11/01/04

Calculator

 

This session is setup to help you understand how to use the HP 10 B II calculator.

The five boxes listed here indicate the five buttons along the top row of your calculator.

N= Number of payments due

I/YR= Interest per year or yield

PV= Present value

PMT= Payment amount

FV= Future value (end result)

 

 

N

I/YR      

PV

PMT

FV

360

7

153600

1021.90  

O

 

With the above example we are looking at a 30 year term at 7% interest.  The starting loan amount is $153,600 and the payment comes to $1,021.90.  The end result or “future value” is that this note is paid off in full.  The balance then would be “0”.  This is the future value of the note.  The HP 10 B calculator automatically calculates this number to 0 unless you change it.  The only reason it would not be 0 is if the note has a balloon due.

 

Example:

N

I/YR      

PV

PMT

FV

240

7

153600

1021.90  

88,012.92

 

In the above example we have changed the number of payments due to a 20 year term(240 payments) then solved for future value which shows us that the balance at that time would be $88,012.92.  The future value shows that there would be a balloon amount due at that time of $88,012.92. 

 

That gives you a basic understanding of what the buttons are.  Now let’s explain how to use them;

 

When we put the details into the calculator it is because we want to solve for one of the numbers.  Maybe we know for example, what the term is and the interest rate and the original amount but we are not sure of the payment.

First press the gold colored button and then press the “clear all” to make sure we are starting new. 

 

Now let’s start from the left and move right.  The first item we enter is Number of payments.  To do this we will enter the number of payments that were to be paid from the start of the note to the end of the note.  This is considered the “Term” of the note.  We will use an example of a fully amortized loan meaning that there is no balloon payment but the loan will be paid off after all payments are made. 

To enter the payments put in the numbers; say 20 year term or 240.  Then you press the N button and it holds that info in memory for us.

Then we will enter the interest rate. To do this press 7 and then press I/YR.  This saves the interest rate in memory for us. 

Next we will enter the Present value as the original amount.  To do this, type 153600 and then press the button on the left side of the calculator that shows +/-.  This will set the PV number to a negative because it is the amount owed.  Now press PV.  This third number is now in the memory.

Now it is time to solve for the payment amount.  Simply press PMT and it will show you what the payment should be.  Your answer should be 1021.90.  If you press any of the other buttons now it will have the details listed here:

 

N

I/YR      

PV

PMT

FV

240

7

153600

1021.90  

88,012.92

 

All of this is stored in the memory of the calculator.  Now when we want to find a different number or details we have only to change the factor that will make the difference and then press the button we want to see change.  For example:

If we have a note that has a payment history of say 23 months and we want to know what the current balance is then we just subtract 23 from the original 240 and get 217.  with that number entered we then press “N” which recalculates the formula.  The next button you press will change according to the new info entered.  So, we press the PV and it will show us the current balance of the note which should be -146,364.78.

You just figured what the current balance on this note should be. The formula now reads:

 

N

I/YR      

PV

PMT

FV

217

7

146,364.78

1021.90  

88,012.92

 

If your investor gives an offer of 144,917.54 then you can calculate what his rough yield would be like this;

Enter 144,917.54 and then press +/- and then PV.  It will recalculate the PV to the offered amount.  Now press the I/YR button and it will show you the rough yield that the investor is looking for.  I say rough yield cause there may be other costs that the investor is going to incur.  IN this scenario with such a high offer you are looking at a yield of only 7.14%.  This is a 99% offer and uncommon unless you have a well seasoned note will lots of equity and of course on a single family residence.