Finance Calculator
Texas Instruments 83


Interest Rate Conversion

The interest conversion function can be used when either the nominal interest rate is given, and the annual effective interest rate is needed, or when the annual effective rate is given and the nominal rate is needed.

To use this function, go to menu items B and C to convert interest rates from an annual effective rate to a nominal rate (Nom () or from a nominal rate to an annual effective rate ( Eff( ).

a. A certificate offers a nominal interest rate of 5% with quarterly compounding. What is the annual effective interest rate?

2nd, FINANCE, scroll down to C: Eff (, ENTER
enter Nominal rate: 5 and then press , (comma can be found on fifth row second column)
enter quarterly compounding: C/Y =4 Note: it should look like: Eff( 5,4
press ENTER for unknown EFF: answer is 5.09%

This process can be reversed, for example, to find the Nominal rate when the Effective rate is given.

b. A certificate offers an annual effective interest rate of 6% with quarterly compounding. What is the nominal interest rate?

2nd, FINANCE, scroll down to B: Nom(, ENTER
enter effective interest rate: EFF = 6 and then press ,
compounding should still be set at: C/Y = 4 Note: it should look like Nom( 6,4
Press ENTER for unknown NOM: answer is 5.87%

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Last Updated on 1 May 2002, e-mail any comments to: robert.balik@wmich.edu