HP 17BIIPLUS - Page 6

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HP 17bII+ Time-Value-Of-Money
And re-solve for the monies that will now be in the savings
account after three years:
FV Answer: 7,545.44
Getting the Cash Flow Direction Wrong
Before we leave this problem, take a look at what would
happen if we made an error in the direction of the cash flow.
Let’s say that we mistakenly put in the $50. with a positive
sign:
50
PMT
FV Answer: 3,727.28
What happened? Where did the money go? Recall that we
deposited the $5,000. as a negative, from the saver’s point of
view indicating that the money was flowing away from the
saver and to the bank for its use. When we subsequently tell
the calculator the periodic amount of $50. has a positive sign,
we are telling it that the money is flowing in an opposite
direction from the initial $5,000. deposit. We are saying that
the money is going to the saver, in effect saying the saver is
withdrawing $50. every month from this account. The
calculator will do what it is told and so it deducts this monthly
amount and the account has less than what it would have had
without these “withdrawals.”
Before we go to our next problem, this is a good time for a reminder that numbers from old calculations can interfere with your
current calculation. So, get rid of those old numbers by clearing your TVM menu with ‘SK’ and ‘CLR DATA.’ Good job! Also, set
your calculator to 12 P/YR if it isn't already.
Another problem: A homebuyer borrows a mortgage loan of $300,000. in order to
buy a house. The annual interest rate on the loan is 7% and
the loan will be paid back over 30 years with monthly
payments. What is this monthly payment that will fully
amortize, that is, fully pay back, this loan, principal and
interest, over the 30 years? Do this one from the
homebuyer/borrower’s point of view.
Analysis/solution: Choose your registers again! What should go in present value?
The loan is what the borrower is getting now and that should
go in the ‘PV’ register. But with a positive or negative sign?
Positive, right? Yes, because the money is flowing to the
borrower. Press ‘300000’ and ‘PV.’ Were we doing this from
the lender’s point of view, the sign on the loan would be
negative.
Put the loan period in, namely 30 years, and remember the
shift key will multiply the years by the number of payments
per year that you have set. Press ‘30,’ ‘SK,’ and ‘N.’
hp calculators - 6 - HP 17bII+ Time-Value-Of-Money