BA II Plus - Nominal & Effective Rate Conversions

BA II Plus - Nominal & Effective Rate Conversions

Hello and welcome! In this video I will be talking about interest
conversions using the BA II plus calculator I'm Joshua Emmanuel. We know that
interest rates could be compounded annually, semi-annually, quarterly, monthly or
even daily. The purpose of this video is to
show how to convert among these different compounding
frequencies using the BA II plus
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calculator. The interest conversion worksheet on the
BA II Plus calculator converts interest rates between nominal
rate and effective annual rate. The nominal rate is basically the interest rate not
compounded annually. It is also known as the annual
percentage rate APR. The effective annual rate simply implies annual compounding. That is, once a year.

The
three variables used on the interest conversion worksheet can be
found by pressing 2ND ICONV that is interest conversion on the BA II Plus calculator. So the
three variables are Nominal, NOM; if you scroll scroll up C/Y which is the compounding frequency
per year; if you scroll up again, Effective which
is the effective annual interest rate. Since there are
only three variables, to navigate through them is pretty
straightforward. Pressing the Up Arrow ↑ once is equivalent to
pressing the Down Arrow ↓↓ twice and vice versa. So if I press the Up Arrow ↑
once here, it goes straight to nominal.

If I press
the down arrow twice ↓↓ it goes to C/Y here. If I go again
to Nominal and I press the Up Arrow once, it goes back to C/Y. Next we'll look at a few
examples. Let us calculate the effective annual rate, which simply means that
interest rate is compounded once a year. In this
example we will calculate the effective annual rate for 10% compounded semi-annually. Press 2ND ICONV it shows NOM =, enter 10 press the ENTER button scroll up, C/Y semi-annually means it's compounded twice a
year so press C/Y = 2 ENTER scroll up again and compute effective EFF.

apr

This shows us that 10%
compounded semiannually is equivalent to 10.25% effective annual interest rate or 10.25% compounded annually. Finding nominal annual interest rates given effective
rates. In this example, given an effective rate of 8.6 percent we want
to find the nominal rate compounded monthly and then compounded
quarterly. So start by going to 2ND interest
conversion ICONV. Since we have the effective rate we have
to scroll up to Effective or like I said you can just scroll down
once and then you'll be in the effective
input mode. Enter the effective rate 8.6 ENTER scroll down C/Y is 12 for monthly compounding ENTER, scroll down and compute nominal. So an effective annual rate of 8.6 percent is equivalent to 8.2785% compounded monthly. If you want to find the nominal rate
compounded quarterly scroll up, change C/Y to 4 ENTER, scroll back down and compute
Nominal. So 8.6 percent compounded annually is equivalent to 8.3358 compounded quarterly Finding Equivalent Rates In this example we want to convert
interest rate from one compounding frequency to another. In this case, we want to find
the nominal interest rate compounded monthly that is
equivalent to 7.53 saying compounded semi-annually.

So we press 2ND
ICONV our nominal rate is 7.5 ENTER scroll up we change C/Y to 2 because its
compounded semiannually ENTER, scroll up again computer effective (EFF). So this is the effective rate for 7.5
percent compounded semiannually but we want the
monthly compounding rate so we scroll back down and change our C/Y to
12 ENTER, scroll down to again and compute nominal. So 7.5% compounded semiannually is equivalent to 7.3854% compounded monthly. And that's how to use the be a two-plus
calculated for interest conversions. Thank you!
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in the cell to use the Dea to post a polluted for
interest combinations think it.

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