Time value of money and financial calculator tutorials
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Time value of money and financial calculator tutorials
In this tutorial we will see how to amortize a fixed-rate loan using the HP 10BII+ calculator from Hewlett Packard. Specifically, we will see how to calculate the amount of principal and interest for any particular payment, or range of payments. For example, you may wish to know how much your principal or interest payments will be for the first…
Over the years, I have received many questions about financial calculators. I will compile a list of the most frequently asked questions here. Q: 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 into this situation,…
This article explains how to calculate the present and future values of graduated annuities using the HP 10BII+ financial calculator. Graduated annuities, where cash flows grow at a constant rate, differ from regular annuities with constant cash flows. The article provides step-by-step instructions for adjusting the interest rate to account for growth and solving for present and future values. It covers both annuities due and regular annuities, with practical examples illustrating the calculations.
This article explains how to calculate bond duration and convexity using the HP 10BII+ financial calculator. It introduces an approximation method that simplifies the process, avoiding complex formulas. The article provides step-by-step instructions for calculating modified duration, Macaulay duration, and convexity by determining bond prices at different yields and applying these to approximation formulas. The method is accurate enough for practical use, making it accessible to users who may not be familiar with advanced calculus.
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),…
The article explains the concept of a "make-whole" call provision in bonds and demonstrates how to calculate the make-whole call price using the HP 10BII+ financial calculator. It contrasts the make-whole call with traditional calls, noting the benefits for investors and issuers. Using an example bond from PPG Industries, it details the calculation process through three methods: TVM keys, the NPV function, and the Bond functions of the calculator. Each method yields the same result, illustrating the present value of remaining cash flows and the call price.
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…
Uneven Cash Flows 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 10BII+ to calculate the present and future values of uneven cash flow…
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 10BII 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 an original HP 10B or HP10BII (not the + version). These calculators differ slightly, so you may prefer the HP 10B tutorial. The Hewlett Packard 10BII+ is a very easy to use financial calculator that will serve you well in all finance courses. This tutorial will demonstrate how…