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Example 1 – Calculating payment on a loan
If $2 million are borrowed at an annual interest rate of 6.5% to be repaid in 60
monthly payments, what should be the monthly payment? For the debt to be
totally repaid in 60 months, the future values of the loan should be zero. So, for
the purpose of using the financial calculation feature of the calculator we will
use the following values: n = 60, I%YR = 6.5, PV = 2000000, FV = 0, P/YR =
12. To enter the data and solve for the payment, PMT, use:
„Ò Start the financial calculation input form
60 @@OK@@ Enter n = 60
6.5 @@OK@@ Enter I%YR = 6.5 %
2000000 @@OK@@ Enter PV = 2,000,000 US$
˜ Skip PMT, since we will be solving for it
0 @@OK@@ Enter FV = 0, the option
End is highlighted
— š @@SOLVE! Highlight PMT and solve for it
The solution screen will look like this:
The screen now shows the value of PMT as –39,132.30, i.e., the borrower must
pay the lender US $ 39,132.30 at the end of each month for the next 60
months to repay the entire amount. The reason why the value of PMT turned
out to be negative is because the calculator is looking at the money amounts
from the point of view of the borrower. The borrower has + US $
2,000,000.00 at time period t = 0, then he starts paying, i.e., adding -US $
39132.30 at times t = 1, 2, …, 60. At t = 60, the net value in the hands of the
borrower is zero. Now, if you take the value US $ 39,132.30 and multiply it
by the 60 payments, the total paid back by the borrower is US $ 2,347,937.79.
Thus, the lender makes a net profit of $ 347,937.79 in the 5 years that his
money is used to finance the borrower’s project.
Example 2 – Calculating amortization of a loan
The same solution to the problem in Example 1 can be found by pressing
@)@AMOR!!, which is stands for AMORTIZATION. This option is used to calculate
how much of the loan has been amortized at the end of a certain number of