Solving for Yield. HP 12C Platinum Financial Calculator, 12c

212 Section 14: Leasing

Solving for Yield

Solving for yield is essentially the same as solving for Internal Rate of Return (IRR).

The keystrokes are as follows:

1. Press fCLEARH.

2. Key in the amount of the first cash flow then press gJ. This initial amount is the difference between the initial loan amount and any payments received at closing time. Observe the sign convention: positive for cash received and negative for cash paid out.

3. Key in the amount of the first cash flow then press gK. Then key in the number of times that cash flow occurs then press ga.

4. Key in 0gK then the number of advance payments minus one. Then press ga.

5. Key in the residual then press gK. Then press fL to solve for periodic yield.

Example: Equipment worth $5,000 is leased for 36 months at $145 per month.

The lessee has agreed to pay the first and last month’s payments in advance. At the end of the lease, the equipment may be purchased for $1,500. What is the annual yield to the lessor if the equipment is purchased?

Keystrokes

(RPN mode)

Keystrokes

(ALG mode)

Display f] fCLEARH

5000Þ\

145\2§= gJ

145§2=

5000Þ gJ

145gK34g a

145gK34g a

0gK f[ fCLEARH

0gK

1500gK 1500gK fL12§ fL§12³

–4,710.00

34.00

Net amount of cash advanced.

Thirty-four cash flows of

$145.00.

0.00 Thirty-fifth cash flow.

1,500.00 Thirty-sixth cash flow.

18.10 Annual yield to lessor.

File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 212 of 275

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