Sharp EL733A EL-733A Operation Manual - Page 45

PV = 500'000 i = already stored n = 8 x 4 = 32 1 II: Ilr3. 14 15 1 8 BGN mode PMT=? 128129 30 ,13, 1 ,1,32 FV = -1001000 As usual, once you have the correct picture drawn, the keystroke solution is easy: (Mode: FIN) 32 IT) 100'000 (+A Fj 500'000 Ej Result: -19'951.34 If you got the result -20'428.94, you are not in BGN mode. Press IRON] and recompute PMT. Question: The leasing company requests the last two payments in advance, You agree to make those two payments in advance, but only if the overall interest rate does not exceed 10.5% APR compounded quarterly. (1) Would they have to reduce the price? (2) What would the overall interest rate be if you make the two advance payments and they do not lower the price? Answer: The first part of the above question can still be answered using the TVM functions, but the cash-flow schedule changes enough that it no longer fits directly into the TVM registers: A PV = 500'000 1 IV I3 I4 i =10.5 12 n = 32 re 11,2611428 1V9, tr30 31 32 PMT = -19'951.34 (three payments at the ♦ front of the lease) FV = -100'000 The lease payment no longer runs all the way to the end of the time line, so you have to do a little before hand modifications before you can do a straight PV calculation. Since the interest rate is specified, you can slide that -100'000 value to the left on the cash-flow line so that the problem conforms to a TVM problem. Turn to page 100 if you wish to see how the first part of this question is solved using the TVM functions. The second part of this question, where the interest rate is unknown, cannot be solved with the TVM functions. However, the second part of this question can be easily analyzed using the Discounted Cash-Flow Functions ( , Ni , OVA , and ling ). Page 115 shows how it is solved using the Discounted Cash-Flow Functions.