HP 10B Operation instructions

Hewlett-Packard 10B Tutorial
To begin, look at the face of the calculator. Every key (except one, the gold shift key) on the 10B has two
functions: each key's primary function is noted in white on the key itself, while each key's secondary
function is noted in gold above the key. To use the function on the key, simply press the key. To access
the gold function above each key, first press the key with the solid gold face, which we will call the "gold
shift"key, and thenpress the desired functionkey. (Note that the gold shift key is near the lower left corner
of the calculator keyboard.)
Turning the Calculator On and Off
To turn on the calculator, press .
C
Note that the ON key is on the lower left corner of the keyboard—the face of the key has a white "C,"
while the word "ON" appears below the key. Also, we will designate keys throughout this tutorialby the
use of small boxes, as above. To conserve the battery, the calculator turns itself off about 10 minutes after
your last keystroke.
To turn the calculator off, press .
OFF
Here we are using the solid black square to represent the gold shift key. Thus, the keystrokes to turnthe
calculator off are (1) press the gold shift key, and (2) then press the Ckey. Note that the word "OFF"
appears above the Ckey in gold. Thus, by pressing the gold shift key first, we are activating the gold
function above the C key, whichis the off function. Also, note that pressing the gold shift key places a little
"up arrow" symbol in the lower left corner of the display. Press the gold shift key again and the symbol
goes away. The keyis atoggle keythat switches back and forthbetween the “regular” and the “gold”
functions. is like the typewriter shift key. After you press , look only at gold writing. In this tutorial,
whenever you see , the label on the next key is the gold label above the key, not the label on the key
itself.
Note that the calculator has a continuous memory, so turning it off does not affect any data stored in the
calculator.
Clearing the Calculator
To clear the calculator’s memory, press .
CLEAR ALL

Hewlett-Packard 10B Tutorial
Page 2
If we did not press , we would input the data shown on the screen to memory. Clearing the calculator
is very important, since unwanted data in memory can result in improper calculations, and hence wrong
answers. It is best to get into the habit of automatically clearing memory before starting a calculation.
Occasionally, you may purposely want to save data, but, in general, you will be entering all new data, so
starting with a clear memory is the safest approach.
There are three different levels of clearing data:
clears all memory and the display.
CLEAR ALL
clears the entire display, but not the memory.
C
clears numbers on the display one at a time if you made a mistake entering data.
»
Changing the Display
Enter 5555.5555.
To change the number of decimal places from 2 to 4, press . 5,555.5555 is displayed.
DISP 4
To change from 4 places to 2, press . 5,555.56 is displayed. (Rounding is automatic.)
DISP 2
We usually set the display to 2 places, which is especially convenient when working with dollars and
percentages. However, we often use 4 places whendealing withinterest rates and rates of return that are
entered as decimals.
Ifperiods and commas are reversed, press . (Many European countries use a ./, conventionthat
./,
is just the opposite of ours.
Note that “PEND” means something is pending. For example, press ÷. The calculator is waiting for
4
the denominator, so “PEND” appears in the display.
Enter and = to get 0.67.
6
Press to see 0.6667.
DISP 4
Press to shift back to 2 decimal places.
DISP 2
To control the brightness of the display, hold down and press or .
C+-

Hewlett-Packard 10B Tutorial
Page 3

Hewlett-Packard 10B Tutorial
Page 4
Periods per Year Setting
One important setting that cancause problems is the periods per year setting. To check the current setting,
press and then press and hold down . The display shows the setting for periods/year.
CLEAR ALL
The calculator comes pre-set at 12 periods per year, that is, it assumes calculations will be done on a
monthly basis. However, finance textbook problems generally use 1 period/year. To change to 1/year:
Press 1 .
P/YR
Now the calculator is set to assume 1 period/year. To confirm this setting, press and hold
.Unlessneededforotherwork, we generallyleave the calculatorsetting at 1period per year.
CLEAR ALL
Time Value of Money (TVM)
The TVM keys are located on the top row of the keyboard.
NI/YR PV PMT FV
In general, TVM problems involve four variables—three are known and the fourth is unknown.
Lump Sums
To begin, we consider TVM calculations withsingle (lump) sums. In this situation, we do not use the PMT
key, so be sure to either clear all, which sets the payment (PMT) equalto 0, or enter 0 as the PMT when
entering the input data. If you know any three variables, you can find the value of the fourth.
Example 1:
What is the FV of $100 after 3 years if the interest rate is 26 percent? First, clear with .
CLEAR ALL

Hewlett-Packard 10B Tutorial
Page 5
Next, enter the data.
3N
26 I/YR
100 PV
0(Optional if registers are cleared.)
PMT
To determine the FV simply press and the FV of -$200.04 is displayed.
FV
The HP is programmed so that if the PVis +thenthe FV is displayed as - and vice versa, because the HP
assumes that one is an inflow and the other is an outflow. When entering both PV and FV, one must be
entered as negative and the other as positive.
Example 2:
What is the PV of $500 due in 5 years if the interest rate is 10 percent? Clear first and then enter the
following data.
5N
10 I/YR
0(Optional if registers are cleared.)
PMT
500 FV
Pressing the key reveals that $310.46 will grow to $500 in 5 years at a 10 percent rate.
PV
Example 3:
Assume a bond can be purchased today for $200. It will return $1,000 after 14 years. The bond pays
no interest during its life. What rate of return would you earn if you bought the bond?
14 N
200 (The key changes the sign.)
+/- PV +/-
0PMT
1000 FV

Hewlett-Packard 10B Tutorial
Page 6
Simply press the key and the HP calculates the rate of return to be 12.18 percent.
I/YR
Remember that the HP is programmed so that if the PV is + then the FV is displayed as - and vice versa
because the HP assumes that one is an inflow and other is an outflow. When entering both PV and FV
values, one must be negative and one positive.
Now suppose you learn that the bond will actually cost $300. What rate of return will you earn?
Override the -200 by entering 300 , thenpress to get 8.98 percent. If you pay more
+/- PV I/YR
for the bond, you earn less on it. The important thing, though, is that you can do “what if” analyses with
the calculator.
Nowdo nothing except to turn off the calculator. Then turn on the calculator .The display
OFF C
shows0.00. Isthememoryerased? Notcompletely. Whatwasonthescreenisgone,but press
RCL N
to get N = 14. The other memory registers also retain information unless you press .
CLEAR ALL
Ordinary Annuities
Example 1:
What is the FV of an annuity of$100 paid at the end of each year for 5 years if the interest rate equals 6
percent?
06% 1 2 3 4 5
/))))))))3))))))))3))))))))3))))))))3))))))))1
-100 -100 -100 -100 -100
5N
6I/YR
0PV
100
+/- PMT
Now press the key, and an FV of $563.71 is displayed.
FV

Hewlett-Packard 10B Tutorial
Page 7
Example 2:
What is the PV of the same annuity?
Leave data in calculator, but enter 0 as the FV to override, then press to get $421.24.
PV
Annuities Due
Each payment ofanannuitydue occurs at the beginning ofthe period instead ofat the end as with a regular
annuity. In essence, each payment is shifted back one period. To analyze annuities due press
. The word “begin” appears on the screen. Now the HP analyzes the cash flows based on
BEG/END
beginning of period payments. Change back to end mode by pressing .
BEG/END
Interest Conversion
The following equation is used to convert a nominal rate to an effective rate.
Given: kNom = 10% and m = 12 payments/year,
However, it’s much easier to convert the nominal rate using the calculator:
10 NOM %
12 P/YR
= 10.47% shows on the screen.
EFF %
Now switch back to 1 payment/year: 1 .
P/YR

Hewlett-Packard 10B Tutorial
Page 8
Cash Flow Operations
Example 1: Uneven Cash Flows
Assume the following cash flows:
0 10% 1 2 3 4
/))))))))3))))))))3))))))))3))))))))1
0 50 100 150 200
What is the PV of these CFs?
First clear the HP and make sure that periods/year is set equal to 1.
0Sets CF0equal to 0.
CFj
50 Sets CF1equal to 50. Onnext entry, hold down CFjkeyto see what it says. By
CFj
holding down CFjkey, you see that you just entered CF2.
100 CFj
150 CFj
200 CFj
The CFs from the time line are entered. Now enter the interest rate.
10 I/YR
At this point the HP knows the cash flows, the number of periods, and the interest rate. To find the PV,
press to get PV = NPV = $377.40.
NPV
Example 2: Embedded Annuities
We have these cash flows, which contain embedded annuities:
0 10% 1 2 3 4 5 6 7 8 9
/)))))))3))))))3))))))3))))))3))))))3))))))3))))))3))))))3))))
))1 0 100 100 100 200 200 300 300 300 300

Hewlett-Packard 10B Tutorial
Page 9
What’s the PV?
Clear, set P/YR = 1 if changed.
0CFj
100 CFj
3 Nj
200 CFj
2 Nj
300 CFj
4 Nj
Now the HP knows the cash flows. Thus, enter the interest rate:
10 I/YR
Now press to get PV = NPV = $1,099.94.
NPV
To check your entries:
0 to see CF0.
RCL
to see first CF entry.
RCL CFj
to see how many times CF1is repeated, etc.
RCL Nj

