HP

12c Calculator Skills for Real Estate

SelfStudy Guide/Certification Test Preparation

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Copyright 2013 by Real Estate Financial Modeling, LLC. All rights reserved.

HewlettPackard, HP and HP 12c are trademarks of HewlettPackard Development Company L.P.

Overview. The HewlettPackard HP 12c is the most widelyused financial calculator in
real estate. You will see it in meetings, board rooms and on financial analyst bullpen desks.
Top commercial real estate finance professionals have sworn by it since its introduction in
1981 (before Excel even existed!). Unfortunately, while the HP 12c is powerful, using it is
not that straightforward in that the keystrokes all seem to be totally backwards vs. what
your intuition would tell you to do.
This guide will teach you in plain English the skills and steps critical to successfully
leverage the HP 12c for your real estate analyses. Enjoy!
The REFM Team

Questions or comments? Email faq@GetREFM.com


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Table Of Contents

Overview of HP 12c Calculator Keys

1. Financial Registers

2. Simple Interest On A 360 Or 365Day Basis

3. Compound Interest

4. Periodic and Annual Interest Rates

10

5. Nominal Interest Rate Conversion to Effective Interest Rate

11

6. Effective Interest Rate Conversion to Nominal Interest Rate

12

7. Weighted Average Functions

13

8. Discounting Cash Flows: Net Present Value and IRR

14

9. Modified Internal Rate of Return (MIRR)

18

10. Annual Percentage Interest Rate Calculations with Fees

22

11. Price of a Mortgage Traded at a Discount or Premium

24

12. Yield of a Mortgage Traded at a Discount or Premium

26

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Overview of HP 12c Calculator Keys

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1. Financial Registers

What It Is: A register in 12cspeak is a place in the calculators memory where a

specific data value is stored for use in an ongoing calculation. Financial Registers are a
subset of the many different Storage Registers that the 12c possesses. It is important to
remember to clear these registers when the values are no longer needed.
Application: To store a numeric value you want to associate with a variable, such as to
make $1,000.00, as a constant Payment Amount, the value associated with the PMT
variable.
How To:
a. Store a number into a financial register:

i. Key the number into the display, then press the key for the

corresponding variable e.g., [n],[i],[PV],[PMT],[FV]

Example: Store 90 as [n], the number of days
1. 90[n]

b. Recall a stored register value:

i. [RCL] followed by the corresponding variable you wish to recall

Example: Recall the number of days
1. [n]

c. Clear all the financial registers at once:

i. [f][REG]

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2. Simple Interest On A 360 or 365Day Basis

What It Is: Simple interest is interest that is calculated in each period off of the
beginning of period account balance, where the account balance does not include any
interest earned from previous periods. The annual interest rate can be applied against a
360day calendar or a 365day calendar. The 12c calculates on both bases at once, but
displays on a 360day basis as a default. You can toggle to see the amount on a 365day
basis as described below.
Application: To calculate how much interest is being earned by a lender over a
specified time period.
How To:
a. Calculate simple interest
i. Enter the number of days to be used and press [n]
ii. Enter the annual interest rate, then press [i]
iii. Enter the principal amount borrowed, then press [CHS][PV]
iv. Press [f][INT] to calculate and display the interest accrued on a 360
day basis.
v. If you wish to see the interest value on a 365day basis, press
[R][x><y]
vi. If you wish to see the total of the principal and the accrued interest
amount, press [+]

Example: If a $1,000 loan is taken out for 90 days, the money is lent at 9.00%
simple interest, and the interest is calculated on a 360day basis, what is the
amount of interest accrued in 90 days? How much is owed in total after 90 days,
2.
3.
4.
5.
6.

90[n]
9[i]
1000[CHS][PV]
[f][INT]
[+]

Answers: $22.50, and $1,022.50

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3. Compound Interest

What It Is: Compound interest is interest that is calculated in each period off of the
beginning of period account balance, where the account balance includes the sum of
unreturned principal loaned and unpaid interest amounts that have been earned to
date. The key element in calculating compound interest is the specification of the
compounding period, i.e., the interval and frequency at which the compounding occurs.
Application: To calculate how much interest is being earned by a lender over a
specified time period, where interest compounds monthly, or quarterly, or annually.
How To:
a. Set up the compounding periods and interest rate (using monthly as an
example)

i. Enter the number of years and press [g][12x] this automatically

enters the total number of compounding periods into the [n] register
ii. Calculate and store the monthly interest rate, enter the annual
interest rate and press [g][12] this automatically enters the
monthly interest rate into the [i] register

b. Calculate the number of payments or compounding periods required to pay
off a loan:

i. Press [f][FIN] to clear the financial registers

ii. Enter the periodic interest rate with [i] or [12]
iii. Enter at minimum 2 of the following metrics
a. Present Value, [PV]
b. Payment Amount, [PMT]

a. If a payment value has been entered, press [g][BEG] or

[g][END] to set the payment mode as occurring either
at the beginning of each period or at the end of each
period
c. Future Value, [FV]
iv. Press [n] to calculate the number of payments or periods

