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Solution 11269: Calculating Interest Only Payments on the BA II PLUS™ or BA II PLUS™ PROFESSIONAL.

How do I compute interest only payments on the BA II PLUS or BA II PLUS PROFESSIONAL?

In an interest-only mortgage, none of the payment is applied to the principal. This means that at the end of the term, the full loan amount is still owed, therefore, the future value (FV) is the same as the present value (PV). The example below shows how to compute an interest only payment on the BA II PLUS and BA II PLUS PROFESSIONAL.

Example: What is the interest only payment of a mortgage for $75,000 at 8.5 % interest with 360 payments?

Solution:

PV = 75000
I/Y = 8.5
N = 360
PMT = ?
FV= 75000

Compute:

1) Press the [2nd] key and the [I/Y] key. (This enters the P/Y worksheet.) 
2) Set P/Y to 12 for monthly payments by entering 12 and pressing the [ENTER] key. This also sets the C/Y (compounding periods) to monthly. 
3) Press the [2nd] key and the [CPT] key. (This exits the P/Y worksheet.) 
4) Press the [2nd] key and the [FV] key. (This clears the TVM worksheet.) 
5) Input 75000 and press the [PV] key. (This stores 75000 to the Present Value register.) 
6) Input 8.5 and press the [I/Y] key. (This stores 8.5 to the Interest Per Year register.) 
7) Input 360 and press the [N] key. (This stores 360 to the N register.) 
8) Input -75000 and press the [FV] (This stores -75000 to the Future Value.) 
9) Press the [CPT] key and the [PMT] key.

The monthly payment displayed will be $531.25.

Please see the BA II PLUS and BA II PLUS PROFESSIONAL guidebooks for additional information.