HP 20B Canadian Mortgages TVM Canada, 365, Time Value of Money 6Interest Rate Conversion Example

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Time Value of Money

Table 3-6Interest Rate Conversion Example

Keys

Display

Description

365 I

>=

Inputs 365 as the value for the number of compounding periods per year.

Scrolls to the variable for the effective rate and calculates it. A 36.5% nominal rate compounded daily equals an effective rate of 44.03%.

Note: C/YR is the same number as P/YR in TVM calculations, since most interest calculations are based on the same number of payments and compounding periods per year, and interest rate conversions are commonly linked to a subsequent TVM calculation. This feature is provided for your convenience, but this means modifying one number also modifies the other. If your TVM problem requires different values for P/YR and C/YR, refer to the section below titled, Canadian Mortgages: TVM Canada.

The IConv menu permits you to solve for C/YR, but the result is not always a positive integer. TVM calculations, however, require C/YR to be an integer larger than zero. If you attempt to perform a TVM calculation without a valid value for C/YR or P/YR, an invalid P/YR error (ER: Invalid P/YR) will occur.

If you set C/YR to 0, the resulting interest conversions are calculated assuming a continuous compounding. As stated above, 0 is not a valid value for P/YR or C/YR when used in TVM calculations, and you will have to reset it to a valid value before performing TVM calculations.

To reset the menu items to their default values, with any item of the Interest Conversion menu displayed press :x. With IConv displayed, press Ito reset, or Oto cancel. To exit the menu, press Oonce again.

Canadian Mortgages: TVM Canada

Figure 4 The Menu Map for the P/YR Menu

In Canada, interest rates for mortgages are, by law, given as a nominal interest rate, compounded twice yearly. This means that the compounding period for the per-period interest rate calculation differs from the compounding period used to calculate the nominal rate.

By default, the HP 20b performs calculations assuming that the number of compounding periods always equals the number of payments per year. You can, however, enable the TVM Canada option in the Mode menu, which enables you to select the number of compounding periods per year. For more information, refer to Chapter 1, Basic Features.

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Contents HP 20b Business Consultant Financial Calculator Manual HP part number F2219-90201 First edition AugustLegal Notices Revision HistoryLegal Notices Revision HistoryContents Business Problems Time Value of MoneyCash Flows BondsErrors Warranty, Regulatory, and Contact InformationIndex Feature Feature ChaptersHP 20b Business Consultant Keyboard Keyboard Map LegendBasic Features Adjusting the Display ContrastBasic Features Selecting a LanguageMode Menu Setting Preferences Two Line DisplayBasic Features 1Mode Menu Settings Setting top line DescriptionChanging the Calculation Mode Keys Display DescriptionKey Presses and the Secondary Function Key AnnunciatorsUsing the I and = Keys I Key= Key Reset x Menu Editing and Clearing Entries On/CE O KeyMemory and the Memory Menu Accessing Menus and Menu Maps Menu Map for the Break-even Menu Mathematical Calculations Mathematical FunctionsNumber Entry and Display Chain Mode Algebraic ModeReverse Polish Notation RPN Mode RPN StackLast Number U3IO1c23 I56c1 3I4+ 5I6+Mathematical Calculations 2Last Number RPN StackKeys Display Description RPN Stack One-Number Functions and the Math Menu RPN Stack and the Roll Down OperationMath s Menu Keys DescriptionMenu Map for the Math Menu Probability Sub-menu Mathematical Calculations 5Math Menu ExampleIor = Two-Number Functions 10I10I 12I 7Inverse Probability ExampleStoring and Recalling Numbers Recall Arithmetic Storing and Recalling with Time Value of Money TVM KeysRecalling a Menu Item Value in a Menu Rounding NumbersPage Time Value of Money Time Value of Money TVM KeysTime Value of Money 360 N 140000V Calculating Payments on a LoanAmortization Time Value of Money 2TVM ExampleMenu Item/Key Description 10Y 1400 00VCreating an Amortization Schedule Using the Interest Conversion Menu Interest Conversion MenuCanadian Mortgages TVM Canada 365Time Value of Money 6Interest Rate Conversion Example Page O300N 6Y350 00V Canadian Mortgage ExampleCash Flow Diagram Cash FlowsCash Flow Example Key DescriptionCash Flow Amount 8000 5000I4500I 4000I115000 Analyzing Cash FlowsCash Flows 2Cash Flow Example NPV and IRR Menu Items IRR%Editing Cash Flows Cash Flows 4NPV and IRR ExampleSample Cash Flow Diagrams Bonds Bond Menu2010 2020Bond Calculation Example Bond Menu Items+L1= Bonds 2Bond Calculation ExampleDate Calculation Date Calculation MenuDate Calculation Example 10.3 12010 Date Calculation 1Date Calculation ExampleBreak-even Break-even MenuBreak-even 1Break-even Example Business Problems Percent Calculation Menu15I 22I20I 35IWhat is 30% of 80? 4Part % of Total Example 80I30I Depreciation Depreciation Menu1Depreciation Methods 2Depreciation Menu ItemsDepreciation Method Description Sline 1000 500Depreciation Example Depreciation Menu ItemsDepreciation 3Straight Line Depreciation Example Statistical Operations Menu Maps for the Data and Statistics MenusData and Stats Menus Statistical Operations 1The Statistics Menu Items Menu Item Description1I1 50I 2I1 65I3I1 60I 4I1 75I5I1 70I Statistical Operations 3Statistics ExampleErrors Error Messages and Calculator Status1Error Messages Error Message Status Warranty, Regulatory, and Contact Information HP Limited Hardware Warranty and Customer CareReplacing the Batteries Customer Care 210 969 Honduras Hong Kong 香港特別行政區 852 India+65 6100 Ireland 01 605 Italia 02 754 19877 232 495 22801 439 Singapore 6100Product Regulatory & Environment Information ModificationsCanadian Notice Avis CanadienChemical Substances Pbde Index Calendar Actual, Cal.360Off calculator off