Interest rate conversions, Investments with different compounding periods, Example: comparing investments – HP 10B User Manual
Page 74
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Interest Rate Conversions
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The Inlcrcsl Conversion application uses three keys:
BlNOM%l. BIEFF%L and M
p
7
yr
I, They convert between
nominal and annual cfTective interest rates. Nominal and
effective interest rates arc described on page 47.
If you know an annual nominal interest rale and you wish to solve for the
corresponding annual effective rate:
1. Enter the nominal rate and press BlNOM%l.
2. Enter the number of compounding periods and press BIP/YRI.
3. Calculate the cITcctive rate by pressing ЯШЕЕЭ*
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
ШШ-
1Ш1ЕЗ
In the TVM application, BlNOM%l and ll/YRl share the same register.
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 arc considering opening a
savings account in one of three banks. Which bank has the most favorable
interest rale?
5: Time Value of Money Calculatlont 71