Does anyone know how to use the BA II Plus to calculate the the above, including the portfolio std. deviation for 2 values? I read the manual but didn’t find the solution and I don’t want to spend to much time trying to figure it out. I figured out 1 value but not 2. Any help would be greatly appreciated!!
give me a second to re edit this
Since I’ve been through pretty much all of the readings, I assumed that if this were possible I would have known about it. Upon further review, check out pages 67 to 68 on here http://education.ti.com/guidebooks/financial/baiiplus/BAIIPLUSGuidebook_EN.pdf Seeing this makes me wonder about a couple of things. Why didn’t Schweser or the Curriculum mention this? Is this “cheating”? I assume it’s not because they let you use the calculators… but you think they would have mentioned that you could calculate this stuff without doing it by hand…
Wow, I just tried it out - that’s super nice! Yes I wonder why Schweser didn’t tell us about it… This is definitely faster than doing it by hand. Thanks for bringing this up!
Thanks tmjones2! I read the relevant pages you posted but I can’t get the right values when you have 1 security with probabilities/weights. Can you please post an example? Thanks!
when you put values into X1, X2, etc. are you entering “return * probability”? for example: if there is a 50% prob. of .1 and a 50% prob. of .05, put X1=.25 & X2=.025. I don’t have my calculator in front of me but I assume you have to factor in the probabilities before you put the x-values in and not after. if you can do it without the probabilities I don’t see what else you could be doing wrong. You can also do some depreciation stuff on there that is pretty useful if you read the manual. There is some stuff on bonds too but it’s more complicated and I’m not really sure how to use it. Make sure you guys check out the interest rate conversion thing on there. It’s something like you input the annual rate and the # of compounds per year and it computes the effective rate or effective annual yield or something I don’t remember, but I know it gives you all the right answers for that type of question without remembering the formula.
I didn’t know this either. Thanks tmjones2
2nd (5) is pretty useful too its basically holding period return. pretty sure you won’t forget how to do it on the test but it’s always nice to know 100% that you won’t miss it.
tmjones2 Wrote: ------------------------------------------------------- > when you put values into X1, X2, etc. are you > entering “return * probability”? for example: if > there is a 50% prob. of .1 and a 50% prob. of .05, > put X1=.25 & X2=.025. I don’t have my calculator > in front of me but I assume you have to factor in > the probabilities before you put the x-values in > and not after. if you can do it without the > probabilities I don’t see what else you could be > doing wrong. So… how exactly did you get the X1=0.25 and X2=0.025? I’m not quite getting it.
tmjones2 Wrote: ------------------------------------------------------- > when you put values into X1, X2, etc. are you > entering “return * probability”? for example: if > there is a 50% prob. of .1 and a 50% prob. of .05, > put X1=.25 & X2=.025. I don’t have my calculator > in front of me but I assume you have to factor in > the probabilities before you put the x-values in > and not after. if you can do it without the > probabilities I don’t see what else you could be > doing wrong. > > You can also do some depreciation stuff on there > that is pretty useful if you read the manual. > There is some stuff on bonds too but it’s more > complicated and I’m not really sure how to use > it. > > Make sure you guys check out the interest rate > conversion thing on there. It’s something like > you input the annual rate and the # of compounds > per year and it computes the effective rate or > effective annual yield or something I don’t > remember, but I know it gives you all the right > answers for that type of question without > remembering the formula. I tried this but it didn’t work! Can you please post an example and show the keystrokes for a 1 stock with Probabilities and 2 stocks with returns . Thanks soo much!!
