Tutorial for Users » hp 12c (platinum) - Problem Solving (Examples)

Examples

  1. Calculating a future value
  2. Calculating the present value of an annuity
  3. Calculating the value of a bond
  4. Valuing a series of uneven cash flows
  5. Calculating the yield to maturity on a bond


  1. Calculating a future value.
    Problem: Suppose you  invest $10,000 today in an account that pays 5% interest, compounded annually, how much will you have in the account at the end of 6 years?
    Solution:
    $13,401
    10000CHSPV
    5i
    6n
    FV

  2. Calculating the present value of an annuity.
    Problem: Suppose you are promised annual payments of $1,500 each year for the next five years, with the first cash flow occurring in one year. If the interest rate is 4%, what is this stream of cash flows worth today?
    Solution:
    $6,678
    1500PMT
    5n
    4i
    PV

  3. Calculating the value of a bond.
    Problem: Calculate the value of a bond with a maturity value of $1,000, a 5% coupon (paid semi-annually), five years remaining to maturity, and is priced to yield 8%.
    Solution:
    $878.34
    Note:
    FV = 1,000 (lump-sum at maturity)
    CF = $25 (one half of 5% of $1,000)
    N = 10 (10 six-month periods remaining)
    i = 4% (six-month basis, 8%/2)
    1000FV
    10n
    4i
    25PMT
    PV

  4. Valuing a series of uneven cash flows
    Problem: Consider the following cash flows,

    CF0 = -$10,000
    CF1 = +$5,000
    CF2 = $0
    CF3 = +$2,000
    CF4 = +$5,000

    1. What is the internal rate of return for this set of cash flows?
    2. If the discount rate is 5%, what is the net present value corresponding to these cash flows?
    3. IRR = 7.5224%
    4. NPV = +$603.09
    Solution:
    10000CHSgCF0
    5000gCFj
    0gCFj
    2000gCFg
    5000gCFg
    fIRR
    5i
    fNPV

  5. Calculating the yield to maturity on a bond
    Problem: Calculate the yield to maturity of a bond with a maturity value of $1,000, a 5% coupon (paid semi-annually), ten years remaining to maturity, and is priced $857.
    Solution:
    7.01%
    Note:

    FV = $1,000 (lump-sum at maturity)
    CF = $25 (one half of 5% of $1,000)
    N = 20 (20 six-month periods remaining)
    PV = $857

    1000FV
    20n
    857CHSPV
    25PMT
    i
    2x

Updated On: 15.01.02

  1. On 19-Feb-2013, Anonymous wrote: 
    calculate monthly payment on a $5,000 coupon Bond at a 13% rate over one?
    Your reply to Anonymous

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