Using Financial

and Business Calculators

Daniel J. Borgia
 Table of Contents

Texas Instruments (TI) BA-35 SOLAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Texas Instruments (TI) BA II PLUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Hewlett Packard (HP) 12C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Hewlett Packard (HP) 17BII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

Hewlett Packard (HP) 19BII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

 Using Financial
and Business Calculators

Most business and financial calculators offer a multitude of powerful functions. The purpose
of this guide is to provide students with an easy and quick reference for some of the most
commonly used financial functions. More detailed operational descriptions can be obtained
from the owner’s manuals that accompany the calculators.
This calculator guide discusses the basic functions of five business and financial cal-
culators: the Texas Instruments (TI) BA-35 SOLAR, the Texas Instruments (TI) BA II
PLUS, the Hewlett-Packard (HP) 12C, the Hewlett-Packard (HP) 17BII, and the Hewlett-
Packard (HP) 19BII. The sections for each calculator present step-by-step instructions for
using general and financial functions offered by each calculator. The calculations for each
type of financial operation have been explained using sample problems. The display on the
calculator’s screen at the completion of each step has also been included to allow you to con-
firm your calculations as you proceed.

V
 Texas Instruments
(TI) BA-35 Solar
The TI BA-35 SOLAR can operate in three different modes: statistical (STAT), financial
(FIN), and profit margin. No indicator is displayed for the profit margin mode. To set the
calculator to a particular mode, press repeatedly until the appropriate indicator is dis-
played. Changing to a new mode clears the contents of the mode registers. Arithmetic, math-
ematical, and percentage operations can be executed in any of the three modes.
The second function ( ) invokes the “second” functions that are marked above
some of the keys. To perform a second function, press and then the appropriate func-
tion key. If you accidentally press the key, simply press it again to cancel its effect.

A. Clearing the calculator display and memory, and setting the decimal points:

Keystrokes Display Description

1. 0 Switches the calculator on.
This will also clear the calcu-
lator completely, including the
display, all pending opera-
tions, and the memory and
mode operations. It also sets
the calculator to floating-deci-
mal mode and financial
mode.
2. 0 Clears incorrect entries, error
conditions, the display, or
pending operations. It does
not affect the memory, the
mode registers, or the display
format.
3. CMR 0 Clears any values that have
been stored in the mode reg-
isters. Changing to a new
mode also clears the con-
tents of the mode registers.
1
2 \ TI BA-35 SOLAR

4. F ix 0.00 Sets the number of decimals

to two.
5. F ix 0 Sets decimals back to float-
ing.

B. Calculating the present value of a lump sum amount:

Example: Liz anticipates it will cost her $65,000 to buy a house in 18 months. How much
should she invest today at an annual interest rate of 15% (interest is compounded monthly)
to be able to afford the house in one and a half years?

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2. 65,000 Records the future cash flow
of $65,000.
3. 18 Calculates the number of
time periods as 18.
4. 1.25 Records the periodic interest
rate of 1.25% per month for
18 months.
5. 51,975.99 Calculates the present value
of $65,000 in 1.5 years dis-
counted at a monthly rate of
1.25%.

C. Calculating the future value of a lump sum amount:

Example: If John invests $1,850 today in an asset earning a 10% rate of return (compound-
ed annually), how much will he have after two years?
 TI BA-35 SOLAR \3

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2. 1,850 Records the present cash out-
flow of $1,850.
3. 10 Stores annual rate of interest
as 10%.
4. 2 Records number of time peri-
ods as 2.
5. 2,238.50 Calculates the future value of
$1,850 after 2 years at 10%.

D. Calculating the present value of an annuity:

Example: How much should you invest now so that starting one year from today your
daughter can receive $6,000 per year for the next five years? Assume the discount rate is
15%.

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2. 6,000 Records the amount of the
periodic payments or annuity.
3. 15 Records annual rate of inter-
est as 15%.
4. 5 Records number of time peri-
ods as 5.
5. PV = 20,112.93 Calculates the PV of the
annuity.
4 \ TI BA-35 SOLAR

E. Calculating the present value of an annuity due:

Example: In this case, instead of receiving payments at the end of each year, your
daughter will receive the payments at the beginning of each year. Therefore, her first
payment will be received immediately.
There are two methods to calculate the present value of an annuity due:

1. You can calculate the present value of an annuity, as shown in Section D, and multiply it
by (1 + k). In that case the additional step would be:

Keystrokes Display Description

Follow steps 1–5 from Section D.
6. 23,129.87 Calculates the PV of
the annuity due.

2. The TI BA-35 SOLAR allows you to set the timing of the payment. You have to set the
payment mode at “BEGIN” and start from the first step. This method is shown below:

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-
Money worksheet.
2. BGN Begin Sets the payment
mode to beginning of
the period.
3. 6,000 Records the amount of
the periodic payments.
4. 15 Records annual rate of
interest as 15%.
5. 5 Records number of
time periods as 5.
6. 23,129.87 Calculates the PV of
the annuity due.
 TI BA-35 SOLAR \5

7. 0 Clears Time-Value-of-Money
worksheet and sets payments
to the default “end of the
period” position.

F. Calculating the future value of an annuity:

Example: You have recently won a lottery for $10,000. Your winnings will come in five
annual payments of $2,000 each starting one year from now. If the annual compound rate is
11.4%, how much is the lottery worth at the end of five years?

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2. 2,000 Records the amount of peri-
odic payments.
3. 11.4 Records the annual com-
pound rate as 11.4%.
4. 5 Records the number of time
periods as 5.
5. -12,555.07 Calculates FV of the annuity.

G. Calculating the future value of an annuity due:

Example: In this case, your winnings will be paid at the beginning, instead of at the end, of
each year for five years. So you are going to get the first payment of your $10,000 lottery, i.e.
$2,000, immediately. There are two methods to calculate the future value of an annuity due:

1. You can calculate the future value of an annuity, as shown in Section F, and multiply it by (1 +
k). In that case the additional step would be:
6 \ TI BA-35 SOLAR

Keystrokes Display Description

Follow steps 1–5 from Section F. (i)
6. -13,986.35 Calculates the FV of the annu-
ity due.

2. The TI BA-35 SOLAR allows you to set the timing of the payment. You have to set the payment
mode at “BEGIN” and start from the first step. This method is shown below.

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2. BGN Begin Sets the payment mode to
the beginning of the period.
3. 2,000 Records the amount of the
periodic payments.
4. 11.4 Records annual rate of inter-
est as 11.4%.
5. 5 Records number of time peri-
ods as 5.
6. -13,986.35 Calculates the FV of the annu-
ity due.
7. 0 Clears Time-Value-of-Money
worksheet and sets payments
to the default “end of the
period” position.

H. Calculating the net present value of an annuity:

Example: Jane thinks if she invests $80,000 by buying property today, she can get $15,000
in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a
rate of return of 12% (with quarterly discounting) on her investment, what is the net pres-
ent value of this project?
 TI BA-35 SOLAR \7

1. The annual rate of return will be divided by four, i.e., the quarterly rate of
return will be 3%.
2. The number of time periods will be multiplied by four, i.e., 80.
3. The amount of annual rent will be divided by four, i.e., $3,750.

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-
Money worksheet.
2.

3,750 Records the amount of

the quarterly periodic
payments.
3. 3 Records quarterly rate
of interest as 3%.
4. 80 Records number of
quarterly time periods
as 80.
5. 113,252.86 Calculates the PV of
the annuity.
6. = 33,252.86 Computes the Net
Present Value.

I. Calculating the internal rate of return of an annuity:

Example: ABC Inc. is planning to spend $35,000 to buy a warehouse. Under the con-
tract they will receive an annual after-tax cash flow of $6,000 (paid semiannually) from
the property for the next eight years. What is the internal rate of return for the invest-
ment?
8 \ TI BA-35 SOLAR

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2.

3,000 Records the amount of the

semiannual periodic pay-
ments.
3. 35,000 Records the cost of the ware-
house.
4. 16 Records number of quarterly
time periods as 80.
5. 3.98 Calculates semiannual IRR.

6. 7.97 Computes the IRR.

J. Bond valuation with interest compounded annually:

Example: How much would you be willing to pay for a bond today if it pays $100 in inter-
est annually for 20 years (starting next year) and has a principal payment of $1,000? The yield
to maturity is 15%.
This question can be interpreted as that of finding the NPV of an uneven cash flow
series with the initial cash outflow equal to zero. Hence, we will follow the steps used for cal-
culating NPV to compute the current price of the bond.

