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The HP 12c has one-line LCD with adjustable contrast display andefficient RPN data entry. Over 120 built in functions. Ideal for realestate, finance, accounting, economics and business work.Permitted for use on the CFP and CFA Certification Exams,

and GARP FRM Exam.

CFP is a registered trademark of the Certified Financial Planner Board of

Standards, Inc. CFA is a registered trademark of the Association forInvestment Management Research (AIMR). Recommended for use by the

Global Association of Risk Professionals (GARP) for the Financial RiskManager Certification (FRM).

HP 12c financial calculator The RPN Method: An Overview and HistoryRPN stands for Reverse Polish Notation. Reverse Polish Notation was developed in 1920by Jan Lukasiewicz as a way to write a mathematical expression without usingparentheses and brackets. Hewlett-Packard Co., believed that Lukasiewicz's method wassuperior to standard algebraic expressions when using calculators and computers, andadapted RPN for its first hand-held scientific calculator, the HP35, in 1972.

Why Use RPN?

RPN saves time and keystrokes. You never have to account for theparentheses while doing calculations. The process is similar to the wayyou learned math on paper.

You can see the intermediary results as you perform your computationsrather than just the answer at the end.

An intermediate result allows the user to check the results and correcterrors more easily. It's easier to follow the stream of calculation.

RPN is logical because the user first gives the number and then tells whatto do with it.

Financial Analysis Overview

Basic Math Calculations

Financial Register Functions

Compounding/Discounting

Mortgages/Bonds/Annuities

Cash Flow Keys

Statistics

Performance Analysis

Programming

Function Keys

To utilize the gold (above the key)functions, press f and then the desiredkey.

To Utilize the blue (below the key)functions, press g and then the desiredkey.

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HP 12 C Basics

Setting the display of Decimals (i.e., thenumber of significant digits to right ofdecimal point).

Keystrokes Display

[f] 2 0.00

[f] 3 0.000

[f] 4 0.0000

[f] 5 0.00000

HP 12 C Basics

Register x is displayed, Register y was thelast number entered

[xy] exchanges the x and y registers

[ENTER] moves a copy of the x register tothe y, and shifts the y to z, and z to t

[CHS] multiplies the x register by -1

HP 12 C Stack

[R ] moves the stack down one registerand moves the contents of the x register tothe t register.

Hit [R ] 4 times and you are back whereyou started.

HP 12 C Basics

Chain Calculations:

(36x10)+(12x50)= ?

Algebraic calculators need to storeintermediate calculations and then recallthem.

With RPN, the stack handles thatautomatically!

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HP 12 C BasicsChain Calculations:

(36x10)+(12x50) = ?

Keystrokes Display

36 [ENTER] 36

10 [x] 360

12 [ENTER] 12

50 [x] 600

[+] 960

Chain Calculation Using Stack

Reg - T

Reg - Z 360 360

Reg - Y 36 36 360 12 12 360

Reg - X 36 36 10 360 12 12 50 600 960

Keystrokes: 36 ENTER 10 x 12 ENTER 50 x +

Clearing Memory

Keystrokes Clears

[CLX] Display & X-register

[f] CLEAR [CLX] / [REG] X-register, Financial &Data Storage, Stack

[f] CLEAR [FIN] Financial Registers

[f] CLEAR [] Statistics Registers

[f] CLEAR [PRGM] Program memory*

*Must be in program mode to clear program memory.

Clearing Memory

Note: It is important to clear

memory for time value problems.

But dont get carried away!

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Percent of Total KeyIn calculating the total of a string of numbers, what percent ofthe total is a certain entry or number.

Keyst ro kes Di splay

23 [ENTER] 2317 [+] 4010 [+] 5013 [+] 6320 [+] 836 [+] 8911 [+] 10010 [%T] 10

Note: To calculate percent of total for other values, push

[CLX] after [%T] calculated, enter another value and push[%T] button again.

Percent ChangeIf a stock went from $17 per share to$21.50 per share, what was the percentincrease?

Keystrokes Display

21.5 [ENTER] 21.5

17 [] 4.5

17 [] .2647

or

26.47%

Percent Change Key

If a stock went from $17 per share to $21.50per share, what was the percent increase?

