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Interest Rate Conversions
Often you need to compare two different quoted interest rates. Some quotes (those
for loans) are nominal rates; others (those for investments) are effective rates.
Furthermore, different compounding periods are used on different investments so
that an effective rate is often not directly comparable with another effective rate.
The TVM menu offers a small utility calculation to convert between the various
kinds of interest rates/rates of return:
1. Press (MENU), (T)VM, (F3) (RE={=IxIX®).
2. Type in the number of payments or compounding periods per year for the
nominal rate and press (F3) (SERIE).
3. Type in the nominalinterest rate and press
JESU).
4. Notice the three equivalent interest rates that are calculated—you can change
any of these rates and watch the others (including I%YR) change:
e
EFFX*
gives the effective annual rate after compounding.
e
COMT
gives the equivalent nominal rate if the compounding was
continuous.
e 368/35 gives the nominal rate based on the 360/365 method.
5. Press
to switch back to the TVM screen. Notice that the rate stored in
I %%'R will be the same rate stored in that variable when you switch back to the
main TVM screen. Of all of the various interest rates, only the I%YR is used
in TVM calculations.
Unit Conversions
Conversions work similarly in most categories. As an example, convert 95.48 liters
to pecks:
1. Press (MENU), (Clonv, (Volume to move to the volume conversion menu.
2. Type 99 .48 and press [F5) (BIRD. You will see the equivalent measures
in each of the other built-in units.
3. Press
(HEED), and see that 95.48 liters is equivalent to 10.84 pecks.
48
2. ANALYZING INFORMATION
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