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BA II Plus Calculator - Compound Interest (Present & Future Values) - YouTube
Channel: Joshua Emmanuel
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Hello and welcome! In this video we'll be
solving basic
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compound interest problems using BA II Plus
calculator
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Example 1: What is the future value of
six hundred dollars
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invested at 8 percent per annum
compounded semiannually
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for four years in six months. To do this
we need to use the
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time value of money buttons stated
here.
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First let's clear time value of money
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by pressing 2nd clear Time Value of Money
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to clear whatever has been stored
in these
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entries. Next we need to set the
compounding periods
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per year so we go to 2nd P/Y
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and in this case it's compounded
semiannually so we set P/Y to 2
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ENTER, scroll down
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and ensure that C/Y is also said to
2
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The we press 2ND QUIT to leave
that mode
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Next we want to input N
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so this investment is made for four
years and six months which is 4.5 years
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K so we do 4.5
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times the P/Y
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so P/Y in this question is 2
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so we multiply that by two. We get a 9.
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Basically we will have 9 total
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compounding periods in four and a half
years
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interest rates per annum eight-percent
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is entered by pressing I/Y. So
we press 8
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I/Y and then present value is six hundred
dollars so we put that in
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as 600 present value
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And in this case we don't have payments but
because we cleared
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our time value of money we don't need to
bother about payments we can just
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move on but if you didn't clear time
value of money you have to do
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0 payments to make sure no payment
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is included and then finally you can
compute
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future value so the future value is
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853 dollars and ninety nine cents.
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Notice that the future value is negative. This is because we entered a positive
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present value
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Now one of them will be positive. The other will be will be negative because money
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is moving
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in and out. Some people prefer to set P/Y to 1
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so N could be the number of years. So
in that case you have something
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like this 2ND P/Y
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set that to 1, ENTER
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scroll down, make sure you set C/Y
back to 2
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ENTER, 2ND QUIT
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and then you can set N to four and a
half years
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4.5 N, and if you compute future value
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you get exact same result as before.
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Let's look at another example. Example 2
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what is a present value of seven
thousand five hundred dollars
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due in nine years if interest is six
percent per annum compounded monthly.
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So begin by setting P/Y. 2ND P/Y
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it's compounded monthly so we enter 12, ENTER
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Scroll down you can see that C/Y
is automatically set to 12 as well
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2ND QUIT. For N we have nine years,
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compounded monthly, so we have nine times
twelve
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total combining periods, that's 108
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N, interest rate is six percent per
annum so we press 6
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I/Y. If you did not clear time value of
money at the beginning
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just like I didn't you can just do 0 PMT
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and then a future value of 7500 so
7 5 0 0
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future value and then compute
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present value. So the present value is
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4376.50 and like I said before
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some people prefer to set P/Y to 1
so if you want to do that's the 2ND
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P/Y
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1 ENTER scroll down and make sure C/Y is set to 12
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ENTER, 2ND QUIT and then make sure
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N is set to nine years
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and then compute present value
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you get the same result as before. Let's
look at one more
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example. Example 3: How many years will
it take 300 to grow to $450
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if interest is 4.5 percent compounded
quarterly
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So this time you want to find the number of
years. We will be computing
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N. So again we start by setting P/Y.
2ND P/Y
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is compounded quarterly so we set the
P/Y to four
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ENTER scroll down, ensure that C/Y is also
set to 4, 2ND QUIT
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so the interest rate IS 4.5 percent so
we have 4.5
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I/Y. The present value is 300
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300 but this time we have to make sure
we make one
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of present value or future value
negative. So we make the present value
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negative
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K and there is no payment so if you
didn't clear time value of money make sure
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do 0 payment
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future value is 450, we input that
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as positive 450 future value
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and then we compute N
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so N is 36.24
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quarters. So it takes 36.24 quarters to grow to 450
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if interest rate is 4.5 percent compounded
quarterly.
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But want to find this in years so to do
so we just divide
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the N value by P/Y
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P/Y was set to 4 so we just divide this result by four
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divided by four and that's it
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9.06 years. So it takes 9.06 years for $300
to grow to 450 at 4.5 percent compounded
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quarterly
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Again if you prefer to set P/Y to 1
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2ND P/Y 1 ENTER
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scroll down. You have to set C/Y to 4
because it's compounded quarterly
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ENTER. So in in that case if you compute
N
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you will just get the number of years
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so I'm going to quit this and compute
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N. There you go. So it give us
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9.06 years. That's basic examples
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in compound interest. Thanks for watching.
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