I’m pretty sure it is going to be impossible to do the portfolio standard deviation/variance on the calculator without already knowing the formula. The only thing you will be able to do is the expected return, by just entering X1 as (probabilty * return) for each one. Sadly the expeted return is the easy part and you really don’t need to use fancy calculator functions for that. That being said, if anyone figures out how to do this I would be thrilled… Note: the expected return is going to be the SUM of X (Sigma X) because it is probabilities and NOT X bar
OK I think I found a way to do the expected return, standard deviation, and variance of one security with probabilities. The reason it wasn’t working is because in my last post, the sum of X was the expected return and for it to calculate standard deviation/variance correctly, X BAR needs to be the expected return. I tried this out twice and it worked both times and if you are a math wizard there is probably a better way of doing this. Example: 3 events: Event 1: probability = .25 return = .05 Event 2: probability = .5 return = .15 Event 3: probability = .25 return = .25 INPUTS INTO DATA: x1: .05 x2: .15 x3: .15 x4: .25 X Bar = expected return Lower case sigma x = standard deviation square that number to get variance Basically what I did here was I had to “simulate” (for lack of a better term) the probabilities into the data. In this example, it is pretty clear that if you run this scenario 4 times, you should get .05 once (25%), .15 twice (50%) and .25 once (25%). IF THE QUESTION USED PROBABILITIES LIKE .12, .44, .18, AND .26 THIS WOULD BE A LOT HARDER and I have no clue what you what do. Technically, I think you can input up to 100 X values so I guess you could just input a ton of data… this would obvoiusly be very time consuming but I don’t see any reason why it wouldn’t work.
Hi guys, I have read this thread and I think I can help here. I am not a math wizard but I know the calculator well and this is not because I’ve read the manual but maybe because I am like “Deedee” from Dexter’s Laboratory, ”what does thees button dooo?” I am surprised to find that candidates don’t use many functions of their calculators which can make it easy. Most students don’t even know the difference of chain mode versus the AOS. We cannot expect the CFAI or schweser books to tell us this. If they do it is a plus. Now that you guys are familiar with the DATA and STAT functions on your calculators, you are in a better position to be able to appreciate the method I am talking about here. I am assuming that we all can calculate std.dev, var, covar and correlations with the DATA and STAT functions. Sadly, there is no direct way of calculating variances in a probability model, I mean no built-in function of you calculator will do that for you, BUT there is a method that I use and it works. DISCLAIMER: THIS IS SOMETHING I USE AND IS NOT A STANDARD PRACTICE. SO, YOU WILL NOT FIND THIS ANYWHERE ELSE. THIS POST IS NOT MEANT TO CONFUSE ANYBODY; I AM JUST TRYING TO HELP. Let’s look at a complex example. We are given 6 returns of a security along with their respective probabilities and we are required to calculate the variance and std.dev with a probability model The values are Returns probabilities 1. 12% 0.12 2. -2% 0.22 3. 4% 0.07 4. 21% 0.35 5. 11% 0.14 6. 7% 0.10 Now, first if you were solving this on paper you would 1. calculate the expected value of returns and call it E(X) 2. subtract the expected value from each of the return figures to get 6 new values 3. square the values from step 2 to again get 6 new values 4. multiply the values from step 3 with their corresponding probabilities and yet again get 6 new values 5. add up the values from step 5, this is your variance 6. square root of variance is the standard deviation You may follow a different procedure but you will eventually pass through all these steps. Now I would ask you to go ahead and actually calculate the variance and std.dev on paper so that you can understand what I am talking about. If you cannot calculate variance with the probability model on paper already, reading this post will not help. Also if you have already computed it once you will have answers to compare and notice the time that you save. To do it on the calculator we’ll follow these steps; 1. clear memories of the DATA mode by 2nd then 7 then 2nd then CE, also we’ll need to store one memory so we’ll use M0 2. Now that you are in the DATA mode enter the return values (in decimal) as the X series and their corresponding probabilities as the Y series. E.g. the 5th return will be entered as X05 = 0.11 and Y05 = 0.14 (If you don’t know how to enter values, it is simply type the value then press ENTER and then the down arrow to move to the next value 3. Once you have entered all values, go to the STAT mode by 2nd then 8 LIN should be displayed here, If not press 2nd then ENTER and repeat till you see LIN on the display. Once it is displayed press the up arrow key once to get SigmaXY. This value of SigmaXY is your expected return (step 1 of paper solving), store it on M0 by pressing STO then 0. 4. go back to the DATA mode X01 will display now press the following series of buttons ‘-(minus)’ then ‘RCL’ then ‘0’ then ‘=’ then ‘xsquare’ then ‘ENTER’ You will then press the down arrow twice so that X02 is displayed and again press the same series of 6 buttons and then down arrow twice again… till you have done the same for all the 6 values till X06. (This has covered our steps 2 and 3 of paper solving). Also remember that the Y series has not been changed and still holds the values of the probabilities 5. go back to the STAT mode and press the up arrow once to get the new SigmaXY, this new value is our variance! (the calculator has taken care of steps 4 and 5 of paper solving) 6. square root to get std.dev I hope that everybody has understood the process here otherwise this post is useless. Some of you may find it complex and long but with some practice you will see that it saves a lot of time. This is no short cut but just an optimized use of the calculator. The variance is 0.00773 If you need help please ask. enjoy and use your calculators more
Bhabib: I don’t have the strength to go through this right now. But being very non savvy with my calculator I am going to save this post and look into it later. You must have put a lot of time and effort into this. Excellent work sir, and thank you very much. You have any problems going forward, I am going to try my best to help you out. Good luck!
