Deferred Annuities - HP 12C Platinum User Manual

Keystrokes Keystrokes
(RPN mode) (ALG mode)
t t
t t
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 Keystrokes
(RPN mode) (ALG mode)
f] f[
fCLEARH fCLEARH
0gJ 0gJ
0gK 0gK
8ga 8ga
7000gK 7000gK
4ga 4ga
6¼ 6¼
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