HP 10B - Manual (Page 76)

Compounding and Payment Periods
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The TVM application assumes that the compounding periods
and the payment periods are the some. Some loan install­
ments or savings deposits and withdrawals do not coincide
with the bank's compounding periods. If the payment period
differs from the compounding period, adjust the interest rate
to match the payment period before solving the problem.
To adjust an interest rate when the compounding period differs from (he
payment period complete the following steps:
1«
Enter the nominal rate and press Enter the number of
compounding periods in a year and press BiP/YRi. Solve for the
effective rate by pressing BfEFP^,
2.
Enter the number of payment periods in a year and press
BlP/V^I.
Solve for (he adjusted nominal rate by pressing![ROMS.
Example: Monthly Payments, Daily Compounding. Starting
today, you make monthly deposits of S2S to an account paying 5%
interest, compounded daily (using a 365 day year). What will the balance
be in seven years?
Step 1. Calculate (he equivalent rate with monthly compounding.
Keys:
cBm
365 ■fPTTRl
|[EEES
12lfP7VR1
Display: Description:
5.00 Stores nominal per­
centage rate.
365.00 Stores bank’s compound­
ing periods per year.
5.13 Calculates annual
effective rate.
12.00 Stores monthly periods.
5.01 Calculates equivalent
nominal percentage rate
for monthly
compounding.
Since NOM% and l/YR share the same register, this value is ready for use
in the rest of the problem.
5: Time Value of Aloney Calculetlona 73