Solution 24650: Calculating a Wrap around Loan on the BA II PLUS™ and BAII PLUS™ PROFESSIONAL.
How do I calculate the yield for a wrap around loan on the BA II Plus and BA II Plus Professional?
The BAII PLUS and BA II PLUS PROFESSIONAL do not have a built in function to calculate a Wrap Around Loan. However, using the steps listed below is a way around to calculate a wrap around loan.
Example:
1.Borrowing:
Loan (PV) - $38,000
Term (N) - 25 years
Interest Yield (I/Y) - 8.5%
Payment (PMT) – $305.99
2. Lending
Loan (PV) - $76,000
Term (N) - 25 years
Interest Yield (I/Y) - 12%
Payment (PMT) – $800.45
In order to calculate the Present Value for our Yield calculation, we first need to take the sales price of property minus balance outstanding on seller mortgage. The sales price of the property is $76,000.
To find the balance outstanding follow the below keystrokes:
- Press [2nd] and then [FV] to clear the Time Value Money Worksheet
- Enter 38000 and then press [PV].
- Enter 300 and then press [N]. 300 is used, as 25 years is 300 months.
- Enter 8.5 and then press [I/Y].
- Enter 305.99, and then [+/-] to change the number to negative. Press [PMT].
- Finally press [CPT] and then [PMT]. You should recieve 3.83 as an answer.
Once you put in all your information you need to enter in the amortization worksheet to enter it follow the instructions below:
- Press [2nd] and then [PV] to enter the Amortization worksheet.
- Press then Down Arrow key to reach P2, enter 60 and then press [Enter].
Note: P1 stands for the first period of the amortization worksheet and P2 is the ending value of the amortization worksheet. Since we are looking for the value after 5 years, we enter 60 as 5 years is equal to 60 months. - Press the Down Arrow key again and we will see our Balance (BAL) $35,258.78.
The sales price of the property (76000) minus the Balance outstanding (35258.78) is equal to 40741.22 - Next you would subtract the Down Payment that the Buyer is putting down. In our example, we do not have one so we will subtract 0 and use 40741.22 as the PV in our final problem.
- To calculate our payment for our final problem, take the Lending payment and Subtract from the Borrowing Payment. In this example, 800.45 - 305.99 = 494.46.
Last we enter our values and compute for the Yield or the I/Y follow the instructions below. - Press [2nd] and [CPT] to exit the armortization worksheet if you have not already.
- Press [2nd] and then [FV] to clear the Time Value Money Worksheet
- Enter 40741.22 and then press [PV].
- Enter 300 and then press [N].
- Enter 494.46, and then [+/-] on the calculator to change the number to negative. Press [PMT].
- Finally press [CPT] and then [I/Y] to get the yield of our wraparound loan of 14.13.
Please see the BA II Plus and BA II Plus Professional guidebooks for additional information.