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Section 3: Basic Financial Functions 37
File name: hp 12c_user's guide_English_HDPMBF12E44 Page: 37 of 209
Printered Date: 2005/7/29 Dimension: 14.8 cm x 21 cm
The Payment Mode
One more bit of information must be specified before you can solve a problem
involving periodic payments. Such payments can be made either at the beginning
of a compounding period (payments in advance, or annuities due) or at the end of
the period (payments in arrears, or ordinary annuities). Calculations involving
payments in advance yield different results than calculations involving payments in
arrears. Illustrated below are portions of cash flow diagrams showing payments in
advance (Begin) and payments in arrears (End). In the problem illustrated in the
cash flow diagram above, payments are made in arrears.
Regardless of whether payments are made in advance or in arrears, the number of
payments must be the same as the number of compounding periods.
To specify the payment mode:
z Press g× if payments are made at the beginning of the compounding
periods.
z Press g if payments are made at the end of the compounding periods.
The
BEGIN
status indicator is lit when the payment mode is set to Begin. If
BEGIN
is not lit, the payment mode is set to End.
The payment mode remains set to what you last specified until you change it; it is
not reset each time the calculator is turned on. However, if Continuous Memory is
reset, the payment mode will be set to End.
Generalized Cash Flow Diagrams
Examples of various kinds of financial calculations, together with the applicable
cash flow diagrams, appear under Compound Interest Calculations later in this
section. If your particular problem does not match any of those shown, you can
solve it nevertheless by first drawing a cash flow diagram, then keying the
quantities identified in the diagram into the corresponding registers. Remember
always to observe the sign convention when keying in PV, PMT, and FV.
The terminology used for describing financial problems varies among the different
segments of the business and financial communities. Nevertheless, most problems
involving compound interest can be solved by drawing a cash flow diagram in
one of the following basic forms. Listed below each form are some of the problems
to which that diagram applies.