The Texas Instruments TI-84 Plus series calculators are ubiquitous in finance courses, from introductory business to more advanced corporate finance applications. While not a dedicated financial calculator like the HP 12C, the TI-84’s versatility and programming capabilities make it a powerful tool for many financial calculations.
Key Financial Functions
Although the TI-84 doesn’t have pre-programmed buttons for every finance calculation, it offers several built-in functions useful in the Finance application (accessed by pressing APPS and then selecting Finance). Some of the most common functions include:
- TVM Solver: This is arguably the most important tool for basic financial calculations. The TVM Solver allows you to solve for one of five variables in time value of money problems:
- N (Number of periods)
- I% (Interest rate per period)
- PV (Present value)
- PMT (Payment per period)
- FV (Future value)
- I% Conv.: Converts nominal interest rates to effective interest rates, which is essential when dealing with compounding periods that differ from the payment frequency.
- NPV and IRR: Calculates the Net Present Value (NPV) and Internal Rate of Return (IRR) of a series of cash flows. These are critical for project evaluation and capital budgeting. You input the initial investment and subsequent cash flows, and the calculator provides the NPV and IRR results.
By entering the known values and positioning the cursor on the unknown variable, then pressing ALPHA and SOLVE (the ENTER key), the TVM Solver calculates the missing value. It’s crucial to understand the sign conventions: typically, inflows are positive, and outflows are negative.
Beyond Built-in Functions
The true power of the TI-84 in finance lies in its ability to be programmed. Many students and instructors write custom programs to handle more complex financial calculations that aren’t directly supported by the built-in functions. This includes:
- Amortization Schedules: You can create a program to generate a full or partial amortization schedule for a loan, showing the principal and interest components of each payment.
- Bond Valuation: While the TI-84 doesn’t have a dedicated bond valuation function, a program can be written to calculate the present value of a bond based on its coupon rate, yield to maturity, face value, and time to maturity.
- Depreciation Calculations: Different depreciation methods (straight-line, double-declining balance, etc.) can be programmed for asset accounting.
Limitations
Despite its usefulness, the TI-84 has limitations compared to dedicated financial calculators:
- Lack of Dedicated Keys: The TI-84 requires navigating through menus or using programmed functions, which can be slower than pressing dedicated keys on a financial calculator.
- Limited Display: The screen is smaller than those found on financial calculators, potentially making it harder to visualize complex calculations.
- No Sensitivity Analysis: Financial calculators often have built-in features for performing sensitivity analysis (e.g., changing the interest rate and seeing the impact on NPV). This requires more programming effort on the TI-84.
Conclusion
The TI-84 Plus remains a valuable tool for finance students and professionals. While a dedicated financial calculator might offer some advantages in terms of speed and specific functionalities, the TI-84’s versatility, programmability, and widespread availability make it a solid choice for handling a wide range of financial calculations, especially when combined with the creation of custom programs.
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