Yield of a Mortgage Traded at a Discount or Premium
The annual yield of a mortgage bought at a discount or premium can be
calculated given the original mortgage amount, interest rate, and periodic
payment, as well as the number of payment periods per year, the price paid for
the mortgage, and the balloon payment amount (if it exists).
Information is entered as follows:
1. Press gÂ and fCLEARG.
2. Key in the total number of periods until the balloon payment occurs and
press n. (If there is no balloon payment, key in the total number of periods
and press n.)
3. Key in the periodic payment amount then press P.
4. Key in the purchase price of the mortgage then press $.
5. Key in the balloon payment amount then press M.
payment, go to step 6.)
6. Press ¼ to obtain the yield per period.
7. RPN: Key in the number of periods per year and press § to obtain the
nominal annual yield.
7. ALG: Press §. Key in the number of periods per year and press ³ to
obtain the nominal annual yield.
Example 1: An investor wishes to purchase a $300,000 mortgage taken out at
6% for 21 years. Since the mortgage was issued, 42 monthly payments have been
made. What would be the annual yield if the purchase price of the mortgage is
$250,000 ? (Since PMT was not given, it must be calculated).
Positive for cash received; negative for cash paid out.
Section 12: Real Estate and Lending
Enter the number of
periods (into n).
Monthly interest rate
Mortgage amount (into
PV; negative to indicate
(If there is no balloon