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Deferred Annuities - HP 12C Platinum User Manual

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By purchasing a house, you would gain $7,047.04 (53,095.65 – 46,048.61)
over an alternate investment at 3% interest.

Deferred Annuities

Sometimes transactions are established where payments do not begin for a
specified number of periods; the payments are deferred. The technique for
calculating NPV may be applied assuming zero for the first cash flow. Refer to
pages 73 through 77.
Example 1: You have just inherited $20,000 and wish to put some of it aside for
your daughter's college education. You estimate that when she is of college age, 9
years from now, she will need $7,000 at the beginning of each year for 4 years
for college tuition and expenses. You wish to establish a fund which earns 6%
annually. How much do you need to deposit in the fund today to meet your
daughter's educational expenses ?
Keystrokes
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(RPN mode)
(ALG mode)
f]
f[
fCLEARH
fCLEARH
0gJ
0gJ
0gK
0gK
8ga
8ga
7000gK
7000gK
4ga
4ga
fl
fl
Section 12: Real Estate and Lending
Display
Yield.
8.57
Balance in savings.
46,048.61
Display
Initialize.
0.00
First cash flow.
0.00
Second through ninth
0.00
cash flows.
8.00
Tenth through thirteenth
7,000.00
cash flows.
4.00
Interest.
6.00
NPV.
15,218.35
171

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