Keystrokes Display

17 [ENTER] 17

21.5 [%] 26.47

Percent Change Key

If a stock went from $100/share to$50/share, what is the percent increase?

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Percent Key

If a $27 dollar stock increased by 8%, whatwas its dollar increase?

Keystrokes Display

27 [ENTER] 27

8 [%] 2.16

Storage Registers20 Registers available for Storing intermediatecalculations.

First 10 are 0-9

Second 10 are .0-.9

Example, store the number 7:Keyst rokes Di splay

7 [STO] 0 7

Check:

[CLX] 0

[RCL] 0 7

Storage Registers

Note, some of the storage registers can beused for program storage by the statisticsregisters and during uneven cash flowcalculations. So you may get an error whenyou attempt to use them.

Square Root Key

What is the square root of 4?

Keystrokes Display

4 4

[g] [x ] 2

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Reciprocals

What is the reciprocal of 25 ?

Keystrokes Display

25 [1/x] 0.04

Reciprocals

What is the reciprocal of 5 ?

Other 12 C Keys

ex

LN

FRAC

INTG

MEM

Depreciation

Date DYS EEX

Days

To Calculate how many days old MarlonBrando was when he died:

Keystrokes Display

[f] 6 0.000000

4.031924 [ENTER] 4.031924

7.022004 [g DYS] 29,310.00

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Date

A contract requires payment in full 115 daysfrom January 13, 2010. What is date, andday-of-the-week, that the payment must bemade?

Keystrokes Display

[f] 6 0.000000

1.132010 [ENTER] 1.132010

115 [g] [DATE] 5,08,2010 6

Saturday, May 8, 2010

Powers

Calculate 103 (i.e., 10 Cubed)

Note: 103 = 10x10x10 = 1,000

Keystrokes Display

10 [ENTER] 10

3 [yx] 1000

Powers

Calculate: 175

Use Powers to Calculate Roots

Calculate 100

This calculation will determine the numberthat when squared equals 100.

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Calculate 100 (i.e., the square root of100)

Keystrokes Display

100 [ENTER] 100

2 [1/x] 0.50

[yx] 10


Calculate 1251/3

Here were looking for the cube root of 125 or the

number that when cubed will equal 125.

Keystrokes Display

125 [ENTER] 125

3 [1/x] 0.33

[Yx] 5

Interest

If you invest $10,000 in a Certificate ofDeposit (CD) that pays 7% interestcompounded annually (i.e., interest is addedback to, or reinvested in, the principal of theCD), how much interest will you earn in thefirst year?

10,000 x .07 = 700

Keystrokes Display10000 [ENTER] 10,000

.07 [x] 700

Interest (Cont.)

So, how much is your CD worth at the endof the first year?

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Compound Interest

Now, how much interest do you earn in thesecond year?

Keystrokes Display

10700 [ENTER] 10,700

.07 [x] 749

Compound InterestAt the end of 1 year, with interest reinvested, youwill have:

10,000 x 1.07 = 10,700

At the end of 2 years, with interest reinvested, youwill have:

(10,000 x 1.07) x 1.07 = 11,449

Or:

10,000 x 1.072 = 11,449

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Compounding and Discounting

0 1 2 3 4 5

Compound Forward

Discount Back

n =

$14,026 (1.07)n=5$10,000

Present Value

(1+r)n = 1 1.0700 1.1449 1.2250 1.3108 1.4026

1/(1+r)n = 1 0.9346 0.8734 0.8163 0.7629 0.7130

$10,000 x (1.07)n=5 $14,026

Continuous Compounding and

Discounting

0 1 2 3 4 5

Compound Forward

Discount Back

n =

$14,191 x

.07(n=5)

$10,000

Present Value

rn = 1 1.0725 1.1503 1.2337 1.3231 1.4191

rn = 1 0.9324 0.8694 0.8106 0.7558 0.7047

$10,000 x .07(n=5) $14,191

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Compound InterestAssuming we invested $10,000 in a 10 yearCD paying 7% annually, with the interestreinvested, how much would our CD beworth at maturity?

Keystrokes Display

10000 [ENTER] 10,000

1.07 [ENTER] 1.07

10 [Yx] 1.97

[x] 19,671.51

Compounding

Calculate what the future value of $50,000

will be 9 years from now at 8%, compoundedannually.

