed for specific purposes. Most of these are simply variations of the same formulas derived in this blog series.

Spreadsheet Formulas

If you already have Microsoft Excel, it comes with a variety of useful financial functions. You can also use Excel to perform calculations on scenarios that don't fit the regular formulas.

If you're too cheap to buy Excel, OpenOffice is a great alternative. They have a a program called Calc which is very similar to Excel. The financial functions work pretty much the same way that the Excel ones do. In fact, the syntax is almost identical in some cases (OpenOffice Calc uses semicolons instead of commas to separate parameters so that will always be a difference). For example, consider the Present Value function.

PV(rate, nper, pmt, [fv], [type])
 PV(rate; numperiods; payment; [futurevalue]; [type])
They're identical (except for the comma/semicolon difference).

So if you're mathematically challenged (or you're like me and simply dislike performing calculations), there are a variety of tools at your disposal, some of which are free to use. 

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