This is absolutely brilliant! I just tried bhabib’s method, and it totally worked. Tested on a Qbank question, and got the correct answer in less than 1.5 minutes. Thank you, Bhabib, for sharing your technique with us 
Do you have any other “secrets” that you can share? I need to make better use of my calculator.
THANKS FOR EVERYONES FEEEDBACK!!! I think i found an easier way For those who have Schweser Notes - Turn to page 204. This is the example I am using here. PROB 10% EPS 1.80 20% EPS 1.60 40% EPS 1.20 30% EPS 1.00 Now start inputting the data. To do this press 2nd (data)< --is number 7 Then 2nd Clear Work to be safe -clear out data With me so far: Now were ready - -This is sooo easy!! X01: 1.80 Press Enter Y01: 10% (put it in % not decimal for all of them) Press Enter X02: 1.60 Enter Y02: 20% Enter…and so forth press enter for all of them X03: 1.20 Y03: 40% X04: 1.00 Y04: 30% Now first step to do is change the stat to 1V ( I think its in “LIN” by default), which is 1 Variable ----> Button 2nd (stat) (stat is number 8) then 2nd (set) (which is the enter button) Keep pressing 2nd set until you see 1-V…Once you see 1-V, start pressing the arrows (up and down) to get the results. In this case, press arrow down. Pressing down twice will give you the (E)r, which on the calculator is XBAR : Nice $1.28 !!! 4th arrow down is the population std deviation (SIGMA x ) on the calculator : .27129 (Pg 205 Schweser) Square that and you get your VARIANCE!!! I’m not sure how to do the Prob Method for 2 Variables but I do know how to do it using the historical data method (Used in Portfolio Mgmt) Same Concept but now you have to change the 1-V to LIN Enter Data for Stock A as X and Stock B for Y 2nd Stat —> LIN start pressing the arrows It calculates the population and sample mean for , sample std deviation (Sx), Population Std Dev (Sigma x) for stock A&B and the correlation coefficient (which is “r”) on the calculator. For historical data, remember its n-1, so use the sample std deviations for A&B Square the std deviations and you get the Variances and obviously if you have both Std Deviations and the Correlation Coefficient, Guess what? You can get easily get the Covariance…I’ll leave that for you to figure out!! Now if someone can figure out a way to get this information for 2 Variables using Probabilities, PLEASE POST IT ASAP!! Thanks and good luck EVERYONE!!
Try using historical data in Portfolio Mgmt Pg 117-118 -Schweser. Enter the returns for both stocks in decimal, in other words, they way they have it listed. Remember switch 2nd stat to LIN for 2 variables You will get the Std Deviations (Calculator Sx for Stock A and Sy for Stock B), and r is the correlation coefficient. Covariance you have to calculate. IT WORKS!! 2nd Data 2nd Clr Work 2004 : X01:+.10 enter Y01: +.20 enter and so forth…once your done entering data 2nd stat 2nd set until you see LIN and press arrow done until you see the info you need! Please post instructions for 2 variable probabilities if anyone can figure it out. Also, does anyone know if this equates to Portfolio std dev and Portfolio Variance? Or do we need to still put in the data in that nasty formula and square it?
njlevel10610, this is indeed very very neat! Thank you so much
hmmm not sure why njlevel10610… but im getting error 4 when i attempt the EPS question… any thoughts?
For which example?