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Example: Investor X takes a loan of $150,000 at 10% annual interest,

compounded monthly, to buy a rental property. If Investor X makes
payments at the end of each month of $1,500, how many payments are
necessary to pay off the loan? How many years will it take?
1.
2.
3.
4.
5.
6.

[f][FIN]
10[g][12] calculates and stores the monthly interest rate
150,000[PV]
1,500[CHS][PMT]
[g][END]
[n]

Answer: 216 Number of payments required to pay down the

loan
7. 12[]
Answer: 18.00 Number of years required to pay off the loan

c. Calculate a final fractional payment (an amount less than the constant
periodic payment amount), or a final balloon payment (an amount more
than the constant periodic payment amount) required to pay off a loan:

A Final Fractional Payment:
Lets say that instead of 216 payments being needed to pay off the loan, there
were only 215 needed. This would mean that it would take 17.91667 years to
pay off the loan instead of exactly 18.00 years.
How do we calculate the final fractional payment amount?
1. 216 [n]
2. [FV] this gives us the overpayment amount if 216 full
payments were made ($140.80)
3. [RCL] [PMT]
4. [+]
Answer: $1,359.20

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A Final Balloon Payment:

Lets say that instead of 216 full payments being needed to pay off the loan,
there were actually 215 full payments needed, plus a partial 216th payment
that was a fraction of the full payment amount.
What is the final balloon payment amount (payment #215)?
1. 215 [n]
2. [FV] this gives us the remaining balance after 215 full
payments were made ($1,347.96)
3. [RCL] [PMT]
4. [+]
Answer: $2,847.96 (this is the regular $1,500 PMT plus $1,347.96)

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4. Periodic and Annual Interest Rates

What It Is: The rate of interest on a loan expressed either annually or in another
interval that is more frequent than annually (e.g., monthly, quarterly).
Application: To back solve for what interest rate is needed, given a frequency of
compounding, to produce a future value of a given investment amount.
How To:

a. Calculate a periodic interest rate:

i. Press [f][FIN] to clear the financial registers

ii. Enter number of payments or periods with [n] or [g][12x]
iii. Enter at minimum two of the following metrics
a. Present Value, [PV]
b. Payment Amount, [PMT]

a. If [PMT] was entered, then enter [g][BEG] or [g][END]

to specify the timing of the payments
c. Future Value, [FV]
iv. Press [i] to calculate the periodic interest rate
v. To generate the annual interest rate, enter the number of periods per
year and press [X]

Example: To accumulate $10,000 in 6 years on an investment of $7,000,
what is the annual interest rate required if it is compounding quarterly?
1. [f][FIN]
2. 6[ENTER]4[X][n]
3. 7,000[CHS][PV]
4. 10,000[FV]
5. [i]

1.497% is the quarterly interest rate
6. 4[X]

Answer: 5.988%

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10

5. Nominal Interest Rate Conversion To Effective Interest Rate

What It Is: The nominal interest rate is the annual interest rate in name e.g., an 8%
annual rate. However, when loan interest is compounding in nature, this nominal rate is
in fact lower than the actual, or effective interest rate that results from the
compounding.
Application: To find out what rate of annual interest one is truly paying on a loan
where the interest compounds.

How To:
a. Convert the nominal annual interest rate to the effective annual interest rate:

[g][END] this sets the mode of the interest payment

[f][FIN] this clears the registers
Enter the annual nominal rate as a percentage and press [ENTER]
Enter the number of compounding periods per year and press
[n][][i]
v. Enter in 100 and press [CHS][ENTER][PV]
vi. Press [FV][+]

i.
ii.
iii.
iv.

