HP 10B - Manual (Page 104)

Annual Percentage Rate for a Loan With Fees
The annual percentage ralc./lP^, incorporates fees usually charged when
a mortgage is issued, which cfTcctivcIy raises the interest rale. The actual
amount received by the borrower (the Pl'^ is reduced, while the periodic
payments remain the same. Thot/^/? can be calculated given the term of
the mortgage {N periods), the annual interest rale {I/YR)^ the mortgage
amount (newPi^, and the amount of the fee.
Remember the cash flow sign convention: money paid out is negative;
money received is positive.
Example: APR for a Loan With Fees.
A borrower is charged two
points for the issuance of a mortgage. (One point is equal to 1% of the
mortgage amount.) If the mortgage amount is $60,000 for 30 years and the
annual interest rate is 11.5% with monthly payments what APR is the bor­
rower paying?
Set to End Mode. Press
Keys:
12i(EZYfi)
11.5 OZ
y
R)
30 BlxP/YRl
60000 (py)
ogg
B 2 U
[RCp |Py]
0 2
WM
if BEGIN annunciator is displayed.
Display: Description:
12.00 Sets payments per year.
11.50 Stores interest rate.
360.00 Stores length of
mortgage.
60.000.00 Stores original amount of
mortgage.
0.00 The loan will be com­
pletely paid off in 30
years.
-594.17 Calculates payment.
60.000.00 Recalls loan amount.
58.800.00 Subtracts points.
11.76 Calculates/IPR, con-
.sidcring fees.
8: Additional Examples 101