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
Calculator Workshop
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
Calculator Workshop
You can calculate effective rates from nominal rates using the BA-II
&v
NOM = @ ! "
C/Y = L ! "
EFF = %
Calculator Workshop
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...