Isifip, Yield of a discounted (or premium) mortgage, Example – HP 10B User Manual
Page 102: Step 1
Attention! The text in this document has been recognized automatically. To view the original document, you can use the "Original mode".
18.14
Calculates annual nomi
nal rate for a monthly
paynicnt period.
Set to End Mode. Press BiBEG/ENPl if
BEGIN
annunciator is displayed.
isifip;
250 m
4572.8 Ea (Pg
m
180.00
-250.00
-4,572.80
297.640.27
Stores number of
months.
Stores regular payment.
Stores current balance as
a negative value (like an
initial investment).
Calculates account bal
ance after 15 years of
payments with 18%
interest compounded
continuously.
Yield of a Discounted (or Premium) Mortgage
The annual yield of a mortgage bought at a discount or premium can be
calculated given the original mortgage amount
(PV)y
interest rate (//VK),
periodic payment (PA/7), balloon payment amount
(FV)^
and the price
paid for the mortgage (new
PV).
Remember the ca.sh flow .sign convention: money paid out is negative;
money received is positive.
Example.
An investor wishes to purchase a $100,000 mortgage taken out
at 9% for 20 years. Since the mortgage was issued, 42 monthly payments
have been made. The loan is to be paid in full (a balloon payment) at the
end of its fifth year. What is the yield to the purchaser if the price of the
mortgage is $79,000?
Step 1
. Calculate
PMT.
Make sure
FV
= 0.
Set to End Mode. Press
BIBEG/ENDI
if
BEGIN
annunciator is displayed.
8: Additional Exaenptos 99