Deferred Annuities - HP 12C 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 ?
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Leases often call for periodic contractual adjustments of rental payments. For
example, a 2-year lease calls for monthly payments (at the beginning of the month)
of $500 per month for the first 6 months, $600 per month for the next 12 months,
and $750 per month for the last 6 months. This situation illustrates what is called a
"step-up" lease. A "step-down" lease is similar, except that rental payments are
decreased periodically according to the lease contract. Lease payments are made
at the beginning of the period.
File name: hp 12c pt_user's guide_English_HDPMF123E27
Printed Date: 2005/8/1
Section 12: Real Estate and Lending
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46,048.61
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15,218.35
Page: 169 of 275
Dimension: 14.8 cm x 21 cm
169
Yield.
Balance in savings.
Initialize.
First cash flow.
Second through ninth
cash flows.
Tenth through thirteenth
cash flows.
Interest.
NPV.