Example: Calculate the effective annual interest rate assuming the annual
nominal rate is 6.25% and compounded quarterly

1. [g][END]
2. [f][FIN]
3. 6.25[ENTER]
4. 4[n][][i]
5. 100[CHS][ENTER]
6. [PV]
7. [FV][+]
Answer: 6.398% this is the value of the effective annual interest rate

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6. Effective Interest Rate Conversion To Nominal Interest Rate

What It Is: The nominal interest rate, is the annual interest rate in name e.g., an 8%
annual rate. However, when loan interest is compounding in nature, this nominal rate is
in fact lower than the actual, or effective interest rate that results from the
compounding.
Application: To find out what rate of nominal annual interest one is paying on a loan
where the interest compounds.
How To:

a. Convert the effective annual interest rate to the nominal annual interest rate:

[f][FIN] this clears the registers

Enter the number of periods per year then press [n]
Enter the value 100 and press [ENTER][PV]
Enter the effective annual rate as a percentage and then press
[+][CHS][FV][i]
v. Press [RCL][n][X]

i.
ii.
iii.
iv.

Example: Given the effective annual rate of 5.25% compounding quarterly,
what is the nominal rate?
1. [f][FIN]
2. 4[n]100[ENTER][PV]
3. 5.25[+][CHS]
4. [FV][i]
5. [RCL][n][X]

Answer: 5.149% this is the value of the nominal annual interest rate

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12

7. Weighted Average Function

What It Is: The weighted average is the average of a series of values in which each
quantity to be averaged is assigned a weight.
Application: To find out the average price paid per lot for land to be developed into a
housing subdivision.
How To:
a. Accumulate Statistics:

i. Data is entered using the summation [+] key, which calculates and

stores statistical data into the storage registers R1R6 (these are
known as the statistics registers). Before entering statistical data, it
is important to clear the statistic registers with the following key
strokes: [f][]
a. In statistical calculations with one variable, to enter a data
point referred to as the xvalue key the xvalue into the
main display, then press []

b. Calculate the weighted average of a series of values:

i.
ii.
iii.
iv.
v.

Press [f][] this clears the statistical registers

Key in the value and press [ENTER]
Key in the weight (number of times the value occurs) and press [+]
Repeat steps ii and iii for all additional values
Press [g][xw] the resultant value will be the weighted average

Example: A real estate broker is selling a parcel of land that has been subdivided
into lots. The prices and quantities are as follows: 2 Lots are $200,000 each, 4
Lots are $230,000 each, 14 Lots are $190,000 each, and 9 Lots are $290,000 each.
What is the weighted average price per lot?
1. [f][]
2. 200,000[ENTER]2[+]
3. 230,000[ENTER]4[+]
4. 190,000[ENTER]14[+]
5. 290,000[ENTER]9[+]
6. [g][xw]

Answer: $227,241
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8. Discounting Cash Flows: Net Present Value (NPV) and Internal Rate
of Return (IRR)

What It Is: The concept of the time value of money and the act of discounting of cash
flows are the underlying premises of real estate finance. The short version is: a dollar
today is worth more than a dollar tomorrow, and predictable (safe) cash flows are
more valuable than unpredictable (risky) cash flows. The Net Present Value is the sum
of the Time 0 investment amount and the discounted values of the future cash flows,
given an assumed Discount Rate. The IRR is that discount rate that will generate an NPV
of 0, or thought of another way, the average annual return on the capital investment.
Application: To perform a valuation of an existing incomeproducing real estate asset
such as an office building or retail plaza by projecting and then discounting those future
cash flows.
How To:

a. Key in cash flow streams:

i. [f][REG] this clears the registers

ii. Enter the initial investment, and press [CHS] to make the value

negative, then press [g][CF0]

a. if the value is 0, then enter 0[g][CF0]
iii. Enter the value of the next cash flow, and press [CHS] if the cash flow
is negative
iv. Press [g][CFj]
a. If the cash flow amount is 0 press 0[g][CFj]
v. Repeat steps iii and iv as needed until done

b. Calculate the Net Present Value (NPV):

i. Once the cash flows have been stored:

a. Enter the interest rate, using [i] or [12]
b. Press [f][NPV]

Example on next page

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14

Example: An incomeproducing property is purchased for $100,000 in cash.

The asset will be held for 5 years and sold for $170,000 at the end of the hold
period. The investor has projected the project cash flows as follows: Year 0,
100,000; Year 1,1,000; Year 2, 9,000; Year 3, 11,000; Year 4, 8,000; Year 5,
170,000. If the Investors discount rate is 13%, what is the NPV?
1. [f][REG]
2. 100,000[CHS][g][CF0]
3. 1,000[CHS][g][CFj]
4. 9,000[g][CFj]
5. 11,000[g][CFj]
6. 8,000 [g][CFj]
7. 170,000[g][CFj]
8. [RCL][n]
9. 13[i]
10. [f][NPV]
Answer: $10,962.66

c. Calculate the Internal Rate of Return (IRR):

i. Enter cash flows using method described above in section 8(a)

ii. Press [f][IRR]

Example: Using the same values from the Example above, calculate the IRR.
1.
2.
3.
4.
5.
6.
7.
8.