50,000 x 1.089 = ?Keystrokes Display

50000 [ENTER] 50,000

1.08 [ENTER] 1.08

9 [yx] 2.00

[x] 99,950.23

Practice Problem

How much will you have in your account in12 years assuming you invest $100,000 andyour account earns 6% per year with theearnings reinvested?

Keystrokes Display

100000 [ENTER] 100,000

1.06 [ENTER] 1.06

12 [yx

] 2.01[x] 201,219.65

Rule of 72

Divide 72 by the interest rate, and thats howmany years it takes to double your money.

For the last problem: 72/6 = 12 years

Approx imate...not good for extremes.

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Discounting

What is the Present Value of 100,000 received 6years from now discounted at 12% per year?

PV x 1.12 6 = 100,000

PV = 100,000 / 1.126

Keystrokes Display

100000 [ENTER] 100,000

1.12 [ENTER] 1.12

6 [yx] 1.97

[] 50,663.11

Practice Problem

How much must you invest today to have$500,000 20 years from now assuming youearn 10% per year?

Keystrokes Display

500000 [ENTER] 500,000

1.1 [ENTER] 1.1

20 [yx] 6.73

[] 74,321.81

Practice Problem

How much does a 18 year old need to investtoday to have $1,000,000 at age 70 (52years from now) assuming she earns areturn of 11% per year?

Keystrokes Display

1000000 [ENTER] 1,000,000

1.11 [ENTER] 1.1

52 [yx

] 227.4[] 4,397.49

Financial Keys

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Financial Keys

n i PV PMT FV

n number of periods

i interest per period (For 10% enter 10)

PV Present Value

PMT* Payment (Must be constant over n periods)

FV Future Value

* Beginning [g] [BEG], or end of period [g] [END]

Financial Keys

Useful for:

Mortgages

Annuities

Bonds

Discounting

Compounding

Calculating Internal Rate of Return

Financial Keys

Input the Knowns

Financial Keys solve for the unknown thatgives a Zero Net Present Value solution.

Practice Problem

How much do you need to invest today tohave $500,000 20 years from now assumingyou earn 10% per year?

This time use the Financial Keys.

What are our knowns?

What is our unknown?

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Financial Keys

Example:

[f] CLEAR [FIN] or [f] CLEAR [CLX]

(sets all Financial Registers to 0)

n i PV PMT FV

20 10 ? 0 500,000

PV =74,321.81

Compounding Financial Keys

Future value of 50,000 in 9 years assuming8% annual compound return.

Keystrokes Display

[f] [CLX] 0

50000 [CHS] [PV] 50,000

8 [i] 8

9 [n] 9

[FV] 99,950.23

Discounting Financial Keys

Present Value of 100,000 received 6 yearsfrom now at assuming a annual discountrate of 12%.

Keystrokes Display

[f] [CLX] 0

100000 [FV] 100,000

6 [n] 6

12 [i] 12

[PV] 50,663.11

Financial Keys

n i PV PMT FV

Watch out for Signs

Periods Years/Months

Interest Rate Years/Months

Annuity Mode Beginning/End

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Escalation Rate

If the cost of Tuition increased from $5,000to $17,000 over the last 12 years, what wasthe annual rate of increase (i.e., CAGR)?

Keystrokes Display

12 [n] 12

5000 [PV] 5,000

17000 [CHS] [FV] -17,000

[i] 10.74

Page 69

ofWorkbook

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Example 3 Solution Using Algebra

Keystrokes Display1000 [ENTER] 1,000

700 [] 1.428571

9.5 [1/x] [yx] 1.0382581 [] 0.038258

100 [X] 3.8258

Example 3 Solution Using hp12c

Keystrokes Display

700 [CHS] [PV] 700

1000 [FV] 1,000.00

9.5 [n] 9.50

[STO] [EEX] 9.50 c

[i] 3.8258

c indicates compound return will becalculated for the partial period.

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Annuities

Cash Flow problems, with a constantpayment. (May be inflation adjusted.)

Mortgages are a type of annuity.

