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HP 12-C long term return on real estate

HP 12-C

How do I calculate annual return for a piece of real estate that I've owned mortgage free for 40 years with HP 12=C Financial Calculator?  I put in PV=$93,500 for what I paid in 1978.  I put in $250,000 for FV (what property is currently worth).  I put in PMT=$0 (no mortgage).  n=480 (for 40 years that I've owned property.   When I hit i to see what interest rate return was, I get Error 5.   

Any help would be appreciated.   

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Error 5 indicates that there is no solution for the TVM value you are attempting to solve with the given values in the other variables.  I'm guessing here that you input both the PV and FV as positive values, which is a fairly common cause of this problem.

 

All hp financial calculators use a standard sign convention to imply the direction of cash flow in TVM calculations.  In a situation like you are describing, the normal sign application would be to use a negative value (-93500 in this case) to indicate that you spent/invested that value initially.  Since you are seeking an interest rate with implied growth on this, the 250000 value for the FV should be positive (indicating that you received that value at the end of the calculation periods).

 

If you perform the same steps as before with -93500 for the FV, you'll find the solution for i is 0.205105780.  Note that since you used 480 (40x12) for n, this solution for i represents the monthly-compounded value for i.  To turn that into an APR, you need to multiply that value by 12 to obtain 2.461269361.

 

If you simply want to see the annual compounding rate (as opposed to monthly), use 40 for n while keeping all the other variables the same.  For your situation, solving for i would then yield an annually-compounded interest rate of 2.489225197%.

 

Hope this helps!

- David

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Hi!, @JMWNCD :

You can, see ...

http://www.tvmcalcs.com/index.php/calculators/faq/hp12c_faq

https://h30434.www3.hp.com/t5/Calculators/HP-12C-Error-5/m-p/5590099#M5830

Sintax : TVM convention ... http://www.tvmcalcs.com/terminology#CashFlowSignConvention

Error 5 - Financial Record's.
Excess or total lack, of CHS, in the Financial Register.

Error 5.JPG


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David:

Thanks  for your quick response to my problem.  Once I  switched sign on PV to negative, I got the correct answer.  Just downloaded HP 12-C from Google Play Store & trying to get up to speed for a 2 day investment course that I am taking this weekend in Chicago.  Course promoter wants everyone to have HP 12-C for stock & bond calculations. 

JMW

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Make' :

The second link you sent with the tutorials was very helpful.  Thank you.

JMWNCD

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