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CHARTERED FINANCIAL ANALYST

Texas BA II Calculator Workshop

CHARTERED FINANCIAL ANALYST

Setting up your BAII

Calculator Workshop

Setting up your calculator (BAII Plus)  Decimal places &|F!  Set to mathematical precedence &|"&!  No. of payments per year &-K  Clear time value calculations &0

Calculator Workshop

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

Calculator Workshop

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%

 0.08  FV = $100 1 +  = $108.243 4  

r  Effective rate =  1 +  − 1  n where r is the nominal rate

n

4

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

$2.717 $2.71828…

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Future value based...