Simple and compound interest

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Also See for HP 10BII:

- Owner's manual (145 pages) ,
- User manual (145 pages) ,
- Quick start manual (7 pages)

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HP 10BII Simple and Compound Interest

In this formula, FV stands for the future value, PV is the present value, i is the interest rate per period, and N is the total

number of periods. The interest rate per period is computed by taking the nominal annual rate and dividing by the

number of periods per year.

Compound interest problems can be directly solved using the time value of money application. The nominal annual

interest rate is entered and the HP 10BII automatically uses the value for the number of periods per year to compute the

interest rate per period. Simple interest problems are solved as basic arithmetic problems.

Practice solving time value of money problems

Example 1: If you deposit $175 today, how much is it worth in 10 years, if interest is compounded at a 4% annual rate?

Use the Vw function to clear the time value of money application registers.

Solution:

Vw

1Ud

10A

4B

175C

E

Answer:

$-259.04. Note that the solution is displayed as a negative value. The problem is set up with the $175 as a

deposit. The value at the end of the 10-year period would be a withdrawal and is therefore shown as a

negative value.

Example 2: If you owe $500 today, how much do you owe in 3 months, if the debt accumulates interest at 5% simple

interest?

Solution:

500*0.05*3/12=

+500=

Answer:

$506.25.

Example 3: If you deposit $1,234 today, how much do you have in the account in 87 days, if the deposit earns interest

at 4% simple interest, using ordinary interest?

Solution:

Since the deposit will earn interest using ordinary interest, the T fraction will have 360 as the denominator.

1234*0.04*87/360=

+1234=

Answer:

$1,245.93.

Example 4: If you want $1,000,000 when you retire in 40 years, how much must you deposit today into an account

earning interest at 7%, compounded monthly? Use the Vw function to clear the time value of money

application registers.

Solution:

Vw

12Ud

480A

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HP 10BII Simple and Compound Interest - Version 1.0

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