Time Value of Money Calculations with the TI BA II Plus for the CFP Exam

Time value of money (TVM) calculations are the mathematical backbone of financial planning. They show up in retirement projections, education funding analysis, mortgage calculations, investment analysis, and present value of annuity problems. The CFP exam uses TVM extensively, and the required calculator for the exam is the TI BA II Plus.

This post walks through every TVM problem type you will encounter, with step-by-step keystrokes for each one.

Setting Up the Calculator

Before working any TVM problem, confirm your calculator settings:

Payments per year: Press 2ND then I/Y. Set P/Y to the appropriate number of payment periods per year. For annual problems, P/Y = 1. For monthly mortgage problems, P/Y = 12. For quarterly problems, P/Y = 4.

When P/Y is set correctly, the calculator automatically adjusts all inputs. This is the safest approach for the CFP exam. Alternatively, some candidates keep P/Y at 1 and manually adjust the rate and number of periods. Either method works, but pick one and be consistent.

End vs. Begin mode: Press 2ND then PMT to toggle between END (ordinary annuity, payments at end of period) and BEG (annuity due, payments at beginning of period). Most financial planning problems use END mode. IRA contributions paid at the beginning of the year, certain lease payments, and education funding problems often use BEG mode.

The Five TVM Keys

The TI BA II Plus uses five TVM inputs:

• N: Number of periods
• I/Y: Interest rate per period
• PV: Present value
• PMT: Payment per period
• FV: Future value

In any TVM problem, you know four of these and solve for the fifth. Cash flows going out are entered as negative numbers. Cash flows coming in are positive. Sign conventions matter: if you enter all five as positive, the calculator will give you an error or a wrong sign.

Problem Type 1: Future Value of a Lump Sum

A client invests $50,000 today at 7 percent annually. What will it be worth in 20 years?

Setup: P/Y = 1, END mode Keystrokes:

• 20 then N
• 7 then I/Y
• -50000 then PV (negative because it is cash going out)
• 0 then PMT
• Press FV

Answer: $193,484.22

The logic: $50,000 invested today grows to $193,484 over 20 years at 7 percent annually.

Problem Type 2: Present Value of a Lump Sum

A client will receive $100,000 from a settlement in 10 years. The discount rate is 5 percent. What is it worth today?

Setup: P/Y = 1, END mode Keystrokes:

• 10 then N
• 5 then I/Y
• 0 then PMT
• 100000 then FV
• Press PV

Answer: -$61,391.33 (negative indicates a present value outflow from the perspective of the payer)

The present value is approximately $61,391. If someone offered to sell you the right to receive $100,000 in 10 years for $65,000 today (and your discount rate is 5 percent), you would decline, because the fair value is only $61,391.

Problem Type 3: Future Value of an Ordinary Annuity

A client saves $500 per month for 30 years, earning 6 percent annually (0.5 percent per month). How much will they have?

Setup: P/Y = 12 (monthly payments), END mode Keystrokes:

• 360 then N (30 years times 12 months) OR set N = 30 and use P/Y = 12 with annual rate
• 6 then I/Y (calculator divides by 12 automatically when P/Y = 12)
• 0 then PV
• -500 then PMT
• Press FV

Answer: $502,256.77 approximately

The power of consistent saving over time is a central theme in retirement planning. This type of calculation underlies every savings goal projection.

Problem Type 4: Present Value of an Ordinary Annuity

A client needs $4,000 per month in retirement for 25 years, beginning one month from now. Assuming a 5 percent annual return, how much must they have saved?

Setup: P/Y = 12, END mode Keystrokes:

• 300 then N (25 years times 12 months)
• 5 then I/Y
• 4000 then PMT (positive, money coming in)
• 0 then FV
• Press PV

Answer: approximately -$683,396 (negative indicates the amount that must be in the account today)

The client needs approximately $683,396 at the start of retirement to fund 25 years of $4,000 monthly withdrawals at 5 percent.

Problem Type 5: Annuity Due (Payments at Beginning of Period)

The same problem as above, but payments come at the beginning of each month (annuity due).

Setup: P/Y = 12, switch to BEG mode (press 2ND then PMT and confirm BGN displays) All other inputs same as above Keystrokes: same

Answer: The present value will be slightly higher because payments start immediately rather than one period later.

Annuity due problems on the CFP exam often involve lease payments (paid at the beginning of the month) or education savings plans where contributions are made at the start of each year.

Problem Type 6: Solving for the Interest Rate

A client invested $20,000 ten years ago and the account is now worth $38,000. What was the annual return?

Setup: P/Y = 1, END mode Keystrokes:

• 10 then N
• -20000 then PV
• 0 then PMT
• 38000 then FV
• Press I/Y

Answer: approximately 6.63 percent

This type of calculation is useful for evaluating historical investment performance and for determining whether a proposed investment return assumption is realistic.

Problem Type 7: Solving for N (Time to Reach a Goal)

A client has $10,000 saved and contributes $200 per month. They want to reach $50,000. Assuming a 5 percent annual return, how long will it take?

Setup: P/Y = 12, END mode Keystrokes:

• 5 then I/Y
• -10000 then PV
• -200 then PMT (negative, going out each month)
• 50000 then FV
• Press N

Answer: approximately 104 months, or about 8.7 years

Problem Type 8: Net Present Value and Internal Rate of Return

The CFP exam tests NPV and IRR in the context of business valuation and capital budgeting decisions. These require the cash flow (CF) worksheet on the TI BA II Plus rather than the standard TVM keys.

For NPV: Enter cash flows using the CF worksheet, enter the discount rate in NPV, compute NPV. A positive NPV means the investment creates value at the given discount rate.

For IRR: Enter cash flows using the CF worksheet, then compute IRR. IRR is the discount rate that makes NPV equal to zero. If IRR exceeds the required rate of return, the investment is worth pursuing.

Practice Approach for Calculator Proficiency

Calculator speed and accuracy on the CFP exam come from repetition. Do not try to learn TVM in a single sitting. Work through at least five to ten problems of each type, checking your answers against a known solution. Build muscle memory for the keystroke sequences.

Common mistakes to avoid:

• Forgetting to clear the TVM registers between problems (press 2ND then FV to clear)
• Incorrect sign convention (cash out is negative, cash in is positive)
• Wrong P/Y setting for the problem frequency
• Forgetting to switch between END and BEG mode

TVM is not optional on the CFP exam. It shows up in retirement, education, estate, and investment analysis questions. Build proficiency early in your prep and reinforce it with practice problems throughout your study period.