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HP 10bii Calculator - Cash Flow Examples

Wrap-around mortgages
A wrap-around mortgage is a combination of refinancing a mortgage and borrowing against real estate equity. Usually the two unknown quantities in the wrapped mortgage are the new payment and the rate of return to the lender. To arrive at a solution, use both the TVM and the cash flow applications.
Calculator symbol key
The procedures in this document use the following text to represent symbol keys:
Key
Description
Text Representation
colored key; shift key
SHIFT
Example of calculating a wrap around mortgage
There are 82 monthly payments of $754 left on an 8 percent mortgage, leaving a remaining balance of $47,510.22. It is desirable to wrap that mortgage and borrow an additional $35,000 for another investment. A lender is willing to "wrap" an $82,510.22 mortgage at 9.5 percent for 15 years. What are the new payments and what return is the lender getting on this wrap-around mortgage?
The payment calculation is a straightforward TVM payment calculation using the new amount as the PV.
Set to END mode. Press SHIFT, then BEG/END if BEGIN annunciator is displayed.
Keys
Display
Description
Press SHIFT, then C ALL
0.00
Clears all registers
Press 12, SHIFT, then P/YR
12.00
Sets payments per year
Press 82510, [.], 22, then PV
82,510.22
Stores loan amount on which your new payment is calculated
Press 9, [.], 5, then I/YR
9.50
Stores interest rate
Press 0, then FV
0.00
Stores final balance
Press 15, SHIFT, then xP/YR
180.00
Stores number of monthly payments
Press PMT
-861.59
Calculates the payment
Then, to calculate the lender's return, enter cash flows that represent the complete picture of the wrap-around mortgage from the lender's point of view.
When the cash flows are grouped:
CF0 = 47,510.22 - 82,510.22 = -35,000
CF1 = 861.59 - 754.00 = 107.59
N1 = 82
CF2 = 861.59
N2 = 180 - 82 = 98
Keys:
Display
Description
Press 35000, [+/-], then CFj
CF
-35,000.00
Enters $35,000 for loan amount
Press RCL, PMT, [+/-], [-], 754, then CFj
CF
107.59
Enters net payments for first 82 months
Press 82, SHIFT, then Nj
N
82.00
Enters number of times payment occurs
Press RCL, PMT, [+/-], then CFj
CF
861.59
Enters net payment for next 98 months
Press 180, [-], 82, SHIFT, then Nj
N
98.00
Enters number of times payment occurs
Press SHIFT, then IRR/YR
10.16
Calculates annual return
Net future value
The net future value can be calculated by using the TVM keys to slide the net present value (NPV) forward on the cash flow diagram.
Example of calculating net future value
Deposits have been made over the last two years into a money market fund earning 8.8 percent. What is the current balance of the account?
Set to END mode. Press SHIFT, then BEG/END if BEGIN annunciator is displayed.
Keys
Display
Description
Press SHIFT, then C ALL
Clears all registers
Press 12, SHIFT, then P/YR
12.00
Sets payments per year
Press 12000, [+/-], then CFj
CF
-12,000.00
Enters initial cash flow
Press 0, then CFj
CF
0.00
Enters amount in group 1
Press 2, SHIFT, then Nj
N
2.00
Enters number of times payment occurs
Press 3000, [+/-], then CFj
CF
-3,000.00
Enters amount in group 2
Press 3, SHIFT, then Nj
N
3.00
Enters number of times payment occurs
Press 0, CFj, 9, SHIFT, then Nj
N
9.00
Enters number of times payment occurs
Press 7500, [+/-], then CFj
CF
-7,500.00
Enters cash flow group 4
Press 0, CFj, 3, SHIFT, then Nj
N
3.00
Enters number of times payment occurs
Press 2000, [+/-], then CFj
CF
-2,000.00
Enters cash flow group 6
Press 8, [.], 8, then I/YR
8.80
Stores annual interest rate
Press SHIFT, then NPV
-29,203.14
Calculates net present value (NPV)
Press 24, then N
24.00
Stores known values
Press 0, then PMT
0.00
Press FV
34,800.58
Calculates net future value

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