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# Correct Setup for HP-12C Calculators

The mature Hewlett Packard HP-12C financial calculator still sets the standard.

There is one problem, in my opinion, that was introduced with this wonderful tool.
[This was not the case with the predecessor HP-22 (early 1980's).]

In its normal mode, the HP-12C normally uses **simple interest** for non-integer
periods. This is a deviation from the customary formula and is, in my humble opinion, an
error.

After agonizing over this for several months after I bought my HP-12C in 1985, I
discovered the "switch" to use continuous compounding. It has been set ever
since.

In a recent class, two participants with HP-12C's were asking why they were getting a
slightly **wrong answer**. The reason was that their calculators were set for the
default simple interest.

With some investigation, we re-discovered the procedure for the setting that fixes the
problem (it's on page 59 in the manual). Here is the **recommended "fix"** if
you own one of these calculators:

- Press [STO][EEX]. A small "C" should appear and remain at the bottom of your
display. [Repeat the action to restore the default.]

As a check, the correct discounting for $1000 to be received 3.5 years in the future,
discounting at 10% (effective annual interest), should be PV = $1000^-3.5 = $716.35.
["^" is the symbol for the power function].

Now, using HP-12C's financial functions:

1000[CHS][FV]

3.5[n]

10[i]

[PV] => 716.35.

Happy discounting!

The HP-12c continues the 'gold standard' for financial calculators. HP
has updated the inside electronics several times since the calculator was
introduced in 1981. They now offer a 12c Platinum (3/2004), featuring 10
new functions, a lithium battery, and an algebraic data entry option.
Sales of the 12cPlatinum have been modest, while the sales of the 12c classic
have increases!

-- John Schuyler, rev. 27-Aug-96, 6-Apr-04