How to Use Your Financial Calculator

Finance becomes a heck of a lot easier when we know how to use our financial calculator. This is a walkthrough of how to use the Queen's University recommended finance calculator (SHARP EL-738XT).

Understanding Financial Variables

Before diving into the calculator itself, let's break down the key financial variables you'll frequently use:

• N: Represents the total number of payments or periods. For instance, if you're considering a 5-year loan with monthly payments, N would be 5 x 12 = 60.

• I/Y: Stands for the interest rate per year. 

• PV: The present value, or the initial amount of money. In investment scenarios, this could be the initial investment. In loan scenarios, it's the loan amount.

• PMT: This denotes the payment amount per period. For annuities or loans, it represents the regular payment amount.

• FV: Future Value. If you're thinking about how much an investment will be worth in the future, this is the number you're after.

• P/Y: Payments per year. For monthly payments, this would be 12. For quarterly, it would be 4.

• C/Y: Compounding periods per year. This is how often interest is added to the balance. For daily compounding, it would be 365. For monthly, 12.

Using the SHARP EL-738

1. Turning it on and off:

   • Press the ‘ON’ button to turn it on.
   • Press the ‘2ndF’ button followed by the ‘OFF’ button to turn it off.

2. Inputting Financial Values:

   • Press the respective button for the financial variable you wish to input (e.g., N, I/Y, PV, PMT, FV).
   • Input the value using the numeric keys.
   • If you make a mistake, the ‘BACKSPACE’ key can be used to delete.

3. Setting Payments and Compounding Periods:

   • Press the '2ndF' button followed by the 'P/Y' button.
   • Input the desired value (e.g., 12 for monthly).
   • Repeat the same for 'C/Y' if compounding periods are different from payment periods.

4. Switching Between Annuity Due and Ordinary Annuity:

   • The SHARP EL-738 defaults to ordinary annuities. For annuities due, you'll adjust the calculator to account for the different payment timing.
   • Press the ‘2ndF’ button followed by the ‘BGN’ button (beginning mode).
   • You'll now see a small 'BGN' at the top of the display. This means you're in the annuity due mode.
   • To switch back to ordinary annuity, simply repeat the process.

      

Let’s Dive Into an Example

Imagine you're considering a 4-year car loan of $15,000 at an annual interest rate of 5%, with monthly payments. You want to find out your monthly payment.

Steps:

1. N: 4 years x 12 months/year = 48. Input 48 for N.
2. I/Y: 5% annual interest rate. Input 5 for I/Y.
3. PV: $15,000. Input -15000 for PV (negative because it's money going out).
4. FV: 0 (You'll be paying off the loan, so the future value is zero).
5. P/Y and C/Y: Both should be set to 12 since it's monthly compounding and monthly payments.
6. Press the COMP button and then the PMT button to find your monthly payment!

Once you've inputted all the details, your calculator will give you the monthly payment you'll need to make to repay this loan in 4 years