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2. 100 Records the amount of the
periodic annual coupon pay-
ments.
 TI BA-35 SOLAR \9

3. 15 Records annual yield-to-matu-

rity as 15%.
4. 20 Records number of time peri-
ods as 20.
5. 1000 Records the future face or par
value of the bond.
6. 687.03 Calculates the bond’s current
market price.

K. Bond valuation with interest compounded semiannually:

Because most bonds pay interest semiannually, we will show the conversion required to cal-
culate the current value of such bonds.
Example: If the bond described in Section J pays interest semiannually, the calcula-
tions will be:

It = $50, Pn = $1000, i = 7.5%, n = 40.

Keystrokes Display Description

Clear all memory.
1. 0 Clears Time-Value-of-Money
worksheet.
2. 50 Records the amount of the
periodic semiannual coupon
payments.
3. 7.5 Records semiannual yield-to-
maturity as 7.5%.
4. 40 Records number of time peri-
ods as 40.
5. 1000 Records the future face or par
value of the bond.
6. 685.13 Calculates the bond’s current
market price.
 Texas Instruments
(TI) BA II PLUS
The TI BAII PLUS can perform two basic sets of financial functions. The first set of func-
tions is invoked simply by pressing the relevant keys. The second set is invoked first by press-
ing the gray or yellow colored 2nd function key (depending on which calculator you are
using), which is located at the far left on the second row from the top, and then selecting the
appropriate gray colored function written above the calculator keys.
This 2nd key will be represented by in this chapter.
The BA II PLUS has a continuous memory. Turning off the calculator does not affect
the contents stored in the memory, though the display is reset to zero. Therefore, it is
extremely important to clear the calculator memory after each calculation. The BAII PLUS
automatically turns itself off when not used for more than approximately ten minutes.

A. Clearing the calculator display and memory, and setting the decimal points:

Keystrokes Display Description

1. 0.00 Switch the calculator on.
2. QUIT 0.00 Resets the calculator to the
standard mode, and clears
the screen.
3. MEM CLRW
CLRWor k MO=0.00 Clears all the memory loca-
tions simultaneously.

4. F or mat DEC=9 Allows the number of decimal

places on the calculator to
“float.”
5. QUIT 0.00 Brings the calculator to the
standard mode.

To clear each memory location individually, use the following key sequence.

11
12 \ TI BA II PLUS

Keystrokes Display Description

1. MEM MO=0 Clears the memory location
1.
2. M9=0 Clears the next memory loca-
tion.

A worksheet for this calculator is a framework of formulae, such as the Time-Value-of-

Money worksheet. The term “worksheet” has been used extensively in the owner’s manual
and, hence, is being used in this book.
Note: 1. We will be using two decimal places for all the calculations in this appendix. To reset the TI BA II PLUS to
two decimal places, press F or mat .
2. Even though it displays two decimal digits, the TI BAII PLUS uses 13 digits in all calculations.
3. To erase a part of the entered display, use the CE/C key.
4. The CE/C key can be used to clear any error displays.

B. Using the memory capability:

Example: Before leaving on a sales call one morning, Alfred stored the price of a fax machine
($1,200) and a printer ($1,000) in his calculator. Later that day, he sold three fax machines
and four printers to a customer. He used his calculator to get the total amount due from this
customer in the following way:

Keystrokes Display Description

Clear all memory.
1. 1,200.00 Stores the price of the fax
machine in memory location
1.
2. 1,000.00 Stores the price of the printer
in memory location 2.
3. Turns the calculator off.
Later that day:
4. 0.00 After the sale, Alfred turns the
calculator on.
 TI BA II PLUS \ 13

5. 1,200.00 Recalls the cost of the fax to

the display.
6. 3,600.00 Multiplies 1,200 by 3 to cal-
culate the cost of the three
fax machines.
7. 3,600.00 Stores the number in the
memory location 3.

8. 1,000.00 Recalls the cost of the print-

er.

9. 4,000.00 Calculates cost of four print-

ers.

10. 7,600.00 Recalls the cost of the fax

machines to calculate the
total amount for the sale.

C. Calculating the present value of a lump sum amount:

Example: Liz anticipates it will cost her $65,000 to buy a house in 18 months. How much
should she invest today at an annual interest rate of 15% (interest is compounded monthly)
to be able to afford the house in one and a half years?

Keystrokes Display Description

Clear all memory.
1. CLRTVM 0.00 Clears Time-Value-of-Money
worksheet.
2. P/Y P/Y=12.00 Sets number of payments per
year to 12.
3. QUIT 0.00 Brings the calculator to the
standard mode.
4. FV=65,000.00 Records the future cash flow
of $65,000.
14 \ TI BA II PLUS

5. I/Y=15.00 Records the periodic rate of

interest as 15%.
6. xP/Y 18.00 Calculates the number of
time periods as 18.
7. N=18.00 Stores the number of time
periods.
8. PV=-51,975.99 Calculates the present value
of $65,000 in 1.5 years dis-
counted at a monthly rate of
1.25%.
Note: The display in step 8 has a negative sign because it represents a cash outflow (investment) today.

D. Calculating the future value of a lump sum amount:

Example: If John invests $1,850 today in an asset earning a 10% rate of return (compound-
ed annually), how much will he have after two years?

Keystrokes Display Description

Clear all memory.
1. CLRTVM 0.00 Clears Time-Value-of-Money
worksheet.
2. P/Y P/Y=1.00 Sets number of payments per
year to 1.
3. QUIT 0.00 Brings the calculator to the
standard mode.
4. PV=-1,850.00 Records the present cash out-
flow of $1,850.
5. I/Y=10.00 Stores annual rate of interest
as 10%.
6. N=2.00 Records number of time peri-
ods as 2.
7. FV=2,238.50 Calculates the future value of
$1,850 after two years at
10%.
 TI BA II PLUS \ 15

E. Calculating the present value of an annuity:

Example: How much should you invest now so that starting one year from today your
daughter can receive $6,000 per year for the next five years? Assume the discount rate is
15%.

Keystrokes Display Description

Clear all memory.
1. CLRTVM 0.00 Clears Time-Value-of-Money
worksheet.
2. P/Y P/Y=1.00 Sets number of payments per
year to 1.
3. QUIT 0.00 Brings the calculator to the
standard mode.
4. PMT=6,000.00 Records the amount of the
periodic payments.
5. I/Y=15.00 Records annual rate of inter-
est as 15%.
6. N=5.00 Records number of time peri-
ods as 5.
7. PV=-20,112.93 Calculates the PV of the
annuity.

F. Calculating the present value of an annuity due:

Example: In this case, instead of receiving payments at the end of each year, your daughter
will receive the payments at the beginning of each year. Therefore, her first payment will be
received immediately.
There are two methods to calculate the present value of an annuity due:

1. You can calculate the present value of an annuity, as shown in Section E, and multiply it by (1 +
k). In that case the additional step would be:
16 \ TI BA II PLUS

Keystrokes Display Description

Follow steps 1–7 from Section E.
8. -23,129.87 Calculates the PV of
the annuity due.

2. The TI BAII PLUS allows you to set the timing of the payment. You have to set the pay-
ment mode at “BEGIN” and start from the first step. This method is shown below:

Keystrokes Display Description

Clear all memory.
1. CLRTVM 0.00 Clears Time-Value-of-
Money worksheet.
2. P/Y P/Y=1.00 Sets number of pay-
ments per year to 1.
3. BGN END Shows the default set-
ting for the payment
mode.
4. SET BGN Sets the payment
mode to beginning of
the period.
5. QUIT 0.00 Brings the calculator to
the standard mode.
6. PMT=6,000.00 Records the amount of
the periodic payments.
7. I/Y=15.00 Records annual rate of
interest as 15%.
8. N=5.00 Records number of
time periods as 5.
9. PV=-23,129.87 Calculates the PV of
the annuity due.
10. BGN BGN Invokes the payment
mode.
11. SET END Sets the payment
mode to the end of the
period.
 TI BA II PLUS \ 17

12. QUIT 0.00 Brings the calculator to the

standard mode.

G. Calculating the future value of an annuity:

Example: You have recently won a lottery for $10,000. Your winnings will come in five
annual payments of $2,000 each starting one year from now. If the annual compound rate is
11.4%, how much is the lottery worth at the end of five years?