[f][REG]
100,000[CHS][g][CFj]
1,000[CHS][g][CFj]
9,000[g][CFj]
11,000[g][CFj]
8,000 [g][CFj]
170,000[g][CFj]
[f][IRR]

Answer: 15.56%

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15

d. Change Cash Flow Entries:

i. Enter the amount into the display

ii. Press [STO]
iii. Enter the number of the register containing the cash flow amount to

be changed.

e. To change the number of times that the cash flow amount occurs
consecutively:
i. Store the number of the cash flow amount in the n register
ii. Key the number of times the cash flow amount occurs consecutively
into the display
iii. Press [g][Nj]

Example: Assuming the cash flow is stored in the register, change the second
CF value from 11,000 to 8,000. Then calculate a new NPV for a 15% return.

1. 8000[STO]2
2. 15[i]
3. [f][NPV]

f. Enter a series of investment cash flows if the number of cash flows exceed 20,
and if among the cash flows there are any equal consecutive cash flows:

i. [f][REG] this clears the registers

ii. Enter the initial investment, and press [CHS] to make the value

negative, then press [g][CF0]

1. if the value is 0, then enter 0[g][CF0]
iii. Given an initial investment of more than one cash flow of the amount
entered above, then enter the number of those cash flows, then press
[g][Nj]
1. If [g][Nj] is not pressed, it is assumed that the first cash flow
amount = 1.
iv. Enter the amount of the next cash flow, and press [CHS] if that cash
flow is negative, then press [g][CFj].
1. If the cash flow amount is 0 in the next period, press 0[g][CFj]

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16

v. If the amount entered in step 4 occurs more than once consecutively,

key in the number of times that that cash flow amount occurs
consecutively then press [g][Nj].
1. If [g][Nj] is not pressed, the calculator assumes that Nj is 1 for
the CFj just entered.
vi. Repeat the steps above until all of the cash flows have been entered.

Example: Investor looks to purchase property for $100,000 and has a 15%
Discount Rate. He intends to hold for 10 years and sell for $200,000. Yearly
Cash flows are as follows during years 110: $14,000, $11,000, $10,000,
$10,000, $10,000, $9,100, $9,000, $9,000, $4,500, $200,000
1.
2.
3.
4.
5.
6.

[f][REG]
100,000[CHS][g][CF0] Enters the first cash flow line item
14,000[g][CFj]
11,000[g][CFj]
10,000[g][CFj]
3[g][Nj] Enters the number of instances that the previous
lines CF appears
7. 9,100[g][CFj]
8. 9,000[g][CFj]
9. 2[g][Nj]
10. 4,500[g][CFj]
11. 200,000[g][CFj]
12. 15[i]
13. [f][NPV]
Answer: $1,268.19

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17

9. Modified Internal Rate of Return (MIRR)

What It Is: The traditional Internal Rate of Return falls short of producing meaningful
results in certain situations, such as those in which there are multiple changes in sign
(positive to negative amounts) in a series of cash flows instead of just a single change in
sign (a negative initial investment amount, and either $0 amounts or positive cash flows
thereafter).
The fundamental issue with traditional IRR is that in its calculation, it is assumed that
all cash flows are either reinvested or discounted at the computed IRR rate. MIRR
solves for this by using userprovided reinvestment and borrowing rates. The
borrowing rate is also known as the safe rate, which is a rate that reflects the return on
an investment in a highly liquid account e.g., a shortterm U.S. Treasury Bill.
Application: Calculate the IRR for an investment that contains a series of cash flows
that contain more than one change of sign.
How To:

a. Calculate the MIRR:

i. First, calculate the Future Value (FV) of the positive cash flows at the

reinvestment rate
ii. Second, calculate the Present Value (PV) of the negative cash flows at
the safe rate
iii. With a known number of periods (n), FV and PV, we can solve for the
MIRR (i)
Example on next page

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18

Example for Annual Cash Flows: An investment group is raising

capital for a valueadded real estate private equity fund. The projected
cash flows (in $ Millions) at the fund level are as follows:
Time 0: 100
Year 1: 7
Year 2: 6
Year 3: 1
Year 4: 0
Year 5: 3
Year 6: 9.5
Year 7: 155
What is the MIRR if the assumed safe rate is 3% and the assumed
reinvestment rate is 20%?

