HP 12C Calculator: Solving Mortgage Problems with Balloon Payments, Notas de estudo de Engenharia Mecânica

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HP 12C Mortgages with balloon payments

The HP12C TVM

Cash flow diagrams and sign conventions

Practice solving mortgage problems with balloon payments

HP 12C Mortgages with balloon payments

hp calculators - 2 - HP 12C Mortgages with balloon payments - Version 1.

The HP12C TVM

A set of mathematical tools are built into the HP12C for evaluating the time value of money (TVM), and the concepts of the present value of money ( PV ), the future value of money ( FV ), periodic payments ( PMT ), interest rates ( i ), and the number of periods ( n ). There are many standard situations where TVM calculations can be used to solve problems, such as calculating loan and mortgage variables. The standard HP12C features allow these problems to be solved easily.

Cash flow diagrams and sign conventions

The sign conventions for cash flows in the HP12C follow this simple rule: money received is positive (arrow pointing up), money paid out is negative (arrow pointing down). The key is keeping the same viewpoint through each complete calculation. The regular use of cash flow diagrams allows a faster approach to solve most TVM-related problems. The cash flow diagram below represents the borrower viewpoint of the most common mortgage problems with balloon payment and their relation to the TVM variables.

Figure 1

There are also two functions meant to be an aid when entering or retrieving annual values for n and ¼ : A and C. Pressing gA is the same as pressing \12 μ n, meaning the number of years can be keyed in and stored as number of months automatically. Pressing gC is the same as pressing \12 z ¼, meaning the yearly interest rate can be keyed in and stored as monthly interest rate authomatically. It is also possible to retrieve the yearly-related values by pressing :gA (number of years) and/or :gC (yearly interest rate) whenever necessary.

Practice solving mortgage problems with balloon payment

Example 1: A home priced at $114,400, is bought with a mortgage with a $900 monthly payment for the next 30 years. The bank quoted an interest rate of 8.75%. If after five years the house must be sold, what is the amount still owed on the house? The cash flow diagram in Figure 2 illustrates this example.

Figure 2

$ = Mortgage loan amount

P = Monthly mortgage payments M = Balloon payment

¼ = Monthly interest rate 1 2 3 n-2 n-1 n

n = number of months

...

$114,

Monthly payments: $900,00? (Balloon payment)

i = 8.75% (yearly) 1 2 3 58 59 60

n = 5 years

...