Keystrokes Display Description

Clear all memory.
1. CLRTVM 0.00 Clears Time-Value-of-Money
worksheet.
2. P/Y P/Y=1.00 Sets number of payments per
year to 1.
3. QUIT 0.00 Brings the calculator to the
standard mode.
4. PMT=2,000.00 Records the amount of peri-
odic payments.
5. I/Y=11.40 Records the annual com-
pound rate as 11.4%.
6. N=5.00 Records the number of time
periods as 5.
7. 12,555.07 Calculates FV of the annuity.

H. Calculating the future value of an annuity due:

Example: In this case, your winnings will be paid at the beginning instead of at the end of
each year for five years. So you are going to get the first payment of your $10,000 lottery, i.e.
$2,000, immediately. There are two methods to calculate the future value of an annuity due:

1. You can calculate the future value of an annuity, as shown in Section G, and multiply it by (1 +
k). In that case the additional step would be:
18 \ TI BA II PLUS

Keystrokes Display Description

Follow steps 1–7 from Section G.
8. 13,986.35 Calculates the FV of the annu-
ity due.

2. The TI BAII PLUS allows you to set the timing of the payment. You have to set the payment mode
at “BEGIN” and start from the first step. This method is shown below.

Keystrokes Display Description

Clear all memory.
1. CLRTVM 0.00 Clears Time-Value-of-Money
worksheet.
2. P/Y P/Y=1.00 Sets number of payments per
year to 1.
3. BGN END Shows the default setting for
the payment mode.
4. SET BGN Sets the payment mode to
the beginning of the period.
5. QUIT 0.00 Brings the calculator to the
standard mode.
6. PMT=2,000.00 Records the amount of the
periodic payment.
7. I/Y=11.40 Records annual rate of inter-
est as 11.4%.
8. N=5.00 Records number of time peri-
ods as 5.
9. 13,986.35 Calculates the FV of an annu-
ity due.
10. BGN BGN Invokes the payment mode.
11. SET END Sets the payment mode to
the end of the period.
12. QUIT 0.00 Brings the calculator to the
standard mode.
 TI BA II PLUS \ 19

I. Calculating the net present value of an annuity:

Example: Jane thinks if she invests $80,000 by buying property today, she can get $15,000
in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a
rate of return of 12% (with quarterly discounting) on her investment, what is the net pres-
ent value of this project?
1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be
3%.
2. The number of time periods will be multiplied by four, i.e., 80.
3. The amount of annual rent will be divided by four, i.e., $3,750.

Keystrokes Display Description

Clear all memory.
1. CLRW
CLRWor k 0.00 Clears the Cash Flow work-
sheet.
2. Reset RST 0.00 Resets all variables to zero.

3. CF0 -80,000 Inputs initial cash outflow.

4. CF0=-80,000.00 Stores initial cash outflow.

5. C01 15,000.00 Calculates periodic cash

inflows.
6. C01=3,750.00 Stores quarterly cash inflow
amount.
7. F01=80.00 Stores the number of times
the quarterly cash inflow
occurs.
8. I=3.00 Stores the quarterly interest
rate as 3%.
9. NPV=33,252.86 Calculates the net present
value of the investment.
20 \ TI BA II PLUS

J. Calculating the net present value of a series of uneven cash flows:

The TI BAII PLUS can store 24 cash flow groups besides the initial cash investment. A cash
flow group comprises the cash flow amount and the number of times it repeats consecutive-
ly in the cash flow series. Each cash flow group can have up to 9,999 cash flows i.e., the max-
imum value of Fnn (the frequency of consecutive cash flows in one group) can be 9,999.
Example: Beth is planning to buy a Pentium-based PC for rental purposes. She has
calculated that her expected cash flows from the investment for the next five years would be
as shown below.
$2,500 $1,500 $1,000 $1,000 $800

CF0 = –$4,000
If she has to pay an annual interest rate of 9.75%, should she buy the computer?

Keystrokes Display Description

Clear all memory.
1. CLRW
CLRWor k 0.00 Clears the Cash Flow work-
sheet.
2. Reset RST 0.00 Resets all variables to zero.
3. CF0 -4,000 Inputs initial cash outflow.
4. CF0=-4,000.00 Stores initial cash outflow.
5. C01=2,500.00 Stores the first cash inflow.
6. F01=1.00 Records that cash inflow of
$2,500 occurs once.
7. C02=1,500.00 Stores the second cash
inflow.
8. F02=1.00 Records that cash inflow of
$1,500 occurs once.
9. C03=1,000.00 Stores the third cash inflow.
 TI BA II PLUS \ 21

10. F03=2.00 Stores the number of times

that cash inflow of $1,000
repeats.
11. C04=800.00 Stores the fifth cash inflow.
12. I=9.75 Stores the annual interest
rate as 9.75%.
13. NPV=1,471.37 Calculates the net present
value of the investment.

K. Calculating the internal rate of return of an annuity:

Example: ABC Inc. is planning to spend $35,000 to buy a warehouse. Under the contract
they will receive an after-tax cash flow of $6,000 (paid semiannually) from the property for
the next eight years. What is the internal rate of return for the investment?

Keystrokes Display Description

Clear all memory.
1. CLRW
CLRWor k 0.00 Clears the Cash Flow work-
sheet.
2. Reset RST 0.00 Resets all variables to zero.
3. C0 -35,000.00 Change sign to show cash
outflow.
4. CF0=-35,000.00 Stores initial cash invest-
ment.
5. C01 6,000.00 Computes semi-annual cash
inflow.
6. C01=3,000.00 Stores semi-annual cash
inflow.
7. F01 8.00 Calculates the total number
of time periods.
8. F01=16.00 Stores total number of time
periods.
22 \ TI BA II PLUS

9. IRR=3.98 Calculates semi-annual IRR of

this investment.
10. IRR 7.97 Calculates annual IRR of this
investment.

L. Calculating the internal rate of return of a series of uneven cash flows:

Example: Healthtime has the opportunity to make an investment that requires an initial cash
outflow of $6,500. The estimated cash inflows from the project for the next six years are
shown below. What is the IRR on this investment?
$1,000 $1,000 $900 $900 $750 $60,000

CF0 = –$6,500

Keystrokes Display Description

Clear all memory.
1. CLRW
CLRWor k 0.00 Clears the Cash Flow work-
sheet.
2. Reset RST 0.00 Resets all variables to zero.
3. CF0 -6,500.00 Change sign to show cash
outflow.
4. CF0=-6,500.00 Stores initial cash invest-
ment.
5. C01=1,000.00 Stores first cash inflow.
6. F01=2.00 Records that cash inflow of
$1,000 occurs twice
7. C02=900.00 Stores second cash flow
amount.
8. F02=2.00 Records that cash inflow of
$900 occurs twice.
 TI BA II PLUS \ 23

9. C03=750.00 Stores third cash flow

amount.
10. F03=1.00 Shows that cash flow of
$750,000 occurs once.
11. C04=60,000.00 Stores final cash inflow of
$60,000.
12. IRR=51.88 Calculates IRR of this invest-
ment.

M. Bond valuation with interest compounded annually:

Example: How much would you be willing to pay for a bond today if it pays $100 in inter-
est annually for 20 years (starting next year) and has a principal payment of $1,000? The yield
to maturity is 15%.
This question can be interpreted as that of finding the NPV of an uneven cash flow
series with the initial cash outflow equal to zero. Hence, we will follow the steps used for cal-
culating NPV to compute the current price of the bond.

Keystrokes Display Description

Clear all memory.
1. CLRW
CLRWor k 0.00 Clears the Cash Flow work-
sheet.
2. Reset RST 0.00 Resets all variables to zero.
3. CF0=0.00 Inputs initial cash outflow as
zero.
4. C01=100.00 Stores the first cash inflow.
5. F01=19.00 Records that cash inflow of
$100 occurs 19 times.
6. C02=1,100.00 Stores the final cash inflow.
7. I=15.00 Stores the annual discount
rate as 15%.
24 \ TI BA II PLUS

8. NPV=687.03 Calculates the initial price of

the bond.

N. Bond valuation with interest compounded semiannually:

Because most bonds pay interest semiannually, we will show the conversion required to cal-
culate the current value of such bonds.
Example: If the bond described in Section K pays interest semiannually, the calcula-
tions will be:
It = $50, Pn = $1000, i = 7.5%, n = 40.

Keystrokes Display Description

Clear all memory.
1. CLRW
CLRWor k 0.00 Clears the Cash Flow work-
sheet.
2. Reset RST 0.00 Resets all variables to zero.

