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170 Section 12: Real Estate and Lending
File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 170 of 275
Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm
In the example cited, the rental payment stream for months 7 through 24 are
“deferred annuities,” as they start at some time in the future. The cash flow
diagram from the investor’s viewpoint looks like this:
To find today’s present value of the cash flows assuming a desired yield, the NPV
technique may be used. (Refer to pages 73 through 77.)
Example 2:
A 2-year lease calls for monthly payments (at the beginning of the
month) of $500 per month for the first 6 months, $600 per month for the next 12
months, and $750 per month for the last 6 months. If you wish to earn 13.5%
annually on these cash flows, how much should you invest (what is the present
value of the lease)
?
Keystrokes
(RPN mode)
Keystrokes
(ALG mode)
Display
f]
f[
f
CLEAR
H
f
CLEAR
H
0.00
Initialize.
500
gJ
500
gJ
500.00
First cash flow.
gK
5
ga
gK
5
ga
500.00
5.00
Second through sixth cash
flows.
600
gK
12
ga
600
gK
12
ga
600.00
12.00
Next twelve cash flows.
750
gK
6
ga
750
gK
6
ga
750.00
6.00
Last six cash flows.
13.5
gC
13.5
gC
1.13
Monthly interest rate.
fl
fl
12,831.75
Amount to invest to
achieve a 13.5% yield.