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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:




[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