3. CFO=0.00 Inputs initial cash outflow as

zero.
4. C01 100-00 Calculates the semiannual
interest payment.
5. C01=50.00 Stores the semiannual inter-
est payment as $50.
6. F01 20.00 Calculates the number of peri-
ods when cash inflow of $50
will occur.
7. F01=39.00 Stores the number of interest
periods.
8. C02=1,050.00 Stores the final cash inflow.

9. I 15.00 Calculates semiannual dis-

count rate.
 TI BA II PLUS \ 25

10. I=7.50 Stores semiannual discount

rate as 7.5%.
11. NPV=685.14 Calculates the initial price of
the bond.
 Hewlett Packard
(HP) 12C
The HP 12C is color-coded. The gold “f” key refers to the function coded in gold above the
keys on the calculator. Similarly, the blue “g” key refers to the functions coded in blue on
the lower portion of the keys themselves.
The HP 12C has continuous memory. Therefore, turning of the calculator does not
affect the information you have previously stored in the calculator. If not turned off manu-
ally, the calculator will turn off automatically approximately 8 to 17 minutes after last use.

A. Clearing the calculator display and memory, and setting the decimal points:

Keystrokes Display Description

1. REG 0.00000 Clears screen and storage
registers.
2. FIN 0.00000 Clears the financial registers.

3. 0.00 Sets the number of decimal

places equal to 2. Note: the
HP12C will perform calcula-
tions to 10 decimals even
though only two decimals are
displayed.

B. Using the memory capability:

Example: Before leaving on a sales call one morning, Alfred stored the price of a fax machine
($1,200) and a printer ($1,000) in his calculator. Later that day, he sold three fax machines
and four printers to a customer. He used his calculator to get the total amount due from this
customer in the following way:

Keystrokes Display Description

Clear all memory and financial registers.
1. 1,200.00 Stores the price of the fax
machine in memory location
1.
27
28 \ HP 12C

2. 1,000.00 Stores the price of the printer

in memory location 2.
3. Turns the calculator off.
Later that day:
4. 1,000.00 After the sale, Alfred turns the
calculator on.
5. 1,200.00 Recalls the cost of the fax to
the display.
6. 3,600.00 Multiplies 1,200 by 3 to cal-
culate the cost of the three
fax machines.
7. 1,000.00 Recalls the cost of the print-
er.
8. 4,000.00 Calculates cost of four print-
ers.
9. 7,600.00 Totals the amount for this
sale.

C. Calculating the present value of a lump sum amount:

Example: Liz anticipates it will cost her $65,000 to buy a house in 18 months. How much
should she invest today at an annual interest rate of 15% (interest is compounded monthly)
to be able to afford the house in one and a half years?

Keystrokes Display Description

Clear the memory and financial registers.
1. 65,000.00 Records the future cash flow
of $65,000.
2. 12
1.25 Records the monthly interest
rate of 1.25%.
3. 12 18.00 Records the number of time
periods as 18.
 HP 12C \ 29

4. -51,975.99 Calculates the present value

of $65,000 in 1.5 years dis-
counted at a monthly rate of
1.25%.
Note: The display in step 8 has a negative sign because it represents a cash outflow (investment) today.

D. Calculating the future value of a lump sum amount:

Example: If John invests $1,850 today in an asset earning a 10% rate of return (compound-
ed annually), how much will he have after two years?

Keystrokes Display Description

Clear the memory and financial registers.
1. -1,850.00 Records the present cash out-
flow of $1,850.00.
2. 10.00 Records the annual interest
rate of 10%.
3. 2.00 Records the number of time
periods as 2.
4. 2,238.50 Calculates the future value of
$1,850 after two years at
10%.

E. Calculating the present value of an annuity:

Example: How much should you invest now so that starting one year from today your
daughter can receive $6,000 per year for the next five years? Assume the discount rate is
15%.
Keystrokes Display Description
Clear the memory and financial registers.
1. 6,000.00 Records the amount of the
periodic payments.
2. 15.00 Records the annual interest
rate of 15%.
30 \ HP 12C

3. 5.00 Records the number of time

periods as 5.
4. -20,112.93.00 Calculates the present value
of the annuity.

F. Calculating the present value of an annuity due:

Example: In this case, instead of receiving payments at the end of each year, your daughter
will receive the payments at the beginning of each year. Therefore, her first payment will be
received immediately.
There are two methods to calculate the present value of an annuity due:

1. You can calculate the present value of an annuity, as shown in Section E, and multiply it by (1 +
k). In that case the additional step would be:

Keystrokes Display Description

Follow steps 1–4 from Section E.
5. 1.15 Records the second term (1 +
k) in the formula for an annu-
ity due.
6. -23,129.87 Calculates the PV of the
annuity due.

2. The HP 12C allows you to set the timing of the payment. You have to set the payment mode at
“BEGIN” and start from the first step. This method is shown below:

Keystrokes Display Description

Clear the memory and financial registers.
1. BEG BEGIN Displays BEGIN at the bottom
of the screen to indicate that
payment is made at the
beginning of the period.
2. 6,000.00 Records the amount of the
periodic payments.
 HP 12C \ 31

3. 15.00 Records the annual interest

rate of 15%.
4. 5.00 Records the number of time
periods as 5.
5. END Toggles to the default setting
of end-of-the-period payments.

G. Calculating the future value of an annuity:

Example: You have recently won a lottery for $10,000. Your winnings will come in five
annual payments of $2,000 each starting one year from now. If the annual compound rate is
11.4%, how much is the lottery worth at the end of five years?

Keystrokes Display Description

Clear the memory and financial registers.
1. 2,000.00 Records the amount of peri-
odic payments.
2. 11.4 Records the annual rate of
interest of 11.4%.
3. 5.00 Records the number of time
periods as 5.
4. 12,555.07 Calculates the FV of an annu-
ity.

H. Calculating the future value of an annuity due:

Example: In this case, your winnings will be paid at the beginning instead of at the end of
each year for five years. So you are going to get the first payment of your $10,000 lottery, i.e.
$2,000, immediately. There are two methods to calculate the future value of an annuity due:

1. You can calculate the future value of an annuity, as shown in Section G, and multiply it by (1 +
k). In that case the additional step would be:
32 \ HP 12C

Keystrokes Display Description

Follow steps 1–4 from Section G.
5. 1.114 Records the second (1 + k)
term in the formula for an
annuity due.
6. 13,986.35 Calculates the FV of the annu-
ity due.

2. The HP 12C allows you to set the timing of the payment. You have to set the payment mode at
“BEGIN” and start from the first step. This method is shown below.

Keystrokes Display Description

Clear the memory and financial registers.
1. BEG BEGIN Displays the BEGIN at the
bottom of the screen to indi-
cate that payment is made at
the beginning of the period.
2. 2,000.00 Records the amount of peri-
odic payments.
3. 11.40 Records the annual rate of
interest of 11.4%.
4. 5.00 Records the number of time
periods as 5.
5. 13,986.35 Calculates the FV of an annu-
ity due.
6. END Toggles to the default setting
of end-of-the-period payments.

I. Calculating the net present value of an annuity:

Example: Jane thinks if she invests $80,000 by buying property today, she can get $15,000
in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a
rate of return of 12% (with quarterly discounting) on her investment, what is the net pres-
ent value of this project?
1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be
3%.
 HP 12C \ 33

2. The number of time periods will be multiplied by four, i.e., 80.

3. The amount of annual rent will be divided by four, i.e., $3,750.

Keystrokes Display Description

Clear the memory and financial registers.
1. -80,000 Records the initial cash out-
flow of $80,000.
2. CF0 -80,000.00 Stores the initial investment
in the financial register.
3. CFj 3,750.00 Stores cash inflow amount.

4. Nj 80.00 Records the number of time

periods as 80.
5. 3.00 Records the quarterly interest
rate of 3%.
6. NPV 33,252.86 Calculates the net present
value of the investment.

