KissFC
First Profile of Use
1. Profile for Single Payment:
In order to easily assimilate those examples, it is fundamental to perform all the indicated operations, in KissFC, step by step. These examples make quite clear the convenience of loading KissFC with the option "Always on Top" enabled (default). If that feature was not active, KissFC would disappear from the screen when those HTML pages with examples are loaded.
We will watch Mr. George V. visit to his bank manager, to discuss an investment:
Obviously, Mr. George V. took his laptop with KissFC installed. The manager proposes an investment of $10,000.00, for a period of 18 months, with net monthly profitability of 1.2%. He consults a table and informs Mr. V. that he will receive $12,285.31 at the end of the period . Mr. V. asks for permission to use his computer and inputs the following data in KissFC:
Present
Value = 10000
Number
of Periods = 18
Interest
rate = 1.2
He
clicks Future Value
and obtains as the result:
Future
value = 12,395.08
Mr. V. protests that the bank is making a mistake against him and goes even farther:
With
the previous values still in
the calculator, he inputs the value given by the bank - $12,285.31 - in
the text box "Future Value", clicks the command button Interest
Rate
(it is not necessary to clear the value 1.20 there) and obtains the
real
interest rate used by the bank:
Interest
rate = 1.150
The
manager consults his table again
and discovers that he had made a mistake when transcribing a figure. He
repeats the calculations and arrives at exactly the same values as his
attentive client. Then, Mr. George V. thinks it over for a few seconds
and says:
"Instead
of having to remember
a broken number, I'd rather invest an amount that will pay me
$12,500.00
at the end of the 18 months." In KissFC, he enters:
Numbers
of Periods = 18
Interest
rate = 1.2
Future
value = 12500
He
clicks Present Value
and obtains $10,084.65 as the amount he must invest to have $12,500.00
at the end.
After
further thought, Mr. V., a
gentleman of solid financial foundations, wonders:
- How
long will I have to leave
the money applied to redeem $13,000.00?
With
KissFC, it is very easy to
get the answer. He enters:
Present
Value = 10084.65 (it is
already there, there is no need to reenter it)
Interest
rate = 1.2 (it is also
already there)
Future
value = 13000.
Finally,
he clicks Number
of Periods (he doesn't need to erase the 18 that is
there) and
gets:
Number
of Periods = 21.288
The month fraction, 0.288, corresponds to approximately 9 days. Since banks don't like investments with broken numbers, a last operation is convenient. Mr. George V. enters 21 in "Number of Periods" and recalculates the "Present Value" for the application by clicking Present Value. He calculates $10,119.35 as the amount he should invest for 21 months, at a 1.2% monthly interest rate, in order to have $13,000.00 when redeeming the security.
Notice that, in the examples above, each one to the four elements present in that profile: "Present Value", "Number of Periods", " Interest Rate" and "Future Value" were calculated at least once. A last point to observe, also valid for the next profiles: the "Number of Periods" is linked to the "Interest Rate". So, in the previous example, if the bank had offered an annual interest rate, instead of a monthly one, you should use the tool "Conversion of Interest Rates by Period".
I know that interest rates in the USA and Europe are, usually, compounded annually. This is just a translation of the Brazilian page (in Portuguese). In the near future, I intend to have more adequate examples for your reality.