Hewlett Packard 10B

Calculator examples
prepared by Pamela Peterson

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

    10000+/- PV
    5I/Y
    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/Y
    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/Y
    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?

    Solution:

    1. IRR = 7.5224%
    2. NPV = +$603.09

    10000+/-CF
    5000CF
    0CF
    2000CF
    5000CF
    n IRR
    5 I/Y
    n NPV

    where n indicates the orange-colored key to reach the 2nd level functions.

  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
    857 +/-PV
    25PMT
    i
    x2