Sharp EL733A EL-733A Operation Manual - Page 50

Quoting

Total

Interest

Paid

On

A

Contract

The

IACCI

function

allows

you

to

quote

the

total

interest

paid

on

a

TVM

problem

with

the

push

of

a

button.

Work

the

above

example

on

creating

an

amortization

schedule

to

get

an

idea

of

how

the

function

works.

Then,

to

calculate

the

total

interest

paid

on

the

loan

in

the

above

example,

just

press:

1

I21

180

IR

IACCI

This

calculation

will

take

a

long

time

(around

30

seconds),

but

when

it

is

finished,

the

display

will

show

—69'000.00

with

the

ZPRN

indicator

on

in

the

display

to

tell

you

that

the

entire

principal

of

the

loan

has

been

paid

off.

Press

ACC

again

to

see

the

total

interest

paid

during

this

loan.

The

LINT

indicator

comes

on

and

the

display

shows

—61'819.22.

From

the

fi

rst

payment

to

the

last

payment

of

this

loan,

a

total

of

$61'819.22

in

interest

is

paid.

In

summary,

quoting

the

total

interest

paid

on

a

loan

or

contract

is

a

matter

of

computing

the

accumulated

interest

over

the

entire

term

of

the

contract

using

the

IACCI

key.

Discounted

Loans

And

Mortgages

Occasionally,

in

order

to

become

more

li

quid,

a

lender

will

try

to

sell

a

contract

for

a

price

that

is

discounted

from

the

actual

balance

left

to

pay

on

the

contract.

The

resulting

yield

to

the

party

that

purchases

the

contract

is

higher

than

the

original

rate

that

the

contract

was

based

on.

The

word

"discounted"

is

used

here

to

mean

reducing

the

value

or

price

of

a

contract

in

order

to

sell

it.

The

word

"discounted"

is

applied

differently

in

"Discounted

Cash

-Flow

Analysis"

where

it

refers

to

a

process

of

solving

fi

nancial

problems

by

sliding

or

"discounting"

cash

-flows

on

a

cash

-flow

schedule.

If

you

are

ever

considering

buying

a

discounted

contract

and

you

wish

to

calculate

what

you

will

yield

or

the

price

you

should

pay

for

the

contract

to

yield

a

certain

rate,

don't

make

the

mistake

of

getting

cluttered

up

with

the

numerical

details

of

the

original

contract.

The

trick

to

making

accurate

calculations

on

a

discounted

contract

is

to

look

only

at

the

payment

schedule

that

you

are

buying

and

to

do

your

calculations

from

that.

If

the

payment

schedule

is

regular

and

even,

you

can

calculate

the

yield

or

the

amount

to

pay

for

the

contract

with

the

TVM

functions.

If

the

payment

schedule

is

uneven

or

irregular,

you

will

probably

need

to

use

the

Discounted

Cash

-Flow

Analysis

functions.

Look

at

this

example

of

a

discounted

mortgage

problem

that

can

be

solved

using

the

TVM

functions.

Example:

A

lender

wishes

to

sell

a

mortgage

that

started

about

seven

years

ago.

The

mortgage

was

originally

written

for

$115

1

000

at

10.65%

for

30

years.

A

2%

prepaid

finance

fee

was

paid

at

the

beginning

of

the

loan

and

the

house

for

which

the

mortgage

was

written

was

selling

for

$135'000

requiring

the

borrower

to

come

up

with

a

down

payment

of

$20'000.

The

house

is

now

valued

at

about

$200

1

000.

The

payments

on

the

mortgage

up

to

this

point

have

all

been

on

time,

and

the

remaining

payment

schedule

calls

for

23

years

of

monthly

$1

1

064.87

payments,

starting

at

the

end

of

the

current

month.

What

should

you

pay

for

this

mortgage

if

you

wish

to

cash

out

the

lender

and

yield

14%?

97

Sharp EL733A EL-733A Operation Manual - Page 50

Sharp EL733A Manual

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