Calculator notation

S

sfad

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
Question asks: What is the after-tax required return to accumulate 2,000,000 in 18 years beginning with an investable base of 1,235,000 and with annual outflows of 26,000.
N=18; PV= - 1,235,000; FV= 2,000,000; PMT= - 26,000; CPT→I/Y=4.14%
When computing the required return, either PV or FV must be negative. I set the FV to be positive (since we need to accumulate that amount) and thus set PV as negative.
And then any PMT that is an outflow receives a negative sign, while an inflow would be a positive sign.
Is this the correct way to think it?
 
I may be wrong here but i believe the PMT should be a positive sign as it is the opposite of the investable base (i.e taking money out from there on a yearly basis) so should have the same sign as the FV
Can i ask where this question is from?
 
Treat the payment as yield on the portfolio, which would be a positive number.
A negative number is treated as an additional contribution to the portfolio and will lower your interest rate.
when I calculate the rate required for PMT = -26,000 I get and I/Y of 1.0414% (not 4.14%)
A PMT = 26,000 results in a I/Y of 4.427%.
 
If we use N=18; PV= - 1,235,000; FV= 2,000,000; PMT= 26,000; CPT→I/Y gives = 4.42, which is (4.42 -1)x100 = 342%, which doesn’t make sense.
But more interested in knowing the logic as to when to use negative or positive sign?
And can’t exactly remember where i saw this, but i believe it was CFAI practice problems.
 
if you have a cash inflow just match the signs with the PV.
If you have a cash outflow, don’t match the signs with the PV.
 
FYI, I/Y gives the figure as a whole i.e 4.42 = 4.42%, not the way you are interpreting
 
The TVM buttons are cash flow buttons.
You can approach this problem from the viewpoint of the investor, or from the viewpoint of the account.
If the account, then:
  • PV is positive (inflow to the account from the investor)
  • FV is negative (outflow from the account to the investor)
  • PMT is negative (outflow from the account to the investor)
If the investor, then:
  • PV is negative (outflow from the investor to the account)
  • FV is positive (inflow to the investor from the account)
  • PMT is positive (inflow to the investor from the account)
The viewpoints are equally good, but I encourage you to pick a viewpoint and always use the same one; you’ll make fewer mistakes that way.
 
sfad wrote:
If we use N=18; PV= - 1,235,000; FV= 2,000,000; PMT= 26,000; CPT→I/Y gives = 4.42, which is (4.42 -1)x100 = 342%, which doesn’t make sense.
But more interested in knowing the logic as to when to use negative or positive sign?
And can’t exactly remember where i saw this, but i believe it was CFAI practice problems.
Click to expand...
are you a CFA candidate ?
contributions in -ve ; withdrawals +ve. In your example pmt should be +ve.
I/Y is in percentage term, not absolute value.
what the hell is (4.42-1)x 100 supposed to do?
 
S2000magician wrote:
The TVM buttons are cash flow buttons.
You can approach this problem from the viewpoint of the investor, or from the viewpoint of the account.
If the account, then:
  • PV is positive (inflow to the account from the investor)
  • FV is negative (outflow from the account to the investor)
  • PMT is negative (outflow from the account to the investor)
If the investor, then:
  • PV is negative (outflow from the investor to the account)
  • FV is positive (inflow to the investor from the account)
  • PMT is positive (inflow to the investor from the account)
The viewpoints are equally good, but I encourage you to pick a viewpoint and always use the same one; you’ll make fewer mistakes that way.
Click to expand...
This is a super helpful explanation, S2000. Thanks for posting!
 
s2000, thanks for the explanation. Will remember to look at this from the investor perspective.
Que Sera, thanks for the reminder regarding I/Y being in whole numbers.
 
You must log in or register to reply here.
Back
Top