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How do I input the calculation if the compounds per year differ from the payments per year?
04032017 04:31 PM
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?
Solved! Go to Solution.
04032017 11:53 PM
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%= (1.0475²1)*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
04042017 09:29 AM
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
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