Annuities

2 Basic Types:

1. Annuity Due (Payment in advance)i.e., Retirement [g] [BEG]

2. Ordinary Annuity (Payment in arrears)i.e., Mortgage [g] [END]

Annuity

How much does Ann need to save by thetime she is 65, if she wants to withdraw$20,000 per year (starting on the day sheturns 65) through her life expectancy of age90?

She will withdraw her last $20,000 on her89th birthday. Assume she will earn 8% onthe invested balance of the annuity.

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Annuity Problem Time Line

65 89

$20,000 $20,000. . . . . . . . . . . . .

Now

PMT(Annually)

PV FV = 0

Payments Time LineBirthdays

Payments

* Annuity Due, use [g] [BEG] function, means first payment occurs at age65.

If Ordinary Annuity, use [g] [END] function, then first payment occurs at

age 66 which is the end of the first year of the annuity period. (See timeline below.)

65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90

1* 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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Anns Annuity

n i PV PMT FV

[g] [BEG] 25 8 ? 20,000 0

Keystrokes Display

[g] [BEG] 025 [n] 258 [i] 820000 [PMT] 20,000

0 [FV] 0[PV] 230,575.17

Anns Annuity

If Ann just turned 35 years old, how muchdoes she need to save at the end of eachmonth, to have sufficient funding for herretirement at age 65? Assume she will earn10% per year compounded monthly.

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Annuity Problem Timeline

65 89

$20,000 $20,000

. . . . . . . . . . . . . .

Now

PMT(Annually)

PV = 230,575 FV = 0

Annuity Due

65 89

. . . . . . . . . . . . .

35

PMT(Monthly)

PV = 0 FV

Ordinary

Annuity

90

90

Anns Annuity

Keystrokes Display

[g] [END] 230,575

30 [g] [n] 360

10 [g] [i] 0.833

[RCL] [PV] [CHS] 230,575

[ENTER] [FV] 230,5750 [PV] 0

[PMT] -102

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Roth IRA Facts For 2014, annual limit lesser of $5,500* or 100% of taxable

compensation. (AGI phase-out from $181,000-$191,000 for MFJ, and$114,000-$129,000 for Single.)

Contributions are not deductible. Contributions may be made at any age. Distributions (of earnings) are tax-free, after initial 5-year holding

period, if any one of following occurs: owner is over 59; distributionis to beneficiary following owners death; distribution used for firsthome purchase ($10,000 limit); or owner becomes disabled.

No Minimum Distribution Requirement during owners lifetime. Designated Beneficiary

1. Must begin distributions within one year of owners death2. Must distribute entire IRA over lifetime of beneficiary3. Earnings on principal continue to grow tax free

* $6,500 for those age 50 or over by end of the year.

LEAVE THEM SMILING

Want to enrich your kids? Here are three estate-planning tips.

1. Give your children a lifetime stream of tax-free income bybequeathing your Roth IRA.

2. If you're in poor health, hang onto real estate and taxable-account investments with big gains, so your kids get the step-up in basis.

3. Avoid estate taxes by making sure life insurance is owned byyour kids or an irrevocable trust.

GETTING GOING

By JONATHAN CLEMENTS

What to Leave Behind: Choosing Assets That Will Benefit Your Kidsthe MostJune 29, 2005; Page D1

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Annuity Required Return

If James needs $500,000 at retirement in 30years, and he expects to save $200 permonth, what average annual compoundrequired return would he need to earn on hissavings to reach his goal?

Required ReturnIf James needs $500,000 at retirement in 30 years,and he expects to save $200 per month, whataverage annual compound required return wouldhe need to earn on his savings to reach his goal?

Keystrokes Display

500000 [FV] 500,000

200 [CHS] [PMT] -200

30 [g] [n] 360

[i] 0.87

12 [x] 10.47

Mortgage Calculations

What is the monthly payment on a 30 year,$250,000 mortgage at 7.5%?

What are the knowns?

What is the unknown?


What is the monthly payment on a 30 year,$250,000 mortgage at 7.5%?

Keystrokes Display

[f] Clear [CLX] 0

30 [g] [n] 360

7.5 [g] [i] 0.63

250000 [PV] 250,000

[PMT] 1,748.04

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What would the payment be if the interestrate was 6.75%?

5.75% and a 15 Year mortgage?


