Sharp EL733A EL-733A Operation Manual - Page 51

Itttt, 2ndFJ

Get Sharp EL733A PDF manuals and user guides View all Sharp EL733A manuals
Add to My Manuals
Save this manual to your list of manuals

Page 51 highlights

Solution: The above paragraph contains a lot of wasted words. But so do most real life situations (and test problems often have redundant information thrown in to lead you off track). You are looking for an investment. The above investment offers you a monthly income of $1'064.87 for the next 23 years. That is all you need to know in order to do the calculation! The information about the house and the original terms of the contract is unnecessary (other than for you to use in weighing the security of the investment). You have to pay some money up front in order to gain the right to receive that monthly income of $1064.87. You want that amount to be such that your investment yields 14% APR. The cash-flow schedule looks like this: PMT = 1'064.87 FV = 0 Itttt 1PV =? 127:271112721273127412717 i =14 -.L 12 n =23 X 12 The keystrokes are as follows: (Mode: FIN) 14 (2ndFJ Ej ®1200364rLa.8Ti7) 9,91 Result: -87'559.08 In order to yield 14% APR compounded monthly by purchasing the contract, buy it for $87'559.08. Question: If the asking price is $95'000, what will be your yield? Answer: Change the PV and recalculate the periodic interest rate. Once you have the periodic interest rate, annualize it by multiplying by 12. 95'000 +/-I ET) CumP) M (pause) Ej 12 Result: 12.72 Is that close enough to your desired return? If not, make them an offer. So all those words boil down to a simple PV calculation. By storing your desired yield of 14% as the interest rate, the calculated PV is the amount you need to pay in order to yield 14% on the investment.

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
Solution:
The
above
paragraph
contains
a
lot
of
wasted
words.
But
so
do
most
real
life
situations
(and
test
problems
often
have
redundant
information
thrown
in
to
lead
you
off
track).
You
are
looking
for
an
investment.
The
above
investment
offers
you
a
monthly
income
of
$1'064.87
for
the
next
23
years.
That
is
all
you
need
to
know
in
order
to
do
the
calculation!
The
information
about
the
house
and
the
original
terms
of
the
contract
is
unnecessary
(other
than
for
you
to
use
in
weighing
the
security
of
the
investment).
You
have
to
pay
some
money
up
front
in
order
to
gain
the
right
to
receive
that
monthly
income
of
$1064.87.
You
want
that
amount
to
be
such
that
your
investment
yields
14%
APR.
The
cash
-flow
schedule
looks
like
this:
PMT
=
1'064.87
FV
=
0
Itttt
127:2711
1
2721273127412717
1
i
=14
-.L
12
PV
=?
n
=23
X
12
So
all
those
words
boil
down
to
a
simple
PV
calculation.
By
storing
your
desired
yield
of
14%
as
the
interest
rate,
the
calculated
PV
is
the
amount
you
need
to
pay
in
order
to
yield
14%
on
the
investment.
The
keystrokes
are
as
follows:
(Mode:
FIN)
14
(2ndFJ
Ej
1064.87
9,91
23
rai
0
®
LT)
Result:
—87'559.08
In
order
to
yield
14%
APR
compounded
monthly
by
purchasing
the
contract,
buy
it
for
$87'559.08.
Question:
If
the
asking
price
is
$95'000,
what
will
be
your
yield?
Answer:
Change
the
PV
and
recalculate
the
periodic
interest
rate.
Once
you
have
the
periodic
interest
rate,
annualize
it
by
multiplying
by
12.
95'000
+/-I
ET)
CumP)
M
(pause)
Ej
12
Result:
12.72
Is
that
close
enough
to
your
desired
return?
If
not,
make
them
an
offer.