Use of Financial Calculators for Loans and Monthly Payments

USE OF FINANCIAL CALCULATORS FOR LOANS AND MONTHLY PAYMENTS

This paper aims at answering the bulk of the questions on using calculators for loans and monthly payments. It focuses on two calculators, the HP-12C and HP-17B.

Technical assistance is also available through the HP website. The example used here is of calculations for loan with a term of 25 years, an interest rate of 8% and monthly payments.

HEWLETT PACKARD 12C

Step 1: initial settings

• Set up time of payment: Push the blue “g” button, then “END” located on the #8 key. This says that all payments will be at end of month. You can also program the calculator to have all payments made at “beginning” of month by pressing “g” followed by “BEG” located on the #7 key
• Clear registers: Also, clear the registers by pushing yellow “f” button and then pushing “REG” located in the yellow CLEAR section of keys. The button you wish to press is located on the CLX key.
• Set the number of decimal places: press yellow “f” button and then “4” or the number of decimal places you want.

Step 2: operations

• Enter Term: key in 25. Then press the blue “g” button. Then press the “12x” button located on the “n” key. Display: 300 (25 years x 12 months = 300 periods)
• Enter Interest Rate: Key in 8. Then press the blue “g” button. Then press the “12/” button located on the “i” key. Display: 0.6667 (8% / 12 months = 0.6667%)
• Enter Present Value. We are not given this value so we assume it is $1.00. Key in 1. Then press the “PV” button (top row, 3rd key in). Display: 1
• Learn what the monthly period payment is: Press the “PMT” key. (On the top right of the calculator, fourth key from the left). At first, it will display “running”, then the result will be displayed: -0.0077 (NB: when a negative sign appears, it is an expense)
• Obtain annual constant for a debt service schedule based upon the monthly payments. To do so, hit the “ENTER” key while -0.0077 is still displayed. Then, press your blue “g” button. Then press the “12x” key located on the top right of the calculator. Display: -0.0926 (this is the annual debt constant)

HEWLETT PACKARD 17B

• Enter Term: key in 25. Then press the “INPUT” button. Key in “12” and “x”. Display: 300 (25 years x 12 months = 300 periods). Press “n” at the bottom of the screen. Display “n=300”
• Enter Interest Rate: Key in 8. Then press the “INPUT” button. Key in “12” and “/”. Display: 0.6667. Then press the “I%YR” at the bottom of the screen.
• Enter Present Value. Key in 1. Press “PV”. Display “PV=1”.
• Learn what the monthly period payment is: Press the “PMT” key. Display: -0.0077 (NB: when a negative sign appears, it is an expense)
• Obtain annual constant for a debt service schedule based upon the monthly payments. To do so, key in “12” and “x”. Display -0.0926

USING YOUR FINANCIAL CALCULATOR TO CALCULATE AN ANNUAL CONSTANT