HP 12C Loan Amortizations

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HP 12C Loan Amortizations
hp calculators - 2 - HP 12C Loan Amortizations - Version 1.0
Amortization
The word 'amortization' comes from a Latin word meaning "about to die". When a loan earning interest has regular, fixed
payments, it is said that the loan is being paid off or amortized. Although the debt is reduced by the same periodic
payments, different parts of each payment are applied against the principal and against the interest. The interest is
deduced from each payment and the remaining amount is used to reduce the debt. Figure 1 illustrates this process.
Figure 1
The HP12C amortization approach
In the HP12C, amortization uses the contents of the following Time Value of Money (TVM) registers:
n - used as a reference and contains the number of payments amortized
¼ - periodic interest rate
P - periodic payment
\$ - remaining balance
The display must contain the number of payments to be amortized before executing f!. It is important to keep in
mind that on the HP12C, amortization is a sequenced calculation. This means that once a number of payments is
amortized, all subsequent balances refer to the next amortized payments. If it is necessary to go back and review
previous balance, some values must be restored to their default values. This is because every time f! is pressed,
the following registers have their contents updated:
\$ - contents updated to remaining balance
n - contents updated to current number of payments amortized
The following examples illustrate the HP12C amortization approach.
Practice amortizing loans
Example 1: Calculate the first year of the annual amortization schedule for a 30-year, \$180,000 mortgage at 7.75%,
compounded monthly.
1 2 3 . . . . . . . . . . . . . . . . . . . n
Number of
p
a
y
ments
Periodic Payment
(fixed value)
Part of each
payment related
to interest
Part of each
payment related
to the principal
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HP 12C Loan Amortizations PDF

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