Amortization. HP 12C Platinum Financial Calculator, 12c

Section 3: Basic Financial Functions 69

Amortization

The hp 12c platinum enables you to calculate the amounts applied toward principal and toward interest from a single loan payment or from several payments, and also tells you the remaining balance of the loan after the payments are made.

*

To obtain an amortization schedule:

1. Press fCLEARG to clear the financial registers.

2. Enter the periodic interest rate, using ¼ or gC.

3. Enter the amount of the loan (the principal), using $.

4. Key in the periodic payment, then press ÞP (the sign of PMT must be negative, in accordance with the cash flow sign convention).

5. Press g× or (for most direct reduction loans) g to set the payment mode.

6. Key in the number of payments to be amortized.

7. Press f! to display the amount from those payments applied toward interest.

8. Press ~ to display the amount from those payments applied toward the principal.

9. To display the number of payments just amortized, press dd.

10. To display the remaining balance of the loan, press :$.

11.To display the total number of payments amortized, press :n.

Example: For a house you’re about to buy, you can obtain a 25-year mortgage for $250,000 at 5.25% annual interest. This requires payments of $1,498.12 (at the end of each month). Find the amounts that would be applied to interest and to the principal from the first year’s payments.

Keystrokes Display fCLEARG

5.25gC

250000$

0.44

Enters i.

250,000.00

Enters PV.

* All amounts calculated when f! is pressed are automatically rounded to the number of decimal places specified by the display format. (The display format is described in Section 5.)

This rounding affects the number inside the calculator as well as how the number appears in the display. The amounts calculated on your hp 12c platinum may differ from those on the statements of lending institutions by a few cents, since different rounding techniques are sometimes used. To calculate answers rounded to a different number of decimal places, press f followed by the number of decimal places desired before you press f!.

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 69 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm

70 Section 3: Basic Financial Functions

Keystrokes Display

1498.12ÞP gÂ

12f!

~

:$

:n

–1,498.12

Enters PMT (with minus sign for cash paid out).

–1,498.12

Sets payment mode to End.

–13,006.53

Portion of first year’s payments (12 months) applied to interest.

–4,970.91

Portion of first year’s payments applied to principal.

245,029.09

Balance remaining after 1 year.

12.00 Total number of payments amortized.

The number of payments keyed in just before f! is pressed is taken to be the payments following any that have already been amortized. Thus, if you now press

12f!, your hp 12c platinum will calculate the amounts applied to interest and to the principal from the second year’s payments (that is, the second 12 months):

Keystrokes Display

12f!

~ dd

:$

:n

–12,739.18

Portion of second year’s payments applied to interest.

–5,238.26

Portion of second year’s payments applied to principal.

12.00 Number of payments just amortized.

239,790.83

Balance remaining after 2 years.

24.00 Total number of payments amortized.

Pressing :$ or :n displays the number in the PV or n register. When you did so after each of the last two calculations, you may have noticed that PV and n had been changed from their original values. The calculator does this so that you can easily check the remaining balance and the total number of payments amortized. But because of this, if you want to generate a new amortization schedule from the beginning, you must reset PV to its original value and reset n to

0.

For example, suppose you now wanted to generate an amortization schedule for each of the first two months:

Keystrokes Display

250000$

0n

250,000.00

Resets PV to original value.

0.00 Resets n to zero.

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 70 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm

Section 3: Basic Financial Functions 71

Keystrokes Display

1f!

~

1f!

~

:n

–1,093.75

Portion of first payment applied to interest.

–404.37 Portion of first payment applied to principal.

–1,091.98

Portion of second payment applied to interest.

–406.14 Portion of second payment applied to principal.

2.00 Total number of payments amortized.

If you want to generate an amortization schedule but do not already know the monthly payment:

1. Calculate PMT as described on page 58.

2. Press 0n to reset n to zero.

3. Proceed with the amortization procedure listed on page 69 beginning with step 6.

Example: Suppose you obtained a 30-year mortgage instead of a 25-year mortgage for the same principal ($250,000) and at the same interest rate (5.25%) as in the preceding example. Calculate the monthly payment, then calculate the amounts applied to interest and to the principal from the first month’s payment.

Since the interest rate is not being changed, do not press fCLEARG; to calculate PMT, just enter the new value for n, reset PV, then press P.

Keystrokes Display

30gA

250000$

P

0n

1f!

~

:$

360.00 Enters n.

250,000.00

Enters PV.

–1,380.51

Monthly payment.

0.00 Resets n to zero.

–1,093.75

Portion of first payment applied to interest.

–286.76 Portion of first payment applied to principal.

249,713.24

Remaining balance.

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 71 of 275

Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm