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There are two compounding methods and two corresponding
equations:
B Periodic compounding; for example, quarterly, monthly, or daily
compounding.
E=C(C(1+N+C108BXP)>"P-1)>x108
® Continuous compounding.
E=C(EXP{(N+188>-1>%x188
where
E =
the effective percentage interest rate.
N =
the nominal percentage interest rate.
P =
the number of compounding periods per year.
Entering the Equations. Press lJ[EQUATIONS], then [¥] (if necessary)
until the HP-22S displays TYPE NEW EQN. Type the periodic com-
pounding equation and press (INPUT]. Press (¥], type the continuous
compounding equation ([y*] types *,
types EXP (), and press
(INPUT].
Example: Interest Rate Conversions. You are considering opening
a savings account in one of three banks. Which bank has the most
favorable interest rate to you?
Bank #1
6.7% annual interest, compounded quarterly
Bank #2
6.66% annual interest, compounded monthly
Bank #3
6.65% annual interest, compounded continuously
Press [J[EQUATIONS and display the periodic compounding equation.
Then:
Keys:
Display:
Description:
N?value
Prompts for N.
6.7
P?value
Stores N, prompts for
P.
4
E=6.8702
Calculates E for bank
#1.
N?6.7000
Prompts for N.
8: Additional Examples
133
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