Finance Calculator
Financial Calculator
Select what you want to solve for, enter the other values, then click Calculate.
Assumes end-of-period payments and annual compounding. Negative values represent cash outflows (payments made).
Value Changes Over Time
Amortization Schedule
| Period | Opening Balance | Payment (PMT) | Interest | Closing Balance |
|---|
Understanding the Time Value of Money (TVM)
The Time Value of Money (TVM) contains the association between the value of money now and its equivalent value in the future. TVM is the basis of finance and is used in many financial business calculations in corporate finance, corporate budgeting, and personal finance. It is applied to all investment types including bonds, company valuation, personal finances, mortgages, pension plans, and more. All calculations are used for determination of the future value of a cash flow or series of cash flows given an expected rate of return. Similarly, it can be used to calculate the present value of a cash flow.
Present Value (PV)
The recent value of a future cash flow or series of cash flows.
Future Value (FV)
TThe value of a current asset at a upcoming date.
Discount Rate (I/Y)
The rate of return or interest that is applied to discount future cash flows to their present value.
Compounding (N)
The number of times a return is compounded over a period of time.
The TVM Formula
The following is the basic formula that relates the five key components of TVM:
You can solve any one of the five TVM variables if you know the other four by using our online calculator. In other words, just enter the other four, and this calculator will solve for the fifth, just like a BA II Plus or HP 12C financial calculator.
What Is PMT? Periodic Payment Explained
In Time Value of Money and financial calculator terminology, PMT stands for Periodic Payment. The amount at which cash flows are paid out or received at specific intervals over the life of an investment is the Periodic Payment. It is common for investors to deal with cash flows in installments, such as with mortgages, bonds, retirement funds, and more.
Understanding PMT is essential for:
- Mortgage & Loan Calculation — Find your monthly repayment for a given loan amount, term, and interest rate.
- Retirement Planning — Determine how much to contribute each period to reach a future savings goal.
- Lease Payments — Calculate periodic lease installments for asset financing.
- Annuity Valuation — Price fixed-income streams like pension payouts or structured settlements.
Why PMT Is Important
Calculating PMT enables you to determine the size of a periodical cash flow.
For example, you could use a PMT calculation to determine your monthly mortgage payment for a $600,000 mortgage that is repaid over 30 years at an interest rate of 6%. In this case, the calculation would identify your monthly mortgage payment. Similarly, you could use it to calculate your monthly retirement contribution to reach you financial goals in retirement. Other applications may include lease payments for assets.
In the calculator above, a negative PMT indicates a cash outflow while a positive PMT indicates a cash inflow.
Finance Class: Core Concepts You Need to Know
It is very important to be familiar with the following time value of money (TVM) concepts whether you are studying for the CFA exam, a corporate finance course or the Series 7/ Series 65.
Ordinary Annuity vs. Annuity Due
An ordinary annuity has payments at the end of each period (our calculator's default). An annuity due has payments at the beginning of each period, making it worth slightly more because each payment compounds for one extra period. Many financial calculators have a BEGIN/END mode switch for this purpose.
Net Present Value (NPV) & IRR
NPV is similar to PV, except that it considers a stream of unequal cash flows, with the sign convention as mentioned above. It discounts each individual cash flow and sums them up to get the overall present value of all the cash flows involved. This is often used in capital budgeting to identify if a project is worth the investment or not. A positive NPV implies that a project is worth more than the sum of its costs. The Internal Rate of Return (IRR) is the discount rate that makes the NPV of an investment equal to zero. It is used to assess the rate of return of an investment.
Compound Interest vs. Simple Interest
Simple interest is generally just the primary amount multiplied by an interest rate. In contrast, compound interest is interest on the principal amount plus interest on the unpaid interest from previous periods. This causes compound interest to grow exponentially compared to simple interest. Einstein even referred to it as the eighth wonder of the world!
Effective Annual Rate (EAR) vs. Nominal Rate
The Effective Annual Rate (EAR) is the actual rate of return that an investor earns on an investment as the compounding effect. As can be seen from the formula, when compounding is more frequent, the EAR can be much higher than the Nominal Rate. In fact, this is why banks make more money from mortgages with monthly compounding rather than annual compounding. The formula for EAR is as follows:
EAR = (1 + r/m) ᵐ − 1
Where:
r = Nominal Rate and
m = Number of compounding periods per year
Financial Calculator: Why It Is So Important
When there were no spreadsheets, financial calculator was used to perform time value of money calculations. Texas Instruments (BA II Plus and Hewlett-Packard HP 12C) were the most popular calculators and were used widely by finance professionals and in classrooms. Today, online calculators have grown to make things easier. You don't need the financial calculator anymore. In fact, if you're like most people, you probably don't even have one!
Why TVM Calculations Matter in Real Life
If you are buying a house, you might want to understand what your monthly mortgage payments would be on a $400,000 house with a 6.5% mortgage rate and 30-year repayment schedule. You could try calculating it with our calculator. It's not easy to do by hand! Similar scenarios could include student loan payments, retirement savings, company valuation, bond pricing, and more.
- Student loan repayment planning — Model different repayment scenarios and payoff timelines.
- Retirement savings targets — Calculate required monthly contributions to hit a specific nest egg.
- Business valuation — Discount projected cash flows back to a net present value.
- Bond pricing — Determine fair market value given coupon rate, yield, and maturity.
- Capital lease accounting — Compute the present value of lease obligations for balance sheet treatment.
Using the Amortization Schedule
Our calculator generates a full amortization schedule — a period-by-period breakdown of each payment showing how much goes toward interest and how much reduces the principal balance. This is invaluable for understanding the true cost of debt and for tax planning (interest on certain loans may be tax-deductible).
Sign Convention: A Critical Detail
Financial calculators use a cash flow sign convention: money flowing out (payments, investments) is negative; money flowing in (receipts, loan proceeds) is positive. Violating this convention is the single most common error made by students and practitioners alike. Always ask: "From whose perspective?" — the borrower's PV is positive (they receive the loan), while the lender's PV is negative (they pay out the loan).
How to Calculate Your Mortgage & Income Payments
Our mortgage calculator is a specialized version of the amortization schedule. Essentially, it's an amortization table which is designed to help you understand how much of your monthly mortgage payment goes to interest versus principal, and how your outstanding balance drops over time.
The Sign Convention: Most Common Error
A simple convention that is followed in all financial calculators is that of the sign convention of cash flows. In other words, a negative sign is assigned to cash outflows and a positive sign is assigned to cash inflows. One of the most common errors made by students is to ignore this convention. Always remember that the sign convention is always from the viewpoint of either an investor/lender or a borrower. For example, PV will be positive to the lender/borrower and negative to the borrower/lender.
When you borrow money, the loan proceeds are money received by you. Thus, it is a cash inflow to the borrower and the PV should be positive. On the other hand, it is a cash outflow to the lender, so the PV should be negative from his point of view.