J. Calculating the net present value of a series of uneven cash flows:

The HP12C can store 24 cash flow groups besides the initial cash investment. A cash flow
group comprises the cash flow amount and the number of times it repeats consecutively in
the cash flow series. Each cash flow group can have up to 9,999 cash flows; that is the max-
imum value of Fnn (the frequency of consecutive cash flows in one group) can be 9,999.
Example: Beth is planning to buy a Pentium-based PC for rental purposes. She has
calculated that her expected cash flows from the investment for the next five years would be
as shown below.
$2,500 $1,500 $1,000 $1,000 $800

CF0 = –$4,000
If she has to pay an annual interest rate of 9.75%, should she buy the computer?
34 \ HP 12C

Keystrokes Display Description

Clear the memory and financial registers.
1. CHS -4,000.00 Enters the initial investment
of $4,000.
2. CF0 -4,000.00 Stores the initial investment
in the financial register.
3. CFj 2,500.00 Stores the first cash inflow
amount.
4. CFj 1,500.00 Stores the second cash
inflow amount.
5. CFj 1,000.00 Stores the third cash inflow
amount.
6. Nj 2.00 Records that $1,000 occurs
twice for both the third and
fourth time periods.
7. CFj 800.00 Stores the fifth cash inflow
amount.
8. I 9.75 Records the annual interest
rate of 9.75%.
9. NPV 1,471.57 Calculates the net present
value of the investment.

K. Calculating the internal rate of return of an annuity:

Example: ABC Inc. is planning to spend $35,000 to buy a warehouse. Under the contract
they will receive an after-tax cash flow of $6,000 (paid semiannually) from the property for
the next eight years. What is the internal rate of return for the investment?

Keystrokes Display Description

Clear the memory and financial registers.
1. CHS -35,000 Enters the initial investment
of $35,000.
 HP 12C \ 35

2. CF0 -35,000.00 Stores the initial investment

in the financial register.
3. CFj 3,000.00 Stores the semi-annual cash
inflow amount.
4. Nj 16.00 Stores the total number of
time periods as 16.
5. IRR 3.98 Calculates the semi-annual
IRR.
6. 7.97 Calculates the IRR of the
investment.

L. Calculating the internal rate of return of a series of uneven cash flows:

Example: Healthtime has the opportunity to make an investment that requires an initial cash
outflow of $6,500. The estimated cash inflows from the project for the next six years are
shown below. What is the IRR on this investment?
$1,000 $1,000 $900 $900 $750 $60,000

CF0 = –$6,500

Keystrokes Display Description

Clear the memory and financial registers.
1. -6,500 Enter the initial investment of
$6,500.
2. CF0 -6,500.00 Stores the initial investment
in the financial register.
3. CFj 1,000.00 Stores the first cash inflow
amount
4. Nj 2.00 Stores $1,000 as the cash
inflow amount for both the
first and second periods.
36 \ HP 12C

5. CFj 900.00 Stores the amount of the

third cash inflow.
6. Nj 2.00 Records that $900 occurs
twice for the third and fourth
periods.
7. CFj 750.00 Stores the fifth cash inflow
amount.
8. CFj 60,000.00 Stores the sixth cash inflow
amount.
9. IRR 51.88 Calculates the internal rate of
return for the cash flow
series.

M. Bond valuation with interest compounded annually:

Example: How much would you be willing to pay for a bond today if it pays $100 in inter-
est annually for 20 years (starting next year) and has a principal payment of $1,000? The yield
to maturity is 15%.
This question can be interpreted as that of finding the NPV of an uneven cash flow
series with the initial cash outflow equal to zero. Hence, we will follow the steps used for cal-
culating NPV to compute the current price of the bond.

Keystrokes Display Description

Clear the memory and financial registers.
1. CF0 0.00 Stores the initial investment
as zero in the financial regis-
ter.
2. CFj 100.00 Stores the first cash inflow
amount.
3. Nj 19.00 Records that interest pay-
ments of $100 occur 19
times.
4. CFj 1100.00 Stores the amount of the last
cash inflow (interest + princi-
pal).
 HP 12C \ 37

5. 15.00 Records the yield-to-maturity

as 15%.
6. NPV 687.03 Computes the current bond
price.

N. Bond valuation with interest compounded semiannually:

Because most bonds pay interest semiannually, we will show the conversion required to cal-
culate the current value of such bonds.
Example: If the bond described in Section M pays interest semiannually, the calcula-
tions will be:
It = $50, Pn = $1000, i = 7.5%, n = 40.

Keystrokes Display Description

Clear the memory and financial registers.
1. CF0 0.00 Stores the initial investment
as zero in the financial regis-
ter.
2. CFj 500.00 Stores the first cash inflow
amount.
3. Nj 39.00 Records that interest pay-
ments of $50 occur 39 times.
4. CFj 1050.00 Stores the amount of the last
cash inflow (interest + princi-
pal payment).
5. 7.50 Records the semi-annual YTM
as 7.5%.
6. NPV 685.14 Calculates the current bond
value.
 Hewlett Packard
(HP) 17BII
The HP 17BII contains a two-line display space for messages, prompts, and labels. Menus
and messages show you options and guide you through problems. Some keys and functions
are activated by pressing the “SHIFT” key, which is the amber colored key ( ) located at
the far left on the second line of keys from the bottom. The “CLR” (clear key) clears the
calculator display line. Pressing “SHIFT” “CLEAR DATA” will clear all information in the
current work area such as a time value of money worksheet.
It is also important to note that most financial calculations are accomplished by
accessing the appropriate variable as displayed on the display panel. In order to select a par-
ticular variable, it is necessary to press the up arrow symbol “^” located directly beneath the
variable along the row of keys just beneath the display panel. For the sake of brevity in this
guide, only the actual variable name will be indicated even though the up arrow symbol
beneath the variable is actually pressed. To return to the main display line menu, simply
press “SHIFT” “MAIN”. To back out of a particular menu without going all the way back
to the main menu, simply press EXIT.
The HP 17BII has continuous memory. Therefore, turning of the calculator does not
affect the information you have previously stored in the calculator. If not turned off manu-
ally, the calculator will turn off automatically approximately 10 minutes after last use.

A. Clearing the calculator display and memory and setting the decimal points:

Keystrokes Display Description

1. CLEAR DA
DATA 0.00 Clears screen and storage
registers.
2. FIX 0.00 Sets the number of decimal
places equal to 2.

B. Using the memory capability:

Example: Before leaving on a sales call one morning, Alfred stored the price of a fax machine
($1,200) and a printer ($1,000) in his calculator. Later that day, he sold three fax machines
39
40 \ HP 17BII

and four printers to a customer. He used his calculator to get the total amount due from this
customer in the following way:

Keystrokes Display Description

Clear all memory and financial registers.
1. 1,200.00 Stores the price of the fax
machine in memory location
1.
2. 1,000.00 Stores the price of the printer
in memory location 2.
3. OFF Turns the calculator off.
Later that day:
4. ON 1,000.00 After the sale, Alfred turns the
calculator on.
5. 1,200.00 Recalls the cost of the fax to
the display.
6. 3,600.00 Multiplies 1,200 by 3 to cal-
culate the cost of the three
fax machines.
7. 3,600.00 Stores the cost of the three
fax machine.
8. 1,000.00 Recalls the cost of the print-
er.
9. 4,000.00 Calculates cost of four print-
ers.
10. 7,600.00 Totals the amount for this
sale.

C. Navigating Menus

The main menu is obtained by turning the calculator ON. The main Menu appears as fol-
lows:
 HP 17BII \ 41

0.00
FIN BUS SUM TIME SOLVE

For most calculations finance students will undertake, it will be necessary to next select the
finance menu by selecting FIN, and then TVM for time value of money. The TVM menu
appears as follows:

12 P/YR END MODE

N I%Y PV PMT FV OTHER

The HP 17BII is programmed with the assumption that interest is compounded 12 times
each year (monthly compounding). This manual will reset the number of compounding
periods to once per year and adjust the interest rate as needed in the calculations. The num-
ber of compounding periods and interest can be set to annual compounding as follows:

Keystrokes Display Description

1. Select the TVM Menu
2. OTHER P/YR 1 P/YR END MODE Sets the calculator for
annual compounding (one
compounding period per
year).
Note: To back out of menus, simply press the EXIT key.

D. Calculating the present value of a lump sum amount:

Example: Liz anticipates it will cost her $65,000 to buy a house in 18 months. How much
should she invest today at an annual interest rate of 15% (interest is compounded monthly)
to be able to afford the house in one and a half years?

Keystrokes Display Description

1. CLEAR DA
DATA 0.00 Clears previously stored data.
2. FIN TVM 1 P/YR END MODE Accesses the TVM Menu
42 \ HP 17BII

3. FV FV=65,000.00 Records the FV amount of

$65,000.
4.
I%YR I%YR=1.25 Records the monthly interest
rate of 1.25%
5. N N=18 Records the number of
monthly periods as 18.
6. PV PV = -51,975.99 Calculates the present value.
Note: The display in step 8 has a negative sign because it represents a cash outflow (investment) today.

