HP 12c (platinum)  Problem Solving (Examples)
Examples

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 10000CHSPV5i6nFV

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 1500PMT5n4iPV

Calculating the value of a bond.
Problem: Calculate the value of a bond with a maturity value of $1,000, a 5% coupon (paid semiannually), five years remaining to maturity, and is priced to yield 8%. Solution: $878.34
Note:
FV = 1,000 (lumpsum at maturity)
CF = $25 (one half of 5% of $1,000)
N = 10 (10 sixmonth periods remaining)
i = 4% (sixmonth basis, 8%/2)
1000FV10n4i25PMTPV

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
 What is the internal rate of return for this set of cash flows?
 If the discount rate is 5%, what is the net present value corresponding to these cash flows?
 IRR = 7.5224%
 NPV = +$603.09
Solution: 10000CHSgCF05000gCFj0gCFj2000gCFg5000gCFgfIRR5ifNPV

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 semiannually), ten years remaining to maturity, and is priced $857. Solution: 7.01%
Note:
FV = $1,000 (lumpsum at maturity)
CF = $25 (one half of 5% of $1,000)
N = 20 (20 sixmonth periods remaining)
PV = $857
1000FV20n857CHSPV25PMTi2x