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## HP 10b Calculator - Calculating Skipped Payments

Description
Sometimes a loan (or lease) can be negotiated in which a specific number of monthly payments are going to be skipped each year. This type of agreement may need to be arranged due to seasonal occurrences. For example, because of heavy rainfall, a bulldozer cannot be operated in Oregon during December, January, and February. A lessee wishes to make payments only when the machinery is being used. The lessee makes nine payments per year, but the interest continues to compound during the months in which a payment is not made.
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 Divide divide
Calculating skipped payments
The following procedure calculates the monthly payment amount necessary to amortize the loan (or lease) in the specified amount of time. The only restriction on this procedure is that the term of the loan must be an integral number of years.
1. Press SHIFT, CLEAR ALL, SHIFT, then BEG/END.
2. Key in 12 and press SHIFT, then P/YR.
3. Key in 0 and press CFj.
For the first year of the transaction, enter 1 for each payment that is made, and 0 for each skipped payment. Use the CFj and Nj keys to enter the cash flows.
1. Key in the annual interest rate (as a percentage) and press I/YR.
2. Press SHIFT, then NPV to calculate an equivalent annual cash flow.
3. Key in 12 and press N,then PMT to calculate an equivalent monthly cash flow.
4. Key in the total term (in months) and press N,then PV.
5. Key in the loan amount and press divide, RCL, PV, then [=] to calculate the monthly payment amount.
Example of calculating a loan with skipped payments
A bulldozer worth \$100,000 is purchased in September. The first payment is due 1 month later, and payments continue for 5 years. Because of the weather, the machinery will not be used during the winter months, and the buyer does not wish to make payments during January, February, and March (months 4 through 6). If the annual interest rate is 14 percent, what monthly payment is necessary to amortize the loan?
Set to END mode. Press SHIFT+BEG/END if BEGIN annunciator is displayed.
 Keys Display Description Press SHIFT, then CLEAR ALL 0.00 Clears calculator Press 12, SHIFT, then P/YR 12.00 Set periods per year Press 0, then CFj 0.00 Stores 0 as initial cash flow Press 1, then CFj 1.00 Stores first group of cash flows Press 3, SHIFT, then Nj 3.00 Press 0, then CFj 0.00 Stores second group of cash flows Press 3, SHIFT, then Nj 3.00 Press 1, then CFj 1.00 Stores third group of cash flows Press 6, SHIFT, then Nj 6.00 Press 14, then I/YR 14.00 Stores annual discount rate Press SHIFT, then NPV 8.31 Calculates present value of cash flows in year 1 Press 12, N, then PMT -0.75 Calculates equivalent monthly cash flow Press 60, N, then PV 32.05 Calculates present value of all cash flows Press 100000, divide, RCL, PV, then[=] 3,119.89 Calculates monthly payment amount

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