How to use the calculator
Every note comes down to five numbers. Know any four and the calculator finds the fifth. Choose the value you want with the round button on its left, fill in the others, and press Calculate.
- N is the number of payments left on the note.
- I is your yield: the yearly return on the price you pay, not the note’s interest rate.
- PMT is each payment the payor makes.
- PV is the price you pay for the note today.
- FV is the balloon due at the end. Use 0 for a fully amortized note.
Two questions it answers
“What yield do I get at this price?” Solve for I. A $10,000 note paying $100 a month interest-only, with a $10,000 balloon in 48 months, bought for $8,000, yields 19.2%. That is the example from The Myth of the Discount Rule, and the calculator opens with it.
“What should I pay to get the yield I want?” Solve for PV. Enter the yield your buyer needs as I, and the calculator gives the most you can pay. The same note at $66.66 a month must be bought for about $6,890 to yield 19.2%.
Good habits when you quote
- Price on yield, never on a discount rule of thumb.
- Use the payments left, not the original term.
- Leave room for closing costs and your fee before you quote a seller.
Want to check numbers by hand? Read PVs Without a Calculator and 7 Rules for Quoting the Deal.