n
PV
PMT

192 Appendix D: Formulas Used

 

 

 

 

x y

 

 

 

xy

 

n

 

 

r =

 

 

 

 

 

 

 

2

2

 

x 2

(x )

⋅ ⎢y 2

(y )

n

n

 

 

 

 

 

 

Standard Deviation

 

 

 

 

 

sx =

nx2 (x )2

sy =

 

ny2 (y )2

 

n(n 1)

 

 

 

n(n 1)

Factorial

0! = 1

For n > 1 where n is an integer:

n

n!= i

i=1

The Rent or Buy Decision

Market Value = PRICE(1 + I)n where:

I= appreciation per year (as decimal)

n= number of years

Net Cash Proceeds on Resale = Market Value – Mortgage Balance – Commission

The interest rate is obtained by solving the financial (compound interest) equation for i using:

= number of years house is owned = down payment + closing costs

= mortgage payment + taxes + maintenance rent – (% tax) (interest + taxes)

FV = net cash proceeds on resale

Annual interest rate = 12 × i

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