What if … TVM Calculations

One of the most valuable aspects of the HP 10bII+’s TVM application is the ease with which it handles the question “what if …” in financial calculations. For example, one of the most popular “what if …” questions is, “What if the interest rate changes to …? How will that affect my payment?” To answer this question, once you have calculated a payment based on one interest rate, all you need to do is enter the new interest rate and recalculate PMT.

Some of the examples earlier in this manual have included some brief encounters with “what if …” questions, but a more complete example follows.

Example

You are about to sign on the dotted line for a 30-year, 735,000 mortgage, on a vacation home. The annual interest rate is 11.2%.

Part 1

What will your payments be at the end of the month?

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

Table 13-17 Calculating the monthly payment

KeysDisplay Description

JG\Í

12.00

Sets payments per year.

 

 

 

jDV:::Ï 735,000.00

Stores known values.

JJ7GÒ

11.20

 

 

 

 

 

 

D:\Ú

360.00

 

 

 

 

 

 

:É

0.00

 

 

 

 

 

 

Ì

-7,110.88

Calculates payment.

 

Part 2

Your company’s regular payroll is generated every other Friday. The bank agrees to automatically draw payments of 3,555.00 out of each paycheck (approximately half of what a monthly payment would be) and adjust the payment period accordingly (26 compounding periods per year). What would be the new term of the loan?

Table 13-18 Calculating the number of years required to pay off the loan

KeysDisplay Description

DVVVyÌ

-3,555.00 Enters new payment.

 

Additional Examples 147