Time value of money and financial calculator tutorials
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Time value of money and financial calculator tutorials
Over the years, I have received many questions about financial calculators. I will compile a list of the most frequently asked questions here. Q: My 10B (or 10BII) is showing a comma instead of a decimal point. How do I fix this problem? A: This is easily the most commonly asked question. I wish I knew how people got themselves…
In recent years, bond issuers have changed from the traditional call schedule to a “make-whole” type of call. Generally, this is good for investors as it makes it less likely that high interest bonds will be called. If it is called, then they are “made whole” because they are paid the present value of the remaining cash flows. In a…
Strictly speaking, an annuity is a series of equal cash flows, equally spaced in time. However, a graduated annuity (also called a growing annuity) is one in which the cash flows are not all the same, instead they are growing at a constant rate (any other series of cash flows is an uneven cash flow stream). So, the two types…
Duration and convexity are important numbers in bond portfolio management, but it is far from obvious how to calculate them on the HP 10B or 10BII. Of course, there are formulas that you can type in (see below), but they aren’t easy for most people to remember and are tedious to enter. In this article I will show you how…
One of the key variables in choosing any investment is the expected rate of return. We try to find assets that have the best combination of risk and return. In this section we will see how to calculate the rate of return on a bond investment. If you are comfortable using the TVM keys, then this will be a simple…
A bond is a debt instrument, usually tradable, that represents a debt owed by the issuer to the owner of the bond. Most commonly, bonds are promises to pay a fixed rate of interest for a number of years, and then to repay the principal on the maturity date. In the U.S. bonds typically pay interest every six months (semi-annually),…
Many, perhaps most, time value of money problems in the real world involve other than annual time periods. For example, most consumer loans (e.g., mortgages, car loans, credit cards, etc) require monthly payments. All of the examples in the previous pages have used annual time periods for simplicity. On this page, I’ll show you how easy it is to deal…
In the previous section we looked at the basic time value of money keys and how to use them to calculate present and future value of lump sums and regular annuities. In this section we will take a look at how to use the HP 10B to calculate the present and future values of uneven cash flow streams. We will…
In the previous section we looked at the basic time value of money keys and how to use them to calculate present and future value of lump sums. In this section we will take a look at how to use the HP 10B to calculate the present and future values of regular annuities and annuities due. A regular annuity is…
If the picture at right doesn’t match your calculator, you may have the newer HP 10BII. These calculators differ slightly, so you may prefer the HP 10BII tutorial (it doesn’t matter too much). The Hewlett Packard 10B is a very easy to use financial calculator that will serve you well in all finance courses. This tutorial will demonstrate how to…