Table 13-12 Calculating the annual percentage rate

KeysDisplay Description

Ò

12.53

Calculates APR.

 

Loan With a Partial (Odd) First Period

TVM calculations apply to financial transactions where each payment period is the same length. However, situations exist where the first payment period is not the same length as the remaining periods. This first period is sometimes called an odd or partial first period.

If interest is applied to an odd first period, it is usually calculated as simple interest. So using the HP 10bII+ to do a payment calculation with an odd first period is a two step process:

1.Calculate the amount of simple interest that accrues during the fractional first period and add it to the loan amount. This is the new PV. You must be able to calculate the length of the odd first period as a fraction of the whole period. (For example, a 15-day odd first period would be 0.5 periods assuming a whole period to be a 30-day month.)

2.Calculate the payment using the new PV, with N equal to the number of full periods. Use Begin mode if the number of days until the first payment is less than 30; otherwise use End mode.

Example

A 36-month loan for 4,500 has an annual rate of 15%. If the first monthly payment is made in 46 days, what is the monthly payment amount assuming 30-day months?

The odd first period in this example is 16 days.

Set to End mode. Press \¯if BEGIN annunciator is displayed.

Table 13-13 Calculating the monthly payment amount

KeysDisplay Description

JG\Í

12.00

Sets payments per year.

 

 

 

 

JVÒ

15.00

Stores interest rate.

 

 

 

 

aJGP

 

rate.

 

1.25

Calculates periodic interest

 

 

 

JSaD:P

 

period.

 

0.67

Multiplies by fraction of a

 

 

 

YV::\Ǥ4

 

interest owed for odd

 

30.00

Calculates amount of simple

 

 

period.

 

 

 

1YV::Ï

4,530.00

Adds this simple interest to

 

present value.

 

 

 

DSÙ

36.00

Stores term of loan.

 

 

 

 

144 Additional Examples