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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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