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BA II Plus - Nominal & Effective Rate Conversions - YouTube
Channel: Joshua Emmanuel
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hello and welcome in this video I will
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be talking about interest conversions
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using the BA to plus calculator I'm
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Joshua Emmanuel we know that interest
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rates could be compounded annually
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semi-annually quarterly monthly or even
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daily the purpose of this video is to
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show how to convert among these
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different component frequencies using
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the BA to plus calculator the interest
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conversion worksheet on the BA 2 plus
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calculator converts interest rates
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between nominal rate and effective
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annual rate the nominal rate is
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basically the interest rate not
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compounded annually it's also known as
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the annual percentage rate APR the
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effective annual rate simply implies
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annual compounding that is once a year
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the three variables used on the interest
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conversion worksheet can be found by
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pressing second icon that is interest
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conversion on the br-2 plus calculator
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so the three variables are nominal and
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no M if we scroll up see Y which is the
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compounding frequency per year and then
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if you scroll up again effective which
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is the effective annual interest rate
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since there are only three variables to
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navigate through them is pretty
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straightforward pressing the up arrow
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once is equivalent to pressing the down
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arrow twice and vice versa so if I press
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the up arrow once here it goes straight
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to nominal if I press the down arrow
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twice it goes to see Y here if I go
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again to nominal and I press the up
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arrow once it goes back to see why next
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we'll look at a few examples let us
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calculate the effective annual rate
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which simply means that interest rate is
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compounded once a year in this example
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we will calculate the effective annual
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rate for 10% compounded semi-annually
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press 2nd icon
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it shows nominal enter 10 press the
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enter button scroll up see why Semyon
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only means is compounded twice a year so
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press C y equals to enter scroll up
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again and compute effective this shows
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us that 10% compounded semi-annually is
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equivalent to 10.25%
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effective annual interest rate or 10.25%
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compounded annually finding nominal
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annual interest rates given effective
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rate in this example given an effective
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rate of 8.6 percent we want to find the
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nominal rate compounded monthly and then
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compounded quarterly so start by going
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to second interest conversion since we
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have the effective rate we have to
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scroll up to effective or like I said
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you can just scroll down once and then
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you'll be in the effective input mode
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enter the effective rate 8.6 enter
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scroll down see Y is 12 for monthly
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compounding enter scroll down and
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compute nominal so an effective annual
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rate of 8.6 percent is equivalent to
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eight point two seven eight five percent
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compounded monthly if you want to find
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the nominal rates compounded quarterly
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scroll up change cy2 for four enter
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scroll back down and compute nominal so
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8.6 percent compounded annually is
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equivalent to eight point three three
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five eight compounded quarterly five
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equivalent rates in this example we want
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to convert interest rate from one
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compounding frequency to another in this
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case we want to find the nominal
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interest rate compounded monthly that is
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equivalent to 7.5% compounded
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semi-annually so we'll press 2nd icon a
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nominal rate is 7.5 enter scroll up
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change C y2 - because it's compounded
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semi-annually enter scroll up again
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compute effective so this is the
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effective rate for 7.5% compounded
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semi-annually but we want the monthly
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compounding rate so we scroll back down
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and change our Cy to 12 enter scroll
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down again and computes nominal so 7.5
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percent compounded semi-annually is
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equivalent to seven point three eight
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five 4% compounded monthly and that's
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how to use the br-2 plus calculator for
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interest conversions thank you
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