Hewlett-Packard 10B Tutorial
Page 10
1If a negative CF occurs at the end of a project’s life, then the HP may give an error message, indicating that
there are two IRRs. Enter data, then enter 10 to get the first IRR. Then enter a large
STO IRR/YR
percentage, such as 100 to find other IRR. You might have to experiment with “guesses” to
STO IRR/YR
locate the two IRRs.
Example 3: The Rate of Return Offered by an Investment (IRR)1
Assume that we invest $1,000 now(t = 0) and then expect to receive an uneven set of cash flows. Here
is the CF time line:
0 1 2 3 4
/))))))))3))))))))3))))))))3))))))))1
-1000 300 400 200 600
What rate of return will we earn? Enter the following:
CLEAR ALL
1000
+/- CFj
300 CFj
400 (Hold down CFjkey to be sure you entered CF2.)
CFj
200 CFj
600 CFj
= 16.71%
IRR/YR
Youcanalso determine the NPVofthe investment. Leavedataenteredandthenenter the opportunitycost
interest rate, say 8 percent. To find NPV press
8I/YR
NPV
The NPV of $220.50 is displayed. Thus, the PV of the cash inflows exceeds the cost of the investment
by $220.50.

Hewlett-Packard 10B Tutorial
Page 11
Statistical Calculations
The HP can also be used for several types of statistical calculations.
Mean and Standard Deviation (F)
Year Sales
1994 $150
1995 95
1996 260
What’s the mean (average) and standard deviation (F) of sales over the 3 years?
Use the E+ key to enter data:
CLEAR ALL
150 A number 1 is displayed.
E+
95 A number 2 is displayed.
E+
260 A number 3 is displayed.
E+
Determine the mean and standard deviation by simply pressing
_ _ The mean equals $168.33.
x, y
The standard deviation is $84.01. and are sample standard
Sx, Sy
deviations. Fxand Fyrefer to population statistics.
Linear Regression
Betacoefficients can be calculated by using the HP’s linear regression capabilities. The X(independent
variable) and Y(dependent variable) values must be entered in the proper sequence, where the X data is
on the horizontal axis (market) and Y data is on the vertical axis (stock).
Year Market (kM) Stock (kj)
____ __________ ________
123.8% 38.6%
2-7.2 -24.7
3 6.6 12.3
4 20.5 8.2

Hewlett-Packard 10B Tutorial
Page 12
5 30.6 40.1

Hewlett-Packard 10B Tutorial
Page 13
Enter the data as follows:
CLEAR ALL
23.8 38.6
INPUT E+
7.2 24.7
+/- INPUT +/- E+
6.6 12.3
INPUT E+
20.5 8.2
INPUT E+
30.6 40.1
INPUT E+
0 ^The value -8.92 is ywhenx=0, or kjwhen = 0, which is the vertical
y, m
axis intercept.
The value displayed, 1.60, is the slope coefficient, or the beta coefficient.
SWAP
Amortization
The HP can also be used to calculate amortization schedules.
Example:
Determine the interest and principalpaid eachyear and the balance at the end ofeach year on a three-year
$1,000 amortizing loan which carries an interest rate of 10 percent. The payments are due annually.
First, check payments/year and be sure it’s 1. Now perform the following steps:
CLEAR ALL
3N
10 I/YR
1000 PV
A payment of -402.11 is displayed.
PMT
This is the amortization schedule corresponding to the loan.

Hewlett-Packard 10B Tutorial
Page 14
Beg. Bal. Payment Interest Princ. Repmt. Ending Bal.
1 1,000.00 402.11 100.00 302.11 697.89
2 697.89 402.11 69.79 332.32 365.57
3 365.57 402.11 36.56 365.55 .02
With the data still entered in the TVM menu, do the following:
1INPUT
“PEr 1-1" is displayed.
AMORT
Hold down to see Int, then release and -100.00 is displayed, whichis the interest
=
payment during the first year. Write it into a table as 100.00
Hold down to see Prin; release to see -302.11. This is the repayment ofprincipal
=
in the first year. Write it in the table.
Hold down to see Bal; release to see 697.89, the ending balance at the end of the
=
first year. Write it down.
“PEr 2-2" is displayed.
AMORT
-69.79 is the interest paid in Year 2.
=
-332.32 is the principal paid in Year 2.
=
365.57 is the ending balance at end of Year 2.
=
“PEr 3-3" is displayed.
AMORT
-36.56 is the interest paid in Year 3.
=
-365.55 is the principal repayment in Year 3.
=
0.02 is the balance at end of Year 3.
=
See the manual for an explanation of how to do monthly amortization.

Hewlett-Packard 10B Tutorial
Page 15
Next, with the data still in the calculator, do the following:
1 3 “PEr 1-3" is displayed.
INPUT AMORT
Hold down to see Int, thenreleaseand -206.35 displayed. This is the total interest
=
paid over Years 1 to 3.
Hold down to see Prin, then release and -999.98 is displayed. This is the total
=
repayment of principal over Years 1 to 3.
Hold down to see Bal, then release and 0.02 is displayed. This is the remaining
=
balance.