Calculator Paper

CHARTERED FINANCIAL ANALYST

Texas BA II Calculator Workshop

CHARTERED FINANCIAL ANALYST

Setting up your BAII

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Setting up your calculator (BAII Plus)



Decimal places

&|F!



Set to mathematical precedence

&|"&!



No. of payments per year

&-K



Clear time value calculations

&0

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Memory function

 The calculator can store numbers for you

Example:

 You calculate the answer to 2 + 3.5 = 5.5 and then wish to store it

 Press D then K (5.5 has now been stored and assigned to button K

 Having cleared the screen (P), it is now possible to recall the number by

pressing J then K

It is always possible to recall the last answer from the calculator by pressing

& and then x

CHARTERED FINANCIAL ANALYST

Nominal vs. Effective Interest Rates

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Calculating nominal and effective rates

Periodic rate (r)

Nominal/stated rate

r x Annual no. of periods

Effective Annual Rate (EAR)

EAR = (1 + r)12/n – 1

Where n = number of months

Example: Calculating nominal and effective rates

 Calculate the nominal rate from a 4% six-monthly periodic rate

 Calculate the EAR from a 4% six-monthly rate

 Calculate the EAR from a nominal rate of 8% paid quarterly

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Example:

 8% paid 6-monthly is, in effect, 8.16%

 8% paid quarterly is, in effect, 8.243%

4

 0.08 

FV = $100 1 +

 = $108.243

4 



n

r



Effective rate =  1 +  − 1

 n

where r is the nominal rate

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 You can calculate effective rates from nominal rates using the BA-II

&v

NOM = @ ! "

C/Y = L ! "

EFF = %

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CONTINUOUS COMPOUNDING

Future value based on continuous compounding

 $1 for 1 year at 100% pa, single period

 $1 for 1 year at 100% pa, two periods

 $1 for 1 year at 100% pa, four periods

$2

$2.25

$2.44

 $1 for 1 year at 100% pa, 1,000 periods

$2.717

 $1 for 1 year at 100% pa, infinite...