Step 1 of 2: Find Future Value (FV) of the positive (or $0 if a negative
amount) cash flows at the reinvestment rate:
1. [f][REG]
2. 0[g][CF0] Investment cash flow represented as $0
3. 7[g][CFj]
4. 6[g][CFj]
5. 0[g][CFj] Negative cash flow represented as $0
6. 0[g][CFj]
7. 3[g][CFj]
8. 9.5[g][CFj]
9. 155[g][CFj]
10. 20[i] [f][NPV] $57.64
11. [CHS][PV]
12. 7[n][FV] 7 cash flow periods (Time 0 does not count
as a cash flow period)
Interim Step 1 Answer (FV of positive cash flows):
$206.55

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19


Step 2 of 2: Find Net Present Value (NPV) of the negative (or $0 if a $0
amount or a positive amount) cash flows at the safe rate:
1.
2.
3.
4.
5.
6.

100[CHS][g][CF0] Investment cash flow

0[g][CFj] Year 1 cash flow
0[g][CFj] Year 2 cash flow
1[CHS][g][CFj]
3[i] [f][NPV] $100.92
7[n][i] 7 cash flow periods (Time 0 does not count as
a cash flow period)

Answer (Annual MIRR): 10.77%

Example for Monthly Cash Flows: An investment group is raising

capital for a valueadded real estate private equity fund. The projected
cash flows (in $ Millions) at the fund level are as follows:
Time 0: 100
Month 1: 7
Month 2: 6
Month 3: 1
Month 4: 0
Month 5: 3
Months 6 through 11: 9.5
Month 12: 155
What is the MIRR if the assumed safe rate is 3% and the assumed
reinvestment rate is 20%?

Continued on next page

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20


Step 1 of 2: Find Future Value (FV) of the positive (or $0 if a negative
amount) cash flows at the reinvestment rate:
1. [f][REG]
2. 0[g][CF0] Investment cash flow represented as $0
3. 7[g][CFj]
4. 6[g][CFj]
5. 0[g][CFj] Negative cash flow represented as $0
6. 0[g][CFj]
7. 3[g][CFj]
8. 9.5[g][CFj]
9. 155[g][CFj]
10. 20[g][12] [f][NPV] $162.12
11. [CHS][PV]
12. 7[n][FV] 7 cash flow periods (Time 0 does not count
as a cash flow period)
Interim Step 1 Answer (FV of positive cash flows):
$182.00

Step 2 of 2: Find Net Present Value (NPV) of the negative (or $0 if a $0
amount or a positive amount) cash flows at the safe rate:
1.
2.
3.
4.
5.
6.

100[CHS][g][CF0] Investment cash flow

0[g][CFj] Month 1 cash flow
0[g][CFj] Month 2 cash flow
1[CHS][g][CFj]
3[g][12] [f][NPV] $100.99
7[n][i] 7 cash flow periods (Time 0 does not count as
a cash flow period); this gives us the Monthly MIRR of
8.78%
7. 12[X]

Answer (Annual MIRR): 105.34% (Note: this is so high

because we made so much money in only 7 months)

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21

10. Annual Percentage Rate Calculations with Fees

What It Is: The Annual Percentage Rate is the calculated rate for a mortgage that
accounts for the cash fees that borrowers are charged in connection with the loan.
Application: Calculate exactly what a loan is costing a borrower on an annual basis
given a fee amount paid up front at loan funding.
How To:

b. Calculate the Annual Percentage Rate with Fees:

i. First, calculate and enter the periodic payment amount on the loan:

a.
b.
c.
d.
e.
f.

[g][END]
[f][FIN] this clears the financial registers
Enter total number of payment periods; press [n]
Enter periodic interest rate as a percentage; press [i]
Enter mortgage amount; press [PV]
Press [PMT] for periodic payment amount

ii. Second, calculate and enter the actual net amount disbursed:

a. If the fees are stated as a percentage of the mortgage amount,

recall the mortgage amount ([RCL][PV]), then key in the fee

rate and press [%][][PV]
a. If the fees are stated as a flat charge, recall the mortgage
amount ([RCL][PV]); enter the fee amount; press [][PV]
b. If fees are stated as a percentage of the mortgage
amount plus a flat charge, recall the mortgage amount
([RCL][PV]); key in the fee rate, press [%][]; key in the
fee amount; press [][PV].
iii. Press [i] to return the interest rate per compounding period
iv. To return the annual nominal percentage rate, enter the number of
periods per year and press [X].

