KissFC
Second Profile of Use
2. Financing on installments with Present Value:
To demonstrate this profile, we will accompany Mr. Robert N. and his wife's visit to a car shop, where they intend to buy, financed, their new car. The salesman consults a table and presents the following figures for a financing:
Present
Value: $18,400.00
Number
of Periods: 36 months
Down
Payment: $3,680.00
Installment:
$573.80
Rate:
1.96% a month
Obviously, Mr. Robert N. took his laptop with KissFC installed. He types the values provided by the salesman, except the Interest Rate, and clicks Interest Rate. The answer is: Interest rate = 1.960. So, he confirms that the values - though high - are correct (but, then again, high is also the interest rate). Mr. N., in view of the abusive interest charged (at the end of the financing, he will have paid more than 40% the financed value, as interest), decides for a bigger down payment and to reduce the number of periods to 24 months. To calculate the new value of the installment, he enters:
Present
Value: $18,400.00
Number
of Periods: 24
Down
Payment: $5,400.00
Interest
Rate: 1.96
He
clicks Installment
and obtains $684.21. He thinks for a few seconds and concludes that it
would be very convenient to round this value to $700.00.
First, he researches if that rounding can be obtained by shortening the financing period. Changing in the previous calculations the installment to 700.00 and clicking Number of Periods, he obtains 23.315. He likes the idea of reducing one month and enters 23 in the box "Number of Periods", clicks the button Down Payment and obtains the value he will have to pay for the new condition: $5,539.38.
Madame N., until now just a passive watcher, says: "Bob, I can contribute with $200.00 a month so we can buy a more sophisticated car". So far, the "Present Value" - $18,400.00 - had been kept untouched. Adding $200.00 to the value of the installment (the new value becomes $900.00), and clicking Present Value, we get $22,074.46. Madame N. is now delighted with their new V6 motor car, with lateral airbags the increment allowed for.
In the examples above, we also verified that each one of the 5 variables can be obtained from the 4. We must now answer an obvious question: why can't we, in that profile, enter a number for "Future Value"? The answer is simple: the data would be redundant. Whenever we have all the figures for this profile of use and want to know the "Future Value", we can do so by erasing the contents of the box "Present Value" and clicking Future Value.