Interest Rate Conversions - HP 10bII+ User Manual

Interest Rate Conversions

The Interest Conversion application uses three keys:
\Í
. They convert between nominal and annual effective interest rates.
If you know an annual nominal interest rate and you wish to solve for the corresponding
annual effective rate:
1. Enter the nominal rate and press
2. Enter the number of compounding periods and press
3. Calculate the effective rate by pressing
To calculate a nominal rate from a known effective rate:
1. Enter the effective rate and press
2. Enter the number of compounding periods and press
3. Calculate the nominal rate by pressing
In the TVM application,
Interest conversions are used primarily for two types of problems:
• Comparing investments with different compounding periods.
• Solving TVM problems where the payment period and the interest period differ.
Investments With Different Compounding Periods
Example: Comparing Investments
You are considering opening a savings account in one of three banks. Which bank has the
most favorable interest rate?
First Bank
Second Bank
Third Bank
First Bank
Table 6-23 Calculating the interest rate (First bank)
Keys
S7j\Ó
Y\Í
\Ó
\Ð
\Ð
\Ó
\Ó Ò
and
6.70% annual interest, compounded quarterly
6.65% annual interest, compounded monthly
6.63% annual interest, compounded 360 times per year
Display
6.70
4.00
\Ó \Ð
,
.
\Í
.
.
\Í
.
share the same memory.
Description
Stores nominal rate.
Stores quarterly compounding
periods.
Time Value of Money Calculations
, and
.
.
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