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Example: A lender charges 2 points to the borrower for the issuance of

his mortgage. Given a mortgage of $100,000 amortized over 30 years
with an annual interest rate of 6%, what is the true annual percentage
rate that the borrower is paying?
1. Enter [g][END]
2. [f][FIN]
3. 30[g][12x] Enters the number of Months (30 Years x
12 Months)
4. 6[g][12] Calculates percent monthly interest rate
5. 100,000[PV] Converts Loan Amount to Present Value
(PV)
6. [PMT] Calculates monthly payment
7. [RCL][PV]2[%][][PV] Actual amount received by
borrower (PV)
8. [i]
9. 12[X]
Answer: 6.189%

Assuming the same information from the example above, what is the
APR if the mortgage fee is stated at 2 points plus $500?
1. [g][END]
2. [f][FIN]
3. 30[g][12x]
4. 6.00[g][12]
5. 100,000[PV]
6. [PMT]
7. [RCL][PV]2[%][]
8. 500[][PV]
9. [i]
10. 12[X]
Answer: 6.237%

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11. Price of a Mortgage Traded at a Discount or Premium

What It Is: Mortgages are often traded instead of being held on the balance sheet of the
issuing bank. They can be sold and bought either at a discount to the remaining
principal balance, or at a premium.
Application: Calculating a mortgage purchase price given a targeted (desired) yield
amount.
How To:

a. Calculate the value of a loan that is bought or sold at a premium.

Given the amount of the mortgage, the periodic payment, the timing and
amount of the balloon payment and the desired yield rate, we can back solve
for the price of the mortgage:

i. [g][END]
ii. [f][FIN] this clears the financial registers
iii. Enter the number of periods until the balloon payment or prepayment

iv.
v.
vi.
vii.

occurs. Press [n]. (Follow this even if there is no balloon payment or

prepayment)
Enter the periodic interest rate, press [i]
Enter the periodic payment amount; press [PMT]
Enter the balloon payment amount and press [FV]
Press [PV] to obtain the purchase price of the mortgage

Example: A borrower elects to prepay his loan. The current annual interest
rate is 5% with 60 monthly payments of $150remaining and a balloon
payment at the end of the fifth year of $2,000. The lender has chosen to
discount the future payments at 5%. What is the amount the borrower must
prepay on the note?
1.
2.
3.
4.
5.
6.

[g][END]
[f] [FIN]
60[n]
5[g][12]
150[PMT]
2,000[FV][PV]

Answer: $9,507.02
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Example 2: A 5.5% annual interest rate mortgage with 25 years remaining

and a balance of $35,000 is available for purchase. What price will generate a
15% yield?
1.
2.
3.
4.
5.
6.
7.

[g][END]
[f][FIN]
25[g][12x]
5.5[g][12]
35,000[CHS][PV][PMT]
15[g][12]
[PV]

Answer: $16,780.57

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12. Yield of a Mortgage Traded at a Discount or Premium

What It Is: Mortgages are often traded instead of being held on the balance sheet of the
issuing bank. They can be sold and bought either at a discount to the remaining
principal balance, or at a premium.
Application: Calculating an expected yield amount for a targeted mortgage purchase
price.

How To:
a. Calculate the yield of a mortgage purchased at a desired price:
If we know the original mortgage amount, the interest rate, periodic
payment amount, the number of periodic payments per year and the
amount of the balloon payment, we can back solve to what the yield
would be for a targeted mortgage purchase price amount.
a. [g][END]
b. [f][FIN]
c. Enter the total number of periods prior to the balloon
d.
e.
f.
g.
h.

payment. Press [n]

Enter the periodic payment amount and press [PMT]
Enter the purchase price of the mortgage and press [PV]
Enter the balloon payment amount and press [FV]
Hit the [i] key for the periodic yield
Multiply by the number of periods per year (e.g., 12[X])

Example: Investor A purchases an amortizing loan issued for $160,000

taken out at 8% for 30 years. 36 months of payments have been made. If
the purchase price of the mortgage is $120,000, what is the annual
yield?
1.
2.
3.
4.
5.
6.
7.
8.
9.
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[g][END]
[f][FIN]
30[g][12x]
8[g][12]
160,000[CHS][PV]
[PMT]
[RCL][n]
36[][n]
120,000[CHS][PV]

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10. [i]
11. 12[X]
Answer: 11.15%




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