What is the total amount of interest that willbe paid over the life of a 30 year mortgagefor $250,000 at fixed interest rate of 7.5%?

Keystrokes Display

-1,748.04 [CHS] [ENTER] 1,748.04

360 [x] 629,293.06

250000 [] 379,293.06

Practice Problem

What is the total interest paid over the life ofthe loan for a 15 year, $250,000 mortgage at7.5%?

Remaining Balance

To calculate the remaining balance after 15years, of a 30-year, $250,000 mortgage at7.5%?

1. Set up the loan in the Financial Keys

2. calculate the payment

3. Input 180 for n (number of monthsremaining in mortgage)

4. Calculate PV

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Remaining BalanceTo calculate the remaining balance after 15 years,of a 30 year, $250,000 mortgage at 7.5%?

n i PV PMT FV

30 [g] [n] 7.5 [g] [i] 250000 ? 0

[PMT] = 1,748.04

Change [n] to 180

Recalculate [PV] = 188,566.66

Remaining BalanceWhat % of the loan did we pay off in the first180 payments?

Keystrokes Display

250000 [ENTER] 250,000

188566.66 [] 61,433.34

250000 [] .25

Or, only 25% of the loan was paid off in thefirst 180 payments!

Interest

How much interest will be paid in the first180 payments of a 30 year, $250,000mortgage with fixed rate of 7.5%?

Interest

How much interest will be paid in the first 180payments of a 30 year, $250,000 mortgagewith fixed rate of 7.5%?

We know total amount paid:

1,748.04 x 180 = 314,647.20

We know principal paid:

61,433.34

So, interest paid will be:

314,647.20 - 61,433.34 = 253,213.86

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Brute Force Amortization

Calculate remaining balance after 6payments (354 payments remain).

Calculate the amount of first 6 paymentsthat went to principal by subtraction.

Subtract that amount from the total of thefirst 6 payments.

Brute Force AmortizationKeystrokes Display

30 [g] [n] 360

7.5 [g] [i] 0.63

250000 [PV] 250,000

[PMT] -1,748.04

354 [n] 354

[PV] 248,869.24

[CHS] -248,869.24

250000 [+] 1,130.76 (Principal)

MortgageSet-up

MortgageAmortization


Calculate the total interest paid in the firstsix payments towards a 30 year $250,000mortgage at 7.5%.


Keystrokes Display

1,130.76 [ENTER] 1,130.76 Principal

[CHS] -1,130.76

1748.04 [ENTER] 1,748.04

6 [x] 10,488.24

[+] 9,357.48 Interest

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Using the Amortization Keys

Set up the Mortgage in the Financial keys:

n i PV PMT FV

360 0.63 250000 ? 0

Keystrokes Display

[PMT] -1,748.04

0 [n] 0

6 [f] [AMORT] 9,357.46 (Interest)

[xy] 1,130.78 (Principal)[RCL] [PV] 248,869.22

[RCL] [n] 6


Assume that you made 12 payments in the

second year of the loan.

How much did you pay towards interest

during the second year?

How much towards principal?

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Keystrokes Display30 [g] [n] 360

7.5 [g] [i] 0.63

250000 [PV] 250,000

[PMT] -1,748.04

0 [n] 0

12 [f] [AMORT] -18,671.85

[xy] -2,304.63

[RCL] [n] 12

12 [f] [AMORT] -18,492.93

[xy] -2,483.55

[RCL] [n] 24

1st Year

2nd Year

= Interest

= Princi pal

= Interest

= Princ ipal

Amortization Instructions(See Back of Calculator)

n = 30 1) 30 [g] [12x] 5.25 [g] [] 50000 [PV]

i = 5.25% 2) [PMT] 0 [n]

PV = 50 000 3) 12 [f] [AMORT] PMTINT

# PMTS = 12 4) [xy] PMTPVAMORT

Note: The instructions on the back of some of the Platinum HP12c calculators may

contain an error. Line 1) may incorrectly show the Present Value input as 5000

instead of the correct value: 50000.

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New Type of Mortgage Surges in PopularityFixed-Rate Interest-Only Loans Offer Lower Initial Payments but

Delay Debt Reduction

The Wall Street Journal, April 19, 2006; Page D1

hp12c basics - fall 2014 (1)

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