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sberg1
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How do I input the calculation if the compounds per year differ from the payments per year?

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HP 10bii +
Microsoft Windows 10 (64-bit)

How would I input this question into my calculator? My class is using a different calculator, please help

 

How much money should Mark invest today in a fund that earns interest at 4.74% compounded quarterly, if he wants to receive $4,250 at the end of every 6 months for the next 3 years?

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cyrille
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Hello,

 

If I understand your problem correctly, the exercise is:

investment of X

interest = 4.75% every 3 months (I am assuming that this is an effective interest, nor nominal)

payements = 4250 every 6 months

duration = 3 years (6 periods)

 

enter P/YR=1 (this will simplify the calculations as we will not have to transform the interest from effective to nominal)

enter I%= (1.0475²-1)*100. What we are doing here is calculating the interest for 6 month. assuming that the interest rate is effective, we need to square (compound) the interest rate over a 2 month period to make it work...

enter N=6

make sure the other registers are at 0

type of PV to get the present value = X

 

Another way to do it, maybe less convoluted would be to use Cash flows to calculate the NPV of an investement with alternatives Ni of 4250 and 0

 

Cyrille

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Jan_D
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I think you will have to read pages 80 and 81 of the manual:

Compounding and Payment Periods Differ.

http://h10032.www1.hp.com/ctg/Manual/c02989763.pdf

 

Use this to calculate the adjusted interest rate, and next store:

 

Payment = PMT = 4250, maybe a minus sign.

Number of payments = N = 6

Future value = FV = 0

 

And solve for present value = PV

sberg1
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Thank you for the help.  The calculator that my classmates are using has a c/y function, I guess this one doesn't.

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