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36 Section 3: Basic Financial Functions
File name: hp 12c_user's guide_English_HDPMBF12E44 Page: 36 of 209
Printered Date: 2005/7/29 Dimension: 14.8 cm x 21 cm
The form in which n is entered determines whether or not the calculator
performs financial calculations in Odd-Period mode (as described on pages
50 through 53). If n is a noninteger (that is, there is at least one nonzero
digit to the right of the decimal point), calculations of i, PV, PMT, and FV are
performed in Odd-Period mode.
z i is the interest rate per compounding period. The interest rate shown in the
cash flow diagram and entered into the calculator is determined by dividing
the annual interest rate by the number of compounding periods. In the
problem illustrated above, i = 6% ÷ 12.
z PV — the present value — is the initial cash flow or the present value of a
series of future cash flows. In the problem illustrated above, PV is the $1,000
initial deposit.
z PMT is the period payment. In the problem illustrated above PMT is the $50
deposited each month. When all payments are equal, they are referred to as
annuities. (Problems involving equal payments are described in this section
under Compound Interest Calculations; problems involving unequal
payments can be handled as described in under Discounted Cash Flow
Analysis: NPV and IRR. Procedures for calculating the balance in a savings
account after a series of irregular and/or unequal deposits are included in
the hp 12c Solutions Handbook.)
z FV — the future value — is the final cash flow or the compounded value of a
series of prior cash flows. In the particular problem illustrated above, FV is
unknown (but can be calculated).
Solving the problem is now basically a matter of keying in the quantities identified
in the cash flow diagram using the corresponding keys, and then calculating the
unknown quantity by pressing the corresponding key. In the particular problem
illustrated in the cash flow diagram above, FV is the unknown quantity; but in other
problems, as we shall see later, n, i, PV, or PMT could be the unknown quantity.
Likewise, in the particular problem illustrated above there are four known
quantities that must be entered into the calculator before solving for the unknown
quantity; but in other problems only three quantities may be known — which must
always include n or i.
The Cash Flow Sign Convention
When entering the PV, PMT, and FV cash flows, the quantities must be keyed into
the calculator with the proper sign, + (plus) or – (minus), in accordance with …
The Cash Flow Sign Convention: Money received (arrow pointing up)
is entered or displayed as a positive value (+). Money paid out (arrow
pointing down) is entered or displayed as a negative value (–).