Deferred Annuities - HP 12c User Manual

134 Section 12: Real Estate and Lending
Keystrokes
4n
10¼
70000$
t
t
t
By purchasing a house, you would gain $10,858.08 (32,391.87 – 21,533.79)
over an alternate investment at 6.25% 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 58 through 62.
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
fCLEARH
0gJ
0gK
8ga
7000gK
4ga
6¼
fl
File name: hp 12c_user's guide_English_HDPMBF12E44
Printered Date: 2005/7/29
Display
4.00
Years in investment.
10.00
Yearly appreciation rate.
70,000.00
House price.
32,391.87
NCPR (calculated).
19.56
Yield.
21,533.79
Balance in savings.
Display
0.00
Initialize.
0.00
First cash flow.
0.00
Second through ninth cash flows.
8.00
7,000.00
Tenth through thirteenth cash flows.
4.00
6.00
Interest.
15,218.35
NPV.
Page: 134 of 209
Dimension: 14.8 cm x 21 cm