HP 12C Platinum User Manual page 12

Making Financial
Calculations Easy
Before you begin to read through this handbook, let's take a look at how easy
financial calculations can be with your hp 12c platinum. While working through
the examples below, don't be concerned about learning how to use the calculator;
we'll cover that thoroughly beginning with Section 1.
Example 1: Suppose you want to ensure that you can finance your daughter's
college education 14 years from today. You expect that the cost will be about
$6,000 a year ($500 a month) for 4 years. Assume she will withdraw $500 at the
beginning of each month from a savings account. How much would you have to
deposit into the account when she enters college if the account pays 6% annual
interest compounded monthly ?
This is an example of a compound interest calculation. All such problems involve at
least three of the following quantities:
n: the number of compounding periods.
i: the interest rate per compounding period.
PV: the present value of a compounded amount.
PMT: the periodic payment amount.
FV: the future value of a compounded amount.
In this particular example:
n is 4 years × 12 periods per year = 48 periods.
i is 6% per year ÷ 12 periods per year = 0.5% per period.
PV is the quantity to be calculated — the present value when the financial
transaction begins.
PMT is $500.
FV is zero, since by the time your daughter graduates she (hopefully!) will
not need any more money.
To begin, turn the calculator on by pressing the ; key. Then, press the keys
shown in the Keystrokes column below.
*
If you are not familiar with the use of an hp calculator keyboard, refer to the description on
pages 16 and 17.
*
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