Read the manual. Do the examples. They LET you bring in an approved calculator to the exam. It will be your only friend during the exam. XOXOXOXOXOXO Unka Breddie
AND DON’T GET ME STARTED ON BALLPOINT PENS!!!
2 Likes
Yes, I recommend bringing a calculator into the exam as well.
1 Like
as a reminder,
also, double check and make sure the calculator is in the appropriate BEG or END mode. it would suck to have the wrong answer for the annuity calculation because you forgot to change it back to END mode between problems.
2 Likes
Only psychopaths use the HP. Fact.
4 Likes
To approximate continuous compounding on the TVM worksheet, set C/Y to something extremely high, e.g. 525,600 or 999,999.
To approximate a perpetuity on the TVM worksheet, set N as something extremely high, e.g. 100,000.
2 Likes
Linear interpolation on a BAII
Enter your 2 (x,y) pairs in DATA. Go into the STATS worksheet and select LIN. Arrow thru the variables until you hit X’ or Y’. Enter your given value, arrow to the value you are looking for and CPT.
Example: Given (0,10) and (50,110), interpolate for X=25
2nd DATA
2nd CLR DATA
0 X01 ENTER 
10 Y01 ENTER 50 X02 ENTER 110 Y02 ENTER
2nd QUIT, 2ND STAT
LIN
until you reach X’
25 ENTER
CPT Y’ 60
2 Likes
Calculating equivalent interest rates
Use the ICONV worksheet and make the effective interest rate the “anchor” for any recalculation.
Example: If the nominal rate compounded monthly is 8.7%, what is the equivalent rate compounded daily?
2nd 2 (for the ICONV worksheet)
NOM 8.7 ENTER C/Y 12 ENTER 
EFF CPT 9.055434578 C/Y 365 ENTER NOM CPT 8.66964357
1 Like
not a fan of Reverse Polish Notation (or whatever it’s called)?
agreed, use the BA II+
1 Like
Setting P/Y and C/Y
Your calculator allows you to set P/Y and C/Y to match the parameters given in the question. For example, if you have monthly payments and semi-annual compounding, you can set P/Y=12 and C/Y=2. The calculator will do all the drudge calculations for you.
Now I know some of you set P/Y=C/Y=1 and rejig I to fit in the TVM worksheet. As long as you set I correctly, you will get the same answer as if you set P/Y and C/Y to match the frequencies given in the question. Key point: as long as you set I correctly!!
I prefer to think of myself as a sociopath.
Annuities where the payment amount bumps up once or even multiple times
Say you have an annuity that pays $1,000/year for years 1-5 years and then $2,000 for years 6-10. To calculate the PV, you could use any of the following setups in the TVM worksheet ways:
- Calculate a 10 year annuity of $2,000 and subtract a 5 year annuity of $1,000/year
- Calculate a 5 year annuity of $1,000 and add the 5 year value of $2,000.year discounted by 5 years of interest
- Calculate a 10 year annuity of $1,000 and add a 5 year annuity of $1,000/year discounted by 5 years
The above are all algebraically equivalent, but ain’t nobody got time for that!!! Go to the CF worksheet. Set C01=1000, F01=5, C02=2000, F02=5; go to the NPV worksheet, plug in I and compute NPV. Waaaaaaay less keystrokes than with the TVM worksheet.
Variance and standard deviation
If you’re given percentages or weights for the observations, just turn them into whole numbers and plug 'n chug with DATA/STATS!! The (x,y) pairs only let you enter whole numbers for y, where y is the relative frequency of observation X.
E.g X=1 occurs 75.3% of the time, X=3 occurs 24.7% of the time. Enter (1,753) and (3,247) in the DATA worksheet. The STAT worksheet will calculate the mean and standard deviation for you!!!
Actually, learn to use both. The 12C is blazingly fast to calculate once you learn RPN. No contest there. TVM, much faster, too. The for IRR &NPV, use the BAII. The 12C is okay, but if you make a mistake you have to re-enter everything. THE BAII allows you to go back and check your entries and correct them if they’re wrong. It’s well worth learning RPN.
As a reminder to everyone,
the Proctor is required to reset your calculator to default mode.
You need to know how to change the calculator settings.
Here’s a video on how to change from Chn to AOS, and go from 2 to 9 (floating) decimals.
1 Like
Macaulay Duration
- Calculate the denominator using the TVM worksheet
- Enter the values for t*CF in the CF worksheet and set F0x to 1
- In the NPV worksheet, calculate the numerator using the current yield
- Divide step 3 result by step 1 result
Example: 4 year, 7% coupon, 5% market yield, all annual
Bond price:
2nd P/Y 1 ENTER C/Y 1 ENTER
2nd CLR TVM
N 4 I 5 PMT 7 FV 100 CPT PV -107.091901
Numerator of Macaulay formula
CF
2nd CLR WRK
C01 7 ENTER F01 1 C02 14 F02 1 C03 21 F03 1 F04 428
2nd QUIT
NPV worksheet
I 5 CPT NPV 389.622328
Macaulay duration = 389.622328/107.091901 = 3.638
For non-annual compounding and coupons, you would have to adjust rates and cash flows accordingly.
1 Like
When valuing a single amount for PV, FV, I, or N, it is vital that you set P/Y=1!!! The BAII does funny things if P/Y <> 1.
1 Like
Harmonic mean
Using the DATA worksheet, set (1/value) as X0x and 1 for Y0x. Use the 1-V STAT mode, arrow down to X bar and hit the 1/X key to take its reciprocal.
Example: Find the harmonic mean of 10, 11, 12
2ND DATA
CLR WRK
0.1 X01 1 Y01 0.09091 X02 1 Y02 0.08333 X03 1 Y03
2ND QUIT
2ND STAT
1-V
Xbar displays as 0.09141
1/X key will display 10.93923