Using the HP10B II
In these notes, ■ refers to the yellow 2nd function key on your calculator.
Introduction
Turning your calculator on or off: To turn it on, press
To clear all previously stored values: Press
■
ON
then
. To turn it off, press
■ then press ON .
OFF
C
C ALL
The time value of money keys are the row of keys on top.
•
N represents the number of periods (the variable “t”).
•
I/YR represents the nominal interest rate per period (the variable “r”).
•
PV represents the present value of the cash flow(s).
•
PMT represents the periodic payment made in an annuity.
•
FV represents the future value of the cash flow(s).
Before you start, there is one setting that you need to change. For our simple examples, we want to assume that interest is
paid once per year. BUT, the HP10BII is figured to compound interest monthly, that is, it thinks that interest is paid 12 times
per year. To see the current setting:
Press
RCL
then
■
then
To change this setting, key in 1
PMT
P/YR
then
You will see a display, 12.00 (for 12 monthly payments)
■
then PMT
P/YR
Now your calculator will accrue interest once per period (once per year, once per month, once per quarter, etc.), and
you should ALWAYS have your calculator on this setting. The good news is that, even when you clear stored TVM
values using the clear all function, this setting does not change. In fact, your calculator display will say “1 P_Yr” when
you clear past values, as a reminder.
Finding the future value of a lump sum:
You deposit $10,000 in a 2-year CD that pays interest annually at 8.75%. What will its value be at the end of 2
years?
Get in the habit!! Before you start a new question, press ■ then C and verify that there is 1P_Yr for interest
C ALL
Key in –10000 and press PV
Key in 8.75 and press I/YR
Key in 2 and press N
Now, to find the future value, press FV .
Answer: $11826.56
Finding the present value of a lump sum:
At the end of five years you would like to have $3,000 in your stock portfolio. If you expect an annual return of 15%,
how much should you have in your portfolio today?
5=N
3000 = FV
To find the present value, press PV .
15 = I/YR
Answer: -$1491.53
Finding the interest rate:
You borrow $1000 for four years. At the end of this time you repay the lender $1519. What is the annual rate of
interest on this loan?
1000 = PV
4=N
To find the interest rate, press I/YR
-1519 = FV
Answer: 11%
Finding the future value of an ordinary annuity:
You deposit $100 at the end of every quarter in a mutual fund that earns 16% annual interest, compounded quarterly.
How much do you have after 10 years?
PMT = -100
N = 40
To find the future value press FV
I/YR = 4
Answer: $9502.55
To change beginning and end-of-period payments (for annuities due and ordinary annuities):
Press
■
then
MAR
BEG/END
Your calculator will display “BEGIN” in the window to show that it is ready to handle an annuity due, otherwise it will
calculate an ordinary annuity.
To display a certain number of decimal places:
Press
■
then
=
then the number of decimals you want showing (e.g. 4).
DISP
3
To calculate exponents: e.g., to calculate (1.12) , press 1.12 then ■
then
x
yx
then 3 (ans= 1.4049)
To calculate a natural log: e.g. to calculate the natural logarithm of 203.45, key in 203.45
■
2 (ans = 5.3154)
LN
To calculate an exponential: e.g., to find e4, press 4 then
■ then
1
ex
(ans= 54.5982)
To use the memory keys to contain calculated values: To store a displayed value to a memory (0 through 9), press ■ RCL
STO
and a digit key 0 through 9. Any previous value in that memory is replaced by the new value. When you turn the calculator
off, the Constant Memory feature retains all stored values.
To recall a number stored in a memory to the display, press RCL and a digit key 0 through 9. The number is displayed, but
also remains in memory.
Example: calculate the amount of time it would take for $785.10 to grow to $1000.00 if the interest rate is 12.86%. Use the
formula to find t.
 FV 
 1000 
ln t  ln

PV 
785.10 


=
t=
ln (1 + r )
ln (1.1286)
You can solve this answer by keying in 1000 ÷ 785.10 = then find the natural log of this result by pressing ■ LN . The
resulting number can be stored by pressing ■ STO 1 . Now you can find 1.1286 ■ LN and store this result by pressing
■ STO 2 . To find the answer, press RCL 1 ÷ RCL 2 = . Your final answer is 1.999904, or rounded, it’s 2 years.
Loan amortization schedule: prepare a schedule for a four-year, $15,000 car loan. Payments will be made monthly at 6%
annual interest.
First, find the monthly payment:
PV = 15000
N = 48
To find the payment, press PMT.
I/YR = 0.5
Answer: -$352.28
Now (for example), for payment number 1, find the interest, principal, and remaining balance.
Press 1 Input ■
FV
= -277.28
(principal)
AMORT
= -75.00
(interest)
= 14722.72
(balance)
For payment number 12, find the interest, principal, and remaining balance.
Press 1 2 Input ■
FV
= -292.91
(principal)
AMORT
= -59.36
(interest)
= 11579.65 (balance)
Uneven Cash Flows – Finding Net Present Value and Internal Rate of Return
Press ■ then
C
C ALL
Key in the number for CF0 and then CFj
Key in the number for CF1and then CFj
If the frequency is greater than 1, key in the frequency, then ■ , then CFj
Repeat until all cash flows are entered.
Key in the number for the interest rate then I/YR
To find NPV: ■ PRC
To find IRR: ■
NPV
CST
IRR/YR