Finance Calculator
HP 10BII
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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.

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

Enter Nominal rate: 5, 2nd, NOM% (first row second column below the I/YR key)
Enter quarterly compounding: 4, 2nd, P/YR (first row fourth column below the PMT key)
Compute unknown EFF% (2nd, EFF%): answer is 5.09% (2nd, first row third column below the PV key)

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

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

Enter effective interest rate: 6, 2nd, EFF%
Compounding should still be set at: 4, 2nd, P/YR
Compute unknown NOM% (2nd, EFF%): answer is 5.87%

 

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