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.