User`s guide

Additional Examples
141
Yield of a Discounted (or Premium) Mortgage
The annual yield of a mortgage bought at a discount or premium can be calculated given the
original mortgage amount (PV), interest rate (I/YR), periodic payment (PMT), balloon payment
amount (FV), and the price paid for the mortgage (new PV).
Remember the cash flow sign convention: money paid out is negative; money received is
positive.
Example
An investor wishes to purchase a 100,000 mortgage taken out at 9% for 20 years. Since the
mortgage was issued, 42 monthly payments have been made. The loan is to be paid in full
(a balloon payment) at the end of its fifth year. What is the yield to the purchaser if the price
of the mortgage is 79,000?
Step 1
Calculate PMT. Make sure FV = 0.
Set to End Mode. Press \¯ if BEGIN annunciator is displayed.
Step 2
Enter the new value for N indicating when the balloon occurs, then find FV, the amount of the
balloon.
É
Table 13-8 Calculating the monthly payment
Keys Display Description
JG\Í
12.00 Sets payments per year.
dÒ
9.00 Stores interest rate.
G:\Ú
240.00 Stores number of months.
J:::::y
Ï
-100,000.00 Stores original amount of
mortgage.
:É
0.00 Enters amount left to pay after
20 years.
Ì
899.73 Calculates the regular payment.
Table 13-9 Calculating the balloon payment
Keys Display Description
\}Ì
899.73 Rounds payment to two decimal
places for accuracy.