Sharp EL733A EL-733A Operation Manual - Page 33

Sharp EL733A Manual

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Example: As a real estate sales person, you try to keep up on the FHA rates from week to week. Today you were told that the FHA terms were as follows: 10.5% with 1/4 point up front, 10.0% with 1/2% up front, 9.5% with 2.5% up front, and 9.0% with 4.25 points up front. These rates apply to fixed rate, thirty-year loans. Payments and compounding are monthly. Payments are in arrears. (1) By how much do those "points up front" increase each of the quoted rates? (2) What do the points up front amount to on a $90'000 loan, and what are the payments on a $90'000 loan in each case? Solution: The first of the above two questions is answered most easily by looking at a $100.00 loan. The amount of the loan does not matter because the result that you are after is an interest rate. Ask yourself the question, what would be the payment on a 30 year, $100.00 mortgage at 10.5% APR. The cash-flow schedule follows: 1PV = 100.00 = 10.5+ 12 1 2 131415 ~6 1 PMT=? n = 30 x 12 355 356 357 258 359 360 FV 0 This is just a payment calculation. Because the payment occurs at the end of the period, make sure that the BGN indicator is not on in the EL-733A display. Also, check to make sure the FIN indicator is on in the display telling you that you are in FIN mode: (Mode: FIN) 100 E 10.5 2nd (E) 30 2ndF IX14 0 ID [INT1 Result: -0.91 It would take payments of 910 a month to pay off a $100.00, 10.5% loan in 30 years. But that is not the question. The 1/4 point up front requirement actually reduces the net amount of money borrowed by 250, right? But the payments don't change, which means the actual APR is a little higher. Here are the keystrokes: 2ndF PICO Dl E .25 Wi PV Result: 0.88 The computation of M takes a few moments. Interest is not something that can be solved for directly, so the calculator has to use a numerical guessing game to arrive at an answer. The result here, 0.88 is a periodic rate. Multiply by12 to get an APR: M 12 j=1 Result: 10.53

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Example:
As
a
real
estate
sales
person,
you
try
to
keep
up
on
the
FHA
rates
from
week
to
week.
Today
you
were
told
that
the
FHA
terms
were
as
follows:
10.5%
with
1/4
point
up
front,
10.0%
with
1/2%
up
front,
9.5%
with
2.5%
up
front,
and
9.0%
with
4.25
points
up
front.
These
rates
apply
to
fi
xed
rate,
thirty-year
loans.
Payments
and
compounding
are
monthly.
Payments
are
in
arrears.
(1)
By
how
much
do
those
"points
up
front"
increase
each
of
the
quoted
rates?
(2)
What
do
the
points
up
front
amount
to
on
a
$90'000
loan,
and
what
are
the
payments
on
a
$90'000
loan
in
each
case?
Solution:
The
fi
rst
of
the
above
two
questions
is
answered
most
easily
by
looking
at
a
$100.00
loan.
The
amount
of
the
loan
does
not
matter
because
the
result
that
you
are
after
is
an
interest
rate.
Ask
yourself
the
question,
what
would
be
the
payment
on
a
30
year,
$100.00
mortgage
at
10.5%
APR.
The
cash
-flow
schedule
follows:
1
PV
=
100.00
1
1
2
131415
~6
=
10.5+
12
n
=
30
x
12
355
356
357
258
359
360
PMT=?
FV
0
This
is
just
a
payment
calculation.
Because
the
payment
occurs
at
the
end
of
the
period,
make
sure
that
the
BGN
indicator
is
not
on
in
the
EL
-733A
display.
Also,
check
to
make
sure
the
FIN
indicator
is
on
in
the
display
telling
you
that
you
are
in
FIN
mode:
(Mode:
FIN)
100
E
10.5
2nd
(E)
30
2ndF
IX14
0
ID
[INT1
Result:
—0.91
It
would
take
payments
of
910
a
month
to
pay
off
a
$100.00,
10.5%
loan
in
30
years.
But
that
is
not
the
question.
The
1/4
point
up
front
requirement
actually
reduces
the
net
amount
of
money
borrowed
by
250,
right?
But
the
payments
don't
change,
which
means
the
actual
APR
is
a
little
higher.
Here
are
the
keystrokes:
2ndF
PICO
E
.25
Wi
PV
Dl
Result:
0.88
The
computation
of
M
takes
a
few
moments.
Interest
is
not
something
that
can
be
solved
for
directly,
so
the
calculator
has
to
use
a
numerical
guessing
game
to
arrive
at
an
answer.
The
result
here,
0.88
is
a
periodic
rate.
Multiply
by
12
to
get
an
APR:
M
12
j=1
Result:
10.53