Main TVM functions of a BAII Plus Financial Calculator

Main TVM functions of a BAII Plus

Financial Calculator

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The BAII Plus calculator can be used to perform calculations for problems involving

compound interest and different types of annuities. (Note: there are many other TVM

functions of this calculator but they will not be discussed here).

One of the advantages of using a BAII Plus calculator is that it can save you lots of time

on tests and exams. However, always make sure that the numbers the calculator gives

you make sense!

The calculator is also a quick method of double checking your formula calculations.

Main TVM Keys:

N – time in years (for compound interest calculations) OR # of payments made during the

term of the annuity (for annuity calculations)

I/Y – nominal annual rate of interest per year (entered as a %; NOT a decimal)

C/Y – # of interest compounding periods per year

P/Y – # of payment periods per year

PV – present value (the amount of money at the beginning of the transaction.)

PMT – payment amount

FV – future value (money at the end of the transaction.)

Compound Interest Calculations:

1. Set up the payment and interest schedules in the second function (set P/Y and C/Y):

a) Press 2

[I/Y] to get into the P/Y and C/Y mode.

1. If there are payments: input number of payments per year. Press the

number, then [ENTER].

2. If there are no payments: set P/Y equal to C/Y.

b) Press the arrow down ↓

c) Enter the number of compounding periods per year.

Press the number, then [ENTER].

For annually, enter C/Y = 1

For semi-annually, enter C/Y = 2

For quarterly, enter C/Y = 4

For monthly, enter C/Y = 12

d) Press 2

[CPT] (i.e. QUIT) to exit this mode.

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2. Clear out any old information that may be stored by pressing 2

[FV] (i.e. CLR TVM).

3. Input the variables you know. Press the number first and then press the appropriate

TVM key.

For example, to enter a present value of $3,000. Enter 3000, press [PV]. Then, go

on to the next variable.

Important Notes: Since there are no payments, no value is entered for PMT.

Values are entered for all other TVM keys, except the value that is being calculated.

PV is always entered as a negative value to indicate a cash outflow. All other variables

are always positive.

4. Compute the variable you need to find by pressing [CPT] and the variable you are

calculating.

Example:

Find the present value of $3000 due in 5 years and 6 months if money is worth 4.5%

compounded quarterly.

Given:

N = 5.5 years

I/Y = 4.5%

C/Y = 4 (P/Y = 4 since there are no payments)

PMT = none

FV = 3000

PV = ?

Solution:

On your calculator, set P/Y, C/Y = 4.

CLR TVM

5.5 N

4.5 I/Y

3000 FV

Press [CPT] PV

PV = − 2,820.9755

Round the answer to the nearest cent.

Therefore, the present value is $2,820.98.

Tutoring and Learning Centre, George Brown College 2014 www.georgebrown.ca/tlc

Annuities Calculations:

For an Ordinary Annuity (payments made at the END of the payment period):

1. Set up the calculator:

a) Check whether the calculator says “BGN” or nothing on the calculator screen.

If there is nothing, the calculator is in “END” mode.

If the calculator is in “BGN” mode, you need to change it to “END” mode.

Press 2

[PMT] to access the [BGN] second function.

Press 2

[ENTER] (i.e. SET) to switch between BGN and END modes.

Press 2

[CPT] to QUIT.

b) Set the P/Y and C/Y functions:

Press 2

[I/Y] to get into the P/Y and C/Y mode.

Enter the # of payments per year (P/Y).

Press Arrow down ↓

Enter # of compounding periods per year (C/Y)

Press 2

[CPT] to QUIT this mode

2. Clear out any old information by pressing 2

[FV] (i.e. CLR TVM)

3. Input the variables you know.

Important Notes:

For annuity calculations usually only one of either the PV or the FV is involved. The value

not involved in the calculations should be entered as 0. If PV is given it should be entered

as a negative amount.

Payments (PMT) are considered to be cash outflows and should be entered as a

negative number.

4. Compute the variable you need to find.

Example:

Find the future value of $1000 deposited at the end of every month for ten years if interest

is 3.5% compounded semi-annually.

Given:

N = 10 years x 12 = 120 payments

I/Y = 3.5%

C/Y = 2 (since interest is compounded semi-annually)

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P/Y = 12 (since payments are made every month)

PMT = −1000

PV = 0

FV = ?

Solution:

On your calculator, set P/Y = 12 and C/Y = 2.

CLR TVM

120 N

3.5 I/Y

0 PV

−1000 PMT

Press [CPT] FV

FV = 143,243.1146

Round the answer to the nearest cent.

Therefore, the future value is $143,243.11.

For an Annuity Due (payments made at the BEGINNING of the payment period):

1. Set up the calculator:

c) Check whether the calculator says “BGN” or nothing on the calculator screen.

If there is nothing, the calculator is in “END” mode and you need to change it

to “BGN” mode.

Press 2

[PMT] to access the [BGN] second function.

Press 2

[ENTER] (i.e. SET) to switch between BGN and END modes.

Press 2

[CPT] to QUIT.

2. Follow same steps as above (1b to 4).

Example:

Compute the nominal annual rate of interest compounded monthly at which $200

deposited at the beginning of every three months for five years will amount to $5,000.

Given:

N = 5 years x 4 = 20 payments

C/Y = 12 (since interest is compounded monthly)

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P/Y = 4 (since payments are made every three months, which is quarterly)

PMT = −200

PV = 0

FV = 5,000

I/Y = ?

Solution:

On your calculator, set P/Y = 4 and C/Y = 12.

CLR TVM

20 N

0 PV

−200 PMT

5000 FV

Press [CPT] I/Y

I/Y = 9.072823406

Let’s round the answer to two decimal places.

The nominal annual rate of interest is 9.07% compounded monthly.