PRACTICAL APPLICATIONS For YOUR FINANCIAL CALCULATOR

PRACTICAL APPLICATIONSForYOUR FINANCIAL CALCULATORPublished by:KEIR EDUCATIONAL RESOURCES4785 Emerald WayMiddletown, OH 450441-800-795-53471-800-859-5347 FAXE-mail customerservice@keirsuccess.comwww.keirsuccess.com 2011 Keir Educational ResourcesHP 10bII – 1800-795-5347

TABLE OF CONTENTSHP 10bIIHP 12cTI BAII PlusHP 17bII ON/OFF – “Shift Key”HP 10bII – 3HP 12c – 4TI BAII – 3HP 17bII – 3BatteriesHP 10bII – 3HP 12c – 4TI BAII – 3HP 17bII – 4Low Power DisplayHP 10bII – 4HP 12c – 4HP 17bII – 4ContrastHP 10bII – 4HP 12c – 5HP 17bII – 4Comma/DecimalHP 10bII – 4HP 12c – 5HP 17bII – 5Number of Decimal PlacesHP 10bII – 4HP 12c – 5HP 17bII – 5Negative NumbersHP 10bII – 5HP 12c – 6TI BAII – 5HP 17bII – 6Clearing the CalculatorHP 10bII – 5HP 12c – 6TI BAII – 5HP 17bII – 6Algebraic CalculatorHP 10bII – 6HP 12c – 7TI BAII – 6HP 17bII – 7TI BAII – 6HP 17bII – 7Chapter 1:Introduction: The BasicsBackspace and Continuation HP 10bII – 6HP 10bII – 7HP 12c – 8TI BAII – 7HP 17bII – 9HP 10bII – 9HP 12c – 10TI BAII – 9HP 17bII – 10Solving for NHP 10bII – 11HP 12c – 11TI BAII – 11HP 17bII – 13Solving for I/YRHP 10bII – 14HP 12c – 16TI BAII – 15HP 17bII – 16Solving for PVHP 10bII – 17HP 12c – 18TI BAII – 17HP 17bII – 19Solving for PMTHP 10bII – 19HP 12c – 20TI BAII – 19HP 17bII – 21Solving for FVHP 10bII – 22HP 12c – 23TI BAII – 23HP 17bII – 24AmortizationInflation-Adjusted Return(Real Return)College FundingUneven Cash Flows –Internal Rate of Return –Net Present valueAdvanced College FundingHP 10bII – 24HP 12c – 26TI BAII – 26HP 17bII – 27HP 10bII – 26HP 12c – 28TI BAII – 28HP 17bII – 29HP 10bII – 31HP 12c – 32TI BAII – 33HP 17bII – 34HP 10bII – 36HP 12c – 37TI BAII – 39HP 17bII – 39HP 10bII – 41HP 12c – 43TI BAII – 45HP 17bII – 47ResetChapter 2:Time Value of Money 2011 Keir Educational ResourcesHP 10bII – 2800-795-5347

TABLE OF CONTENTS, CONTINUEDHP 10bIIHP 12cTI BAII PlusHP 17bII Chapter 3:CFP Formula SheetChapter 4:Investment CalculationsFormulas – 46Formulas – 48