Financial Functions on the HP 12C

The HP 12C is a legendary financial calculator, renowned for its ease of use and powerful financial functions. Mastering these functions allows for quick and accurate calculations in areas such as loan analysis, investment appraisal, and time value of money.

Key Financial Functions

Here are some of the most frequently used financial functions on the HP 12C:

• n (Number of Periods): Represents the total number of payment periods in a loan or investment. Input the number of periods and press 'n'.
• i (Interest Rate): Represents the interest rate per period. Crucially, this is NOT the annual interest rate unless you're dealing with annual payments. If you have an annual interest rate and monthly payments, you must divide the annual rate by 12 before entering it. Enter the rate as a percentage (e.g., 5 for 5%) and press 'i'.
• PV (Present Value): Represents the current value of a future sum of money or stream of payments. It's the amount you're investing today, or the principal of a loan. Input the present value and press 'PV'. Treat inflows as positive and outflows as negative.
• PMT (Payment): Represents the periodic payment amount. It's the amount you pay or receive each period (e.g., monthly mortgage payment). Input the payment amount and press 'PMT'. Payments are usually treated as outflows (negative).
• FV (Future Value): Represents the value of an investment at a specified future date. It's the amount you'll receive at the end of the investment period. Input the future value and press 'FV'.

Time Value of Money (TVM)

The core of the HP 12C's power lies in its ability to solve time value of money problems. The TVM functions allow you to calculate any of the five variables (n, i, PV, PMT, FV) if you know the other four. For example, you can calculate the monthly payment (PMT) on a loan if you know the loan amount (PV), the interest rate (i), and the loan term (n).

Using the TVM Functions

1. Clear the Registers: Before starting a new calculation, it's good practice to clear the financial registers by pressing [f] then [CLx].
2. Enter the Known Values: Input the values for the known variables (n, i, PV, FV) using the corresponding keys. Remember to treat inflows as positive and outflows as negative.
3. Calculate the Unknown Value: Press the key corresponding to the variable you want to calculate (e.g., 'PMT' to calculate the payment). The calculator will display the result.

Example: Calculating a Mortgage Payment

Suppose you want to take out a mortgage of $200,000 at an annual interest rate of 4% for 30 years. To calculate the monthly payment:

1. Clear the Registers: [f] [CLx]
2. n: 30 [x] 12 [=] [n] (30 years * 12 months/year = 360 months)
3. i: 4 [÷] 12 [=] [i] (4% annual rate / 12 months/year = 0.3333% monthly rate)
4. PV: 200000 [PV]
5. FV: 0 [FV] (Assuming the loan is fully paid off at the end)
6. PMT: [PMT] (The calculator will display the monthly payment, which will be negative because it's an outflow.)

Other Important Functions

Besides the TVM functions, the HP 12C also offers functions for calculating:

• IRR (Internal Rate of Return): Calculates the discount rate at which the net present value of all cash flows from a project equals zero.
• NPV (Net Present Value): Calculates the present value of a series of cash flows, discounted at a specified rate.
• Bond Calculations: Calculates the price and yield of bonds.

By understanding and utilizing these financial functions, you can leverage the power of the HP 12C to make informed financial decisions.