HP 0012C-90001 User Manual page 127

Example 1: A lender wishes to induce the borrower to prepay a low interest rate Example 1: Example 1: Example 1:
loan. The interest rate is 5% with 72 payments remaining of $137.17 and a
balloon payment at the end of the sixth year of $2000. If the lender is willing to
discount the future payments at 9%, how much would the borrower need to prepay
the note ?
Keystrokes Keystrokes
Keystrokes Keystrokes
gÂ
fCLEARG
72w
9gC
137.17P
*
2000M$
1
Example 2: Example 2: A 9 Example 2: Example 2: / % mortgage with 26 years remaining and a remaining balance
2
of $49,350 is available for purchase. Determine the price to pay for this mortgage
if the desired yield is 12%. (Since the payment amount is not given, it must be
calculated.)
Keystrokes Keystrokes Keystrokes Keystrokes
gÂ
fCLEARG
26gA
9.5gC
49350Þ$P
12gC
$
*
Note that the payments are positive because this problem in seen from the viewpoint of the
lender who will be receiving payments. The negative PV indicates money that was lent out.
Section 12: Real Estate and Lending Section 12: Real Estate and Lending
Section 12: Section 12: Real Estate and Lending Real Estate and Lending
Display Display
Display Display
72.00
Months (into n).
0.75
Discount rate (into i i i i ).
137.17 Monthly payments (into PMT).
–8,777.61
Amount necessary to prepay the
note.
Display Display Display Display
312.00
Months (into n n n n ).
0.79
Percent monthly interest rate (into i i i i ).
427.17
Monthly payment to be received
(calculated).
1.00
Desired monthly interest rate (into i i i i ).
–40,801.57
Purchase price to achieve the
desired yield (calculated).
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