How to Answer Amortization Problems With an HP 10bII+ Calculator

Updated on March 1, 2018
Joshua Crowder profile image

Joshua has work experience in manufacturing, distribution, and aerospace. He received his BBA in accounting from Kent State University.

Introduction

Solving an amortization problem can be easy if you have all of the necessary data. To solve this type of problem by hand you normally have to organize your data into a table. This can become very time consuming for a problem that is amortized over the course of 10 years! As long as you have enough information to calculate the payment, you will be able to reference all relevant data with the HP 10bII+ calculator. In order to get similar answers when you follow along, make sure that your calculator is set up for annual interest per year.

Buttons Used

Sample Problem

Let’s say you borrow $100,000 and make annual payments for 3 years. If the interest rate is 7%, how much interest do you pay in year 2?

The first thing we want to do is clear the calculator. Press the orange shift key and the button labeled "C ALL" in orange text ("C" in white text ) consecutively. The calculator should display "1 P_Yr".

Enter Your Data

Follow each step:

1. Type 3, then press the "N" button (There are three payment periods)

2. Type 7, then press the "I/YR" button (Do not input the symbol %)

3. Type 100,000, then press the "PV" button (This is positive because you received cash)

4. Type 0, then press the "FV" button (If you cleared your calculator when you started you can skip this step)

After pressing the N, I/YR, PV, and FV buttons, the inputted data will be saved in the calculator.

Display the Data

To display the fixed payment press the "PMT" button. Your calculator should display a cash outflow of -38,105.17. This is the annual payment that you would have to pay to borrow this money. Now that we know the fixed payment, let's look at the other details. Press the orange shift button, then press the "AMORT" button. The calculator will display 1-1 letting you know it is displaying data for the first period. To cycle through all of your period 1 data, press the equal button. See the results for period 1 below:

Principle -31,105.17

Interest -7,000.00

Balance 68,894.83

Now that you have reviewed period 1 data let's see what period 2 data holds. Press the orange shift button and press the "AMORT" button. The calculator will display 2-2 to let you know that you are in period 2. Now use the equal button to review the data. See the results for period 2 below:

Principle -33.282.53

Interest -4,822.64

Balance 35,612.31

To answer the problem above, interest paid in year 2 would be $4,822.64. Remember that your answer should remain a positive number even though your calculator displays the number as a negative cash flow.

Below is an amortization table/schedule created in MS Excel. This table took me about 8 minutes to create in excel. With the calculator I was able to complete the table in about 2 minutes.

Table Example

Monthly Payment Example

Annual payments were made in our example above. Let's try the same problem, but change annual payments to monthly payments. In this situations you must find the number of periods and the periodic rate. This can be done by completing the calculation right before entering data to the "N" or "I/YR" buttons.

If the original example problem above stated that monthly payments would be made, then we would have to multiply 3 times 12 to give us 36 total payments. So immediately after we make this calculation we can press the "N" button. Now that we are making 36 payments over the course of 3 years our payment should be significantly smaller. Next, we have to figure out the periodic interest rate. This can be found by dividing the interest by the number of periods per year. When entering interest, type 7 / 12 = and then press the "I/YR" button. See below for data entry instructions.

1. Type 3 x 12 =, then press the "N" button

2. Type 7 / 12 =, then press the "I/YR" button

3. Type 100,000, then press the "PV" button

4. Type 0, then press the "FV" button

When you press the "PMT" button to retrieve the value of the payment the result should be -3,087.71 and your interest payment in period 2 would be $568.72.

Quarterly Payment Example

If the original problem above stated that quarterly payments would be made, then we would have to multiply 3 times 4 to give us 12 total payments. The periodic interest rate can be found by dividing the interest by the number of periods per year. When entering interest, type 7 / 4 = and then press the "I/YR" button. See below for data entry instructions.

1. Type 3 x 4 =, then press the "N" button

2. Type 7 / 4 =, then press the "I/YR" button

3. Type 100,000, then press the "PV" button

4. Type 0, then press the "FV" button

When you press the "PMT" button to retrieve the value of the payment the result should be -9,311.38 and your interest payment in period 2 would be $1,617.68.

Questions & Answers

    © 2018 Joshua Crowder

    Comments

      0 of 8192 characters used
      Post Comment

      No comments yet.

      working

      This website uses cookies

      As a user in the EEA, your approval is needed on a few things. To provide a better website experience, toughnickel.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

      For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://toughnickel.com/privacy-policy#gdpr

      Show Details
      Necessary
      HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
      LoginThis is necessary to sign in to the HubPages Service.
      Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
      AkismetThis is used to detect comment spam. (Privacy Policy)
      HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
      HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
      Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
      CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
      Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
      Features
      Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
      Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
      Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
      Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
      Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
      VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
      PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
      Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
      MavenThis supports the Maven widget and search functionality. (Privacy Policy)
      Marketing
      Google AdSenseThis is an ad network. (Privacy Policy)
      Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
      Index ExchangeThis is an ad network. (Privacy Policy)
      SovrnThis is an ad network. (Privacy Policy)
      Facebook AdsThis is an ad network. (Privacy Policy)
      Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
      AppNexusThis is an ad network. (Privacy Policy)
      OpenxThis is an ad network. (Privacy Policy)
      Rubicon ProjectThis is an ad network. (Privacy Policy)
      TripleLiftThis is an ad network. (Privacy Policy)
      Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
      Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
      Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
      Statistics
      Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
      ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
      Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)