Hello! I need help and seriously can’t work out what I am doing wrong or entering incorrectly into the calculator
The question is:
What is the effective annual rate for a credit card that charges 18% compounded monthly?
a) 15.38%
b) 18.81%
c) 19.56%
The answer in the book says 19.56% however I can’t work out how to get this on my calculator
I understand having to use the EAR formula, but why am I not getting the answer?
Please help and let me know the steps you are using on your calculator!!
Thanks so much!!
(1 + .18/12) ^ 12 = 1.195618171 → effective rate 19.5618171% or about 19.56%
double-check your EAR formula. it should be:
effective rate = [1 + nominal_rate_compounded_m_times / m]^m - 1
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On the BAII:
2nd ICONV
18 NOM 12 C/Y CPT EFF 19.561817
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this makes sense, I get this thank you for your help!
this I don’t get 
how do I get '18 NOM 12 C/Y CPT EFF ’ part
is C.Y the same button as I/Y? and where is EFF?
If you are using a BA II Plus/ Pro:
Press the 2ND button on the top left, right below the button CPT.
Then press the button ICONV (this stands for interest conversion). This is the same as button for number 2. You are now in interest conversion mode. Use the arrow keys to navigate.
NOM = nominal rate (18 in this case)
C/Y = compounded how many times a year? for this problem, it’s 12 (because you’re compounding monthly)
EFF = annual effective interest rate
be sure to press the enter button (located at the top) after setting the values for NOM and C/Y.
Then go to EFF and press CPT.
This ICONV mode is quite handy - it can convert to and from Nominal rate to effective rate.
It will save you time during the exam.
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I apologize for not putting more detail in my explanation. I will try to be more like @not_a_CFA in the future.
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omg I got the answer!!! Thank you so much for your detailed explanation and taking the time to write all this!! 
nono all good, you helped me a lot as well, thank you as well for responding to my question!!
you’re very welcome. good luck with your exam!
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