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Applications
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Sample Case: If a member of a credit union borrows $1800 to be repaid over 24 months at a 6% annual rate, what is his monthly payment?
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Solution
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| | Enter: | | | See Displayed: | | |
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24  n 6 SAVE 12 ÷ i 1800 PV PMT | | | | $ |
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per month
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Bonds
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The bond formulas used in the HP-80 assume a semiannual coupon payment.
All bond prices are expressed as a percentage of the dollar
value—whether entered or displayed—in accordance with trade custom.
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The
mathematical approach we use for bond problems is more precise than the
traditional one established in the 1800’s. The reason is that where the
intra-coupon period is applicable to the problem, we use the actual number of days per month instead of an arbitrary 30 days for all months.
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In
deference to long standing custom, however, an option is provided for
calculating bond problems in accordance with traditional trade custom.
The traditional method is quite close to the actual and differs only
beyond the second decimal places except for some extreme cases .
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Both price calculations are accurate to the sixth decimal place (that’s down to the last penny on $1 million). Accuracy for yield problems is detailed in Appendix D.
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Additional types of bond problems are described in Appendix C.
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Bond Price
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This calculation finds the exact price of a bond based on the actual
number of days, when the purchase date, maturity date, effective
yield-to-maturity rate, and coupon rate are known. The formula uses the
constant storage location, therefore, any value stored there will be
destroyed when the final key (the one that triggers the result) is pressed. Enter the information as follows:
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| 1 |
Enter the settlement (or purchase) date (1-or 2-numeral month, decimal point, 2-numeral day, 4-numeral year), press SAVE .
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Enter maturity date according to above convention, press DAY.
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Enter effective yield-to-maturity rate, press i.
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Enter annual coupon rate, press PMT.
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Press , then PV (BOND) to obtain the price of the bond.
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For example, what is the price of a 3% bond to yield 10% if purchased on 1-1-72 and maturing on 10-1-72? Actual price should be ... 95.06Traditional price is ... 95.05
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