E . Calculating the future value of a lump sum amount:

Example: If John invests $1,850 today in an asset earning a 10% rate of return (compound-
ed annually), how much will he have after two years?

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PV PV = -1,850.00 Records the present cash out-
flow of $1,850.00.
2. I%YR I%YR = 10.00 Records the annual interest
rate of 10%.
3. N N = 2.00 Records the number of time
periods as 2.
4. FV FV = 2,238.50 Calculates the future value of
$1,850 after two years at
10%.

F. Calculating the present value of an annuity:

Example: How much should you invest now so that starting one year from today your
daughter can receive $6,000 per year for the next five years? Assume the discount rate is
15%.
 HP 17BII \ 43

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 6,000.00 Records the amount of the
periodic payments.
2. I%YR I%YR = 15.00 Records the annual interest
rate of 15%.
3. N N = 5.00 Records the number of time
periods as 5.
4. PV PV = -20,112.93 Calculates the present value
of the annuity.

G. Calculating the present value of an annuity due:

Example: In this case, instead of receiving payments at the end of each year, your daughter
will receive the payments at the beginning of each year. Therefore, her first payment will be
received immediately.
There are two methods to calculate the present value of an annuity due:

1. You can calculate the present value of an annuity, as shown in section F, and multiply it by (1 +
k). In that case the additional step would be:

Keystrokes Display Description

Follow steps 1–4 from Section F.
5. -23,129.87 Records the
second term
(1 + k) in the
formula for
an annuity
due.

2. The HP 17BII allows you to set the timing of the payment. You have to set the payment mode at
“BEGIN” and start from the first step. This method is shown below:
44 \ HP 17BII

Keystrokes Display Description

Clear the data and select the TVM Menu
1. OTHER BEG 1 P/YR BEGIN MODE Sets the calculator to begin-
ning of the period payments.
2. PMT PMT = 6,000.00 Records the amount of the
periodic payments.
3. I%YR I%YR = 15.00 Records the annual interest
rate of 15%.
4. N N = 5.00 Records the number of time
periods as 5.
5. PV PV = - 23,129.87 Calculates the PV of the
annuity due.

H. Calculating the future value of an annuity:

Example: You have recently won a lottery for $10,000. Your winnings will come in five
annual payments of $2,000 each starting one year from now. If the annual compound rate is
11.4%, how much is the lottery worth at the end of five years?

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 2,000.00 Records the amount of peri-
odic payments.
2. I%YR I%YR = 11.4 Records the annual rate of
interest of 11.4%.
3. N N = 5.00 Records the number of time
periods as 5.
4. FV FV = 12,555.07 Calculates the FV of an annu-
ity.
 HP 17BII \ 45

I. Calculating the future value of an annuity due:

Example: In this case, your winnings will be paid at the beginning instead of at the end of
each year for five years. So you are going to get the first payment of your $10,000 lottery, i.e.
$2,000, immediately. There are two methods to calculate the future value of an annuity due:

1. You can calculate the future value of an annuity, as shown in section H, and multiply it by (1 +
k). In that case the additional step would be:

Keystrokes Display Description

Follow steps 1–4 from Section H.
5.
13,986.35 Calculates the FV of the annu-
ity due.

2. The HP 17BII allows you to set the timing of the payment. You have to set the payment mode at
“BEGIN” and start from the first step. This method is shown below.

Keystrokes Display Description

Clear the data and select the TVM Menu
1. OTHER BEG 1 P/YR BEGIN MODE Sets the calculator to begin-
ning of the period payments.
2. PMT PMT = 2,000.00 Records the amount of the
periodic payments.
3. I%YR I%YR = 11.40 Records the annual interest
rate of 11.4%.
4. N N = 5.00 Records the number of time
periods as 5.
5. FV FV = -13,986.35 Calculates the FV of the annu-
ity due.
46 \ HP 17BII

J. Calculating the net present value of an annuity:

Example: Jane thinks if she invests $80,000 by buying property today, she can get $15,000
in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a
rate of return of 12% (with quarterly discounting) on her investment, what is the net pres-
ent value of this project?
1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be
3%.
2. The number of time periods will be multiplied by four, i.e., 80.
3. The amount of annual rent will be divided by four, i.e., $3,750.

Keystrokes Display Description

1. ON CLEAR DA
DATA 0.00 Turns on and clears the cal-
culator
2. FIN CFLO FLOW (0) = ? Selects the cash flow data
input register.
3.
FLOW (1) = ? -80,000.00 Stores the initial investment
in the financial register.
4. TIMES (1) = 1 Enters the quarterly annuity
cash inflow and prompts the
user to enter the number of
periods.
5.
CALC NPV, NUS, NFV = I% Enters the number of peri-
ods and prompts the user
for the interest rate.
6. I%NPV NPV = 33,252.86 Enters the quarterly interest
rate and calculates the net
present value of the invest-
ment.
 HP 17BII \ 47

K. Calculating the net present value of a series of uneven cash flows:

Example: Beth is planning to buy a Pentium-based PC for rental purposes. She has calcu-
lated that her expected cash flows from the investment for the next five years would be as
shown below.
$2,500 $1,500 $1,000 $1,000 $800

CF0 = –$4,000
If she has to pay an annual interest rate of 9.75%, should she buy the computer?

Keystrokes Display Description

1. ON CLEAR DA
DATA 0.00 Turn on and clear the calcu-
lator
2. FIN CFLO FLOW (0) = ? Select the cash flow data
input register.
3.
FLOW (1) = ? -4,000.00 Stores the initial investment
in the financial register.
4.
FLOW (2) = ? 1.00 Stores the second cash
inflow amount.
5.
FLOW (3) = ? 1.00 Stores the third cash inflow
amount.
5.
FLOW (4) = ? 2.00 Stores the third and fourth
cash inflow.
6. 2.00 Stores the fifth cash inflow
amount.
48 \ HP 17BII

7. CALC
I% I% = 9.75 Enters the discount rate.
8. NPV 1,471.57 Calculates the net present
value of the investment.

L. Calculating the internal rate of return of an annuity:

Example: ABC Inc. is planning to spend $35,000 to buy a warehouse. Under the contract
they will receive an after-tax cash flow of $6,000 (paid semiannually) from the property for
the next eight years. What is the internal rate of return for the investment?

Keystrokes Display Description

1. ON CLEAR DA
DATA 0.00 Turns on and clears the cal-
culator
2. FIN CFLO FLOW (0) = ? Selects the cash flow data
input register.
3.
FLOW (1) = ? -35,000.00 Stores the initial investment
in the financial register.
4. TIMES (1) = 1 Enters the semiannual annu-
ity cash inflow and prompts
the user to enter the number
of periods.
5.
CALC NPV, NUS, NFV = I% Enters the number of semi-
annual time periods.
6. IRR IRR% = 3.98 Results in the present value
of the investment.
7. 7.97 Compute the IRR
 HP 17BII \ 49

M. Calculating the internal rate of return of a series of uneven cash flows:

Example: Healthtime has the opportunity to make an investment that requires an initial cash
outflow of $6,[Link] estimated cash inflows from the project for the next six years are
shown below. What is the IRR on this investment?
$1,000 $1,000 $900 $900 $750 $60,000

CF0 = –$6,500

Keystrokes Display Description

1. ON CLEAR DA
DATA 0.00 Turn on and clear the calcu-
lator
2. FIN CFLO FLOW (0) = ? Select the cash flow data
input register.
3.
FLOW (1) = ? -6,500.00 Stores the initial investment
in the financial register.
4.
FLOW (2) = ? 2.00 Stores the first and second
cash inflow amounts.
5.
FLOW (3) = ? 2.00 Stores the third and fourth
cash inflow amounts.
6.
FLOW (4) = ? 1.00 Stores the fifth cash inflow
amount.
7.
FLOW (5) = ? 1.00 Stores the sixth cash inflow
amount.
50 \ HP 17BII

8. CALC IRR IRR% = 51.88 Calculates the IRR.

N. Bond valuation with interest compounded annually:

The HP 17BII has an extremely sophisticated bond calculator menu that is often used by
practicing bond professionals. However, most finance students using the HP 17BII will be
given bond data in a simplified format. As a result, it is more simple and convenient to use
the time value of money (TVM) menu. This guide will therefore illustrate bond valuation
principles using the TVM menu.
Example: How much would you be willing to pay for a bond today if it pays $100 in
interest annually for 20 years (starting next year) and has a principal payment of $1,000? The
yield to maturity is 15%.
This question can be interpreted as that of finding the NPV of an uneven cash flow
series, with the initial cash outflow equal to zero. Hence, we will follow the steps used for
calculating NPV to compute the current price of the bond.

