Finance 101

Finance 101 is a program to teach you the Time Value of Money or the Magic of Compounding Interest. If you have never learned these lessons, take a few minutes and LEARN. This stuff can make you RICH or POOR depending on how you look at it. This is NOT a get rich quick thing, in fact it is rather a get rich SLOW thing.

Where shall we begin?

• Introduction
• Examples
• About Tegra Systems, LLC
• Soon to be Shareware

Introduction

This stuff is actually quite easy once you get the hang of it. First off, a quick explanation. If you were to invest 100 dollars at 10 % per year, then at the end of the first year you would have 100 + 10 or 110 dollars. Easy enough. At the end of the second year you have 110 + 11 dollars or 121. Third year 121 + 12.1 or 141.1 dollars, and so on. This is called compounding interest. You will find that playing with these numbers is fun, and along the way you can get rich.

Now that I have your attention, we need to go over some variables.

• PV stands for present value. This is where you put an outstanding loan balance or the amount of money you currently have.
• FV stands for future value. This is what the future value of the money is (after the number of periods).
• NP stands for the number of periods. This is the number of periods the money will compound. Often, you will have to multiply this by 12 to convert a yearly value to a monthly value. i.e. 30 years = 360 months.
• PMT is payment. This value is negative if it is a payment for a loan, or positive for savings.
• IR stands for interest rate. This is the interest rate for EACH PERIOD, expressed in a percentage. If you have a 8% loan compounded monthly, don't forget to divide by 12.

Don't worry if you can't remember this stuff. Once you get a "feel" for the numbers, these terms will make sense.

This is how the program works:

1. You enter your known values into the text boxes that correspond to the correct variable.
2. You press the unknown variable "Calculate Button" to calculate the correct variable.
3. Press the "Amortize" button to look at the money schedule.
4. Repeat as necessary
5. Press the About Button, then email me with praise!

Examples

Before beginning this section rearrange the windows on your computer so that you can see this help file and Finance101 at the same time!

1. Simple loan

• PV = 10000 --- Car loan for 10000
• NP = 5 * 12 or 60 --- Car loan for 5 years, 60 payments
• IR = 8% / 12 or 0.666666 --- 8 % yearly interest
• FV = 0 --- no future value of the loan
• Press Payment to get -202.76 (notice it is negative)

2. Simple Savings

• PV = 0 --- No present savings
• PMT = 200 --- We will save $200
• IR = 5/12 = 0.4166666 --- We save at 5% (typical CD or Certificate of Depression :( )
• NP = 10 * 12 = 120 --- Save for 10 years
• Press FV to see what we have. 31056.46
• Now enter 12/12 = 1 into IR --- We get a 12 % return instead (typical mutual fund)
• Press FV, 46007.74
• Notice the >$10000 difference by investing in mutual funds. The CD barely kept up with inflation!

3. The typical car lease... Pay attention to this one. Say you lease a car continuously for a lifetime of 40 years, and it costs $380 (the Avg. car payment in America) per month. Did you know that you could be a multimillionaire instead. Try this:

• PV = 0
• PMT = 380 --- positive value
• NP = 40 * 12 = 480 --- 480 payments
• IR = 12/12 -- 12 percent interest
• Press FV... 4.4 MILLION DOLLARS
• Now try to get out of those car payments...

4. The mortgage example.

• PV = 100000 --- a $100,000 house
• NP = 360 --- 30 year mortgage
• IR = 8 / 12 = .6666666 --- 8% yearly interest
• FV=0
• Press PMT to get -733.36
• Press Amortize to look ate the payment schedule
• Go to the bottom of the amortized schedule and look at the total interest paid ($164180.63)
• Now revise NP to be 180 or a 15 year loan
• Press PMT to get -955.65
• Now Amortize and notice the interest cost 72017.80
• Notice that by paying a extra $220 per month, we saved over $80,000 in interest, and our house is paid off!

5. More examples and problems to come in next revision...

About Finance 101 and Tegra Systems, LLC

Tegra Systems, LLC was formed by Brian and Lori Wagner, January 1998. Under Tegra Systems, LLC, I do all my programming contracts and personal programming projects (BeOS!!!). I hope to have many other fine computer programs for fellow Be people in the future. Also check out Mr. Thermistor and look for more stuff in 1998.

Finance 101 was written because of my love of money. I love to see people saving up to become wealthy and I hate to see this potential wasted on credit cards. Please use this program to discover the potential of those greenbacks in your wallet.

Read these books for more information on becoming wealthy:

• Financial Peace, Dave Ramsey
• The Millionaire Next Door
• The Wealthy Barber

Just think of all the computers you could buy...

Finance101 uses pretty standard formulas to calculate the TVM but there may be errors due to rounding (and possibly a bug, although I don't know of any). Use these numbers with a grain of salt. The next revision will include better formulas and I will have it more thoroughly tested and independently verified. Also, for you Canadians, it seems that there is a weird law governing how compounded interest is calculated up there and this program does not take that into account, so beware!

Finance101 uses libprefs if it is installed on your system. Also, I did all the GUI layout using Interface Elements, which is a fantastic program. Try it an see!

Finance 101 is soon to be Shareware

Yes, you got it...this version is Freeware, and the next (Intel and PPC) versions will be Shareware. The cost will be $19.95, and if you feel like it you can send this to me now (at the above address) and I will get the next version to you when it is ready! I really hope you like the program and you get used to the concept of compounding interest.

$19.95 is really a small price now that I have shown you how to get RICH!!!

Goto my home page! http://home.chattanooga.net/~bpwagner