Finance Calculator
Texas Instruments BA II +

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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, begin by pressing 2nd IConv (above #2 key), and then 2nd CLR Work (bottom row first column)  to erase any old material.

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

Enter Nominal rate: NOM = 5
Press ENTER and then down arrow twice
Enter quarterly compounding: C/Y = 4
Press up arrow once
Compute (press CPT ) 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 CLR Work
Enter effective interest rate: EFF = 6 (to find EFF, press down arrow)
Press ENTER and then down arrow once
Compounding should still be set at: C/Y = 4
Press ENTER and then down arrow once
Compute 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