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 100.00 Records the amount of the
annual coupon payments.
2. I%YR I%YR = 15.00 Records the yield-to-maturity
of 15%.
3. N N = 20.00 Records the number of time
periods as 20.
4. FV FV = 1,000.00 Records the future or face
value of the bond.
5. PV PV = -687.03 Calculates the present value
of the Bond

O. Bond valuation with interest compounded semiannually:

Because most bonds pay interest semiannually, we will show the conversion required to cal-
culate the current value of such bonds.
 HP 17BII \ 51

Example: If the bond described in Section N pays interest semiannually, the calcula-
tions will be:
It = $50, Pn = $1000, I = 7.5%, n = 40.

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 50.00 Records the amount of the
semiannual coupon pay-
ments.
2. I%YR I%YR = 7.50 Records the semiannual yield-
to-maturity of 7.5%.
3. N N = 40.00 Records the number of time
periods as 40.
4. FV FV = 1,000.00 Records the future or face
value of the bond.
5. PV PV = -685.14 Calculates the present value
of the bond
 Hewlett Packard
(HP) 19BII

The HP 19BII is extremely sophisticated and contains a multi-line display space for mes-
sages, prompts, and labels. This manual will discuss only a small fraction of the 19BII’s capa-
bilities, focusing primarily on its time value of money functions. Menus and messages show
you options and guide you through problems. Some keys and functions are activated by
pressing the “SHIFT” key, which is the amber colored key ( ) located at the far left on
the second line of keys from the top. The CLR key combination clears the calculator
display line. Pressing CLEAR DA
DATA will clear all information in the current work area
such as a time value of money worksheet.
It is also important to note that most financial calculations are accomplished by
accessing the appropriate variable as displayed on the display panel. In order to select a par-
ticular variable, it is necessary to press the GRAY key located directly beneath the variable
along the row of keys just beneath the display panel. For the sake of brevity in this guide,
only the actual variable name will be indicated even though the up arrow symbol beneath the
variable is actually pressed. To return to the main display line menu, simply press MAIN .
To back out of a particular menu without going all the way back to the main menu, simply
press .
The HP 19BII has continuous memory. Therefore, turning of the calculator does not
affect the information you have previously stored in the calculator. If not turned off manu-
ally, the calculator will turn off automatically approximately 10 minutes after last use.

A. Clearing the calculator display and memory, and setting the decimal points:

Keystrokes Display Description

1. CLEAR DA
DATA 0.00 Clears screen and storage
registers.
2. FIX 0.00 Sets the number of decimal
places equal to 2.

53
54 \ HB 19BII

B. Using the memory capability:

Example: Before leaving on a sales call one morning, Alfred stored the price of a fax machine
($1,200) and a printer ($1,000) in his calculator. Later that day, he sold three fax machines
and four printers to a customer. He used his calculator to get the total amount due from this
customer in the following way:

Keystrokes Display Description

Clear all memory and financial registers.
1. 1,200.00 Stores the price of the fax
machine in memory location
1.
2. 1,200.00
1,000.00 Stores the price of the printer
in memory location 2.
3. Turns the calculator off.
Later that day:
4. 1,200.00
1,000.00 After the sale, Alfred turns the
calculator on.
5. 1,200.00
1,000.00
1,200.00 Recalls the cost of the fax to
the display.
6. 1,200.00
1,000.00
3,600.00 Multiplies 1,200 by 3 to cal-
culate the cost of the three
fax machines.
7. 1,200.00
1,000.00
3,600.00 Stores the cost of the three
fax machines.
 HB 19BII \ 55

8. 1,000.00
3,600.00
1,000.00 Recalls the cost of the print-
er.
9. 1,000.00
3,600.00
4,000.00 Calculates cost of four print-
ers.
10. 1,000.00
3,600.00
7,600.00 Totals the amount for this
sale.

C. Navigating Menus

The main menu is obtained by turning the calculator ON. The main menu appears as fol-
lows:

0.00
FIN BUS SUM TIME SOLVE TEXT

For most calculations finance students will undertake, it will be necessary to next select the
finance menu by selecting FIN, and then TVM for time value of money. The TVM menu
appears as follows:

12 P/YR END MODE

0.00
N I%Y PV PMT FV OTHER

The HP 19BII is programmed with the assumption that interest is compounded 12 times
each year (monthly compounding). This manual will reset the number of compounding
periods to once per year and adjust the interest rate as needed in the calculations. The num-
ber of compounding periods and interest can be set to annual compounding as follows:
56 \ HB 19BII

Keystrokes Display Description

1. Select the TVM Menu
2. OTHER 1 P/YR 1 P/YR END MODE Sets the calculator for annual
compounding (one compounding
period per year).
Note: To back out of menus, simply press the EXIT key.

D. Calculating the present value of a lump sum amount:

Example: Liz anticipates it will cost her $65,000 to buy a house in 18 months. How much
should she invest today at an annual interest rate of 15% (interest is compounded monthly)
to be able to afford the house in one and a half years?

Keystrokes Display Description

1. CLEAR DA
DATA 0.00 Clears previously stored data.
2. FIN TVM 1 PMTS/YR: END MODE
0.00 Accesses the TVM Menu
3. FV FV=65,000.00 Records the FV amount of
$65,000.
4.
I%YR I%YR=1.25 Records the monthly interest rate
of 1.25%
5. N N=18 Records the number of monthly
periods as 18.
6. PV PV = -51,975.99 Calculates the present value.
Note: The display in step 8 has a negative sign because it represents a cash outflow (investment) today.

E . Calculating the future value of a lump sum amount:

Example: If John invests $1,850 today in an asset earning a 10% rate of return (compound-
ed annually), how much will he have after two years?
 HB 19BII \ 57

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PV PV = -1,850.00 Records the present cash out-
flow of $1,850.00.
2. I%YR I%YR = 10.00 Records the annual interest
rate of 10%.
3. N N = 2.00 Records the number of time
periods as 2.
4. FV FV = 2,238.50 Calculates the future value of
$1,850 after two years at
10%.

F. Calculating the zpresent value of an annuity:

Example: How much should you invest now so that starting one year from today your
daughter can receive $6,000 per year for the next five years? Assume the discount rate is
15%.

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 6,000.00 Records the amount of the
periodic payments.
2. I%YR I%YR = 15.00 Records the annual interest rate
of 15%.
3. N N = 5.00 Records the number of time peri-
ods as 5.
4. PV PV = -20,112.93 Calculates the present
value of the annuity.

G. Calculating the present value of an annuity due:

Example: In this case, instead of receiving payments at the end of each year, your daughter
will receive the payments at the beginning of each year. Therefore, her first payment will be
received immediately.
58 \ HB 19BII

There are two methods to calculate the present value of an annuity due:

1. You can calculate the present value of an annuity, as shown in Section F, and multiply it by (1 +
k). In that case the additional step would be:

Keystrokes Display Description

Follow steps 1–4 from Section F.
5. -23,129.87 Records the second term (1 +
k) in the formula for an annu-
ity due.

2. The HP 19BII allows you to set the timing of the payment. You have to set the payment mode at
“BEGIN” and start from the first step. This method is shown below:

Keystrokes Display Description

Clear the data and select the TVM Menu
1. OTHER BEG 1 P/YR: BEGIN MODE
0.00 Sets the calculator to begin-
ning of the period payments.
2. PMT PMT = 6,000.00 Records the amount of the
periodic payments.
3. I%YR I%YR = 15.00 Records the annual interest
rate of 15%.
4. N N = 5.00 Records the number of time
periods as 5.
5. PV PV = - 23,129.87 Calculates the PV of the
annuity due.

H. Calculating the future value of an annuity:

Example: You have recently won a lottery for $10,000. Your winnings will come in five
annual payments of $2,000 each starting one year from now. If the annual compound rate is
11.4%, how much is the lottery worth at the end of five years?
 HB 19BII \ 59

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 2,000.00 Records the amount of peri-
odic payments.
2. I%Y I%YR = 11.4 Records the annual rate of
interest of 11.4%.
3. N N = 5.00 Records the number of time
periods as 5.
4. FV 12,555.07 Calculates the FV of an
annuity.

I. Calculating the future value of an annuity due:

Example: In this case, your winnings will be paid at the beginning instead of at the end of
each year for five years. So you are going to get the first payment of your $10,000 lottery, i.e.
$2,000, immediately. There are two methods to calculate the future value of an annuity due:

1. You can calculate the future value of an annuity, as shown in section H, and multiply it by (1 +
k). In that case the additional step would be:

Keystrokes Display Description

Follow steps 1–4 from Section H.
5.
13,986.35 Calculates the FV of the annu-
ity due.

2. The HP 19BII allows you to set the timing of the payment. You have to set the payment mode at
“BEGIN” and start from the first step. This method is shown below.
60 \ HB 19BII

Keystrokes Display Description

Clear the data and select the TVM Menu
1. OTHER BEG 1 P/YR: BEGIN MODE
0.00 Sets the calculator to begin-
ning of the period payments.
2. PMT PMT = 2,000.00 Records the amount of the
periodic payments.
3. I%YR I%YR = 11.40 Records the annual interest
rate of 11.4%.
4. N N = 5.00 Records the number of time
periods as 5.
5. FV FV = -13,986.35 Calculates the FV of the
annuity due.

J. Calculating the net present value of an annuity:

Example: Jane thinks if she invests $80,000 by buying property today, she can get $15,000
in rent from it for each of the next 20 years (the rent will be paid quarterly). If she wants a
rate of return of 12% (with quarterly discounting) on her investment, what is the net pres-
ent value of this project?
1. The annual rate of return will be divided by four, i.e., the quarterly rate of return will be
3%.
2. The number of time periods will be multiplied by four, i.e., 80.
3. The amount of annual rent will be divided by four, i.e., $3,750.

Keystrokes Display Description

1. CLEAR DA
DATA 0.00 Turns on and clears the cal-
culator
2. FIN CFLO INITIAL FLOW
?INIT =
0.00 Selects the cash flow data
 HB 19BII \ 61

input register.
3.
?FLOW (1) =
#TIMES =
-80,000.00 Stores the initial investment
in the financial register.
4. FLOW (1) = 3,750.00
?#TIMES (1) = 1
1.00 Enters the quarterly annuity
cash inflow and prompts the
user to enter the number of
periods.
5. CALC I% NEEDED TO CALCULATE
NPV, NUS, AND NFV
80.00 Enters the number of peri-
ods and prompts the user
for the interest rate.
6. I% NPV I% = 3.00
NPV = 33,252.86 Enters the quarterly interest
rate and calculates the net
present value of the invest-
ment.

K. Calculating the net present value of a series of uneven cash flows:

Example: Beth is planning to buy a Pentium-based PC for rental purposes. She has calcu-
lated that her expected cash flows from the investment for the next five years would be as
shown below.
$2,500 $1,500 $1,000 $1,000 $800

CF0 = –$4,000
62 \ HB 19BII

If she has to pay an annual interest rate of 9.75%, should she buy the computer?
Keystrokes Display Description
1. CLEAR DA
DATA 0.00 Turns on and clears the calcu-
lator
2. FIN CFLO INITIAL FLOW
?INIT =
0.00 Selects the cash flow data
input register.
3.
?FLOW (1) =
#TIMES =
-4,000.00 Stores the initial investment
in the financial register.
4.
?FLOW (2) =
#TIMES
1.00 Enters the first annual cash
inflow and selects one period
for the number of occurrences
of this cash flow.
5.
?FLOW (3) =
#TIMES (1) =
1.00 Enters the second annual
cash inflow and selects one
period for the number of
occurrences of this cash flow.
6.
?FLOW (4) =
#TIMES (1) =
2.00 Enters the third annual cash
inflow and selects one period
for the number of occurrences
 HB 19BII \ 63

of this cash flow.

7. ?FLOW (5) =
#TIMES (1) =
1.00 Enters the last annual cash
inflow and selects one period
for the number of occurrences
of this cash flow.
8. CALC
I% NPV I% = 9.75
NPV = 1,471.37 Enters the annual interest
rate and calculates the net
present value of the invest-
ment.

L. Calculating the internal rate of return of an annuity:

Example: ABC Inc. is planning to spend $35,000 to buy a warehouse. Under the contract
they will receive an after-tax cash flow of $6,000 (paid semiannually) from the property for
the next eight years. What is the internal rate of return for the investment?

Keystrokes Display Description

1. CLEAR DA
DATA 0.00 Turns on and clears the calcu-
lator
2. FIN CFLO INITIAL FLOW
?INIT =
0.00 Selects the cash flow data
input register.
3.
?FLOW (1) =
#TIMES =
-35,000.00 Stores the initial investment
in the financial register.
64 \ HB 19BII

4. FLOW (1) = 3,000.00

?#TIMES (1) = 1
1.00 Enters the semiannual annu-
ity cash inflow and prompts
the user to enter the number
of periods.
5. CALC I% NEEDED TO CALCULATE
NPV, NUS, AND NFV
16.00 Enters the number of semian-
nual time periods.
6. IRR 7.97 Calculates the semiannual
IRR, which must then be con-
verted to an annual IRR.

M. Calculating the internal rate of return of a series of uneven cash flows:

Example: Healthtime has the opportunity to make an investment that requires an initial cash
outflow of $6,500. The estimated cash inflows from the project for the next six years are
shown below. What is the IRR on this investment?
$1,000 $1,000 $900 $900 $750 $60,000

CF0 = –$6,500

Keystrokes Display Description

1. CLEAR DA
DATA 0.00 Turns on and clears the calcu-
lator.
2. FIN CFLO INITIAL FLOW
?INIT =
0.00 Select the cash flow data
input register.
 HB 19BII \ 65

3.
?FLOW (1) =
#TIMES =
-6,500.00 Stores the initial investment
in the financial register.
4.
?FLOW (2) =
#TIMES
2.00 Enters the first annual cash
inflow and selects two peri-
ods for the number of occur-
rences of this cash flow.
5.
?FLOW (3) =
#TIMES (1) =
2.00 Enters the second annual
cash inflow and selects two
periods for the number of
occurrences of this cash flow.
6. ?FLOW (4) =
#TIMES (1) =
1.00 Enters the third annual cash
inflow and selects one period
for the number of occurrences
of this cash flow.
7.
?FLOW (5) =
#TIMES (1) =
1.00 Enters the last annual cash
inflow and selects one period
for the number of occurrences
of this cash flow.
66 \ HB 19BII

8. CALC IRR IRR% = 51.88 Enters the annual interest

rate and calculates the net
present value of the invest-
ment.

N. Bond valuation with interest compounded annually:

The HP 19BII has an extremely sophisticated bond calculator menu that is often used by
practicing bond professionals. However, most finance students using the HP 19BII will be
given bond data in a simplified format. As a result, it is more simple and convenient to use
the time value of money (TVM) menu. This guide will therefore illustrate bond valuation
principles using the TVM menu.
Example: How much would you be willing to pay for a bond today if it pays $100 in
interest annually for 20 years (starting next year) and has a principal payment of $1,000? The
yield to maturity is 15%.
This question can be interpreted as that of finding the NPV of an uneven cash flow
series with the initial cash outflow equal to zero. Hence, we will follow the steps used for cal-
culating NPV to compute the current price of the bond.

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 100.00 Records the amount of the
annual coupon payments.
2. I%YR I%YR = 15.00 Records the yield-to-maturity
of 15%.
3. N N = 20.00 Records the number of time
periods as 20.
4. FV FV = 1,000.00 Records the future or face
value of the bond.
5. PV PV = -687.03 Calculates the present value
of the bond
 HB 19BII \ 67

O. Bond valuation with interest compounded semiannually:

Because most bonds pay interest semiannually, we will show the conversion required to cal-
culate the current value of such bonds.
Example: If the bond described in Section N pays interest semiannually, the calcula-
tions will be:
It = $50, Pn = $1000, i = 7.5%, n = 40.

Keystrokes Display Description

Clear the data and select the TVM Menu
1. PMT PMT = 50.00 Records the amount of the
semiannual coupon pay-
ments.
2. I%YR I%YR = 7.50 Records the semiannual yield-
to-maturity of 7.5%.
3. N N = 40.00 Records the number of time
periods as 40.
4. FV FV = 1,000.00 Records the future or face
value of the bond.
5. PV PV = -685.14 Calculates the present value
of the bond
68 \ HB 19BII
HB 19BII \ 69
70 \ HB 19BII
HB 19BII \ 71
72 \ HB 19BII