Example 6 - Unknown Loan Amount

This example applies to our online demo Time Value of Money Calculator. The C-Value! program for Windows works in a similar way and has a few more features. Note, our online demo TVM calculator is limited to calculations using interest rates between 4.0% and 5.99%

Conventional loan or mortgage with an unknown loan amount and a specified regular payment amount for a known term.

For greater detail about how values are entered into the TVM calculator, please see Example 1 - conventional mortgage or loan.

Note: This topic has not been proofed and images need to be added. However, we believe that the steps are complete and accurate.

1. Click the [New] button to clear any previous entries.
2. Set "Rounding" to "Open Balance" by either:

• clicking on the "Rounding" button on the toolbar;
• clicking on the {Compute} menu choice and select {Rounding...};

3. Set compounding to "Monthly".
4. Enter 5.125% for the "Nominal Annual Rate".
5. Create a "Loan" event in row one of the cash flow input area.

1. 1. Set the "Date" to June 25, 2011 (06/25/2011)
   2. Set the "Amount" to "Unknown"
   3. Set the "# Periods" to 1.
   4. Note: Since the number of periods is 1, you will not be able to set a frequency.

6. Click on the second row of the cash flow input area. Select "Payment" for the "Event" type. For this example, we will assume we want to remodel a kitchen and we are willing to pay $450 month for four years.

1. 1. Set the "Date" to July 25, 2011 (07/25/2011)
   2. Set the "Amount" to $450.00.
   3. Set the "# Periods" to 48.
   4. Use the [Tab] key to tab to Frequency. Select "Monthly".
   5. The "End Date" will automatically be calculated (06/25/2015). (48 monthly periods is 4 years.)

Your calculator should now look like this:

7. Calculate the unknown. The amount that you can borrow is 19,114.46

7. If you want to see a detailed amortization schedule showing how the monthly payment is allocated between principal and interest as well as the final balloon payment amount, click on the "Amortization" tab above the input area.

Note: The amount of the loan is this cash flow's present value.

Back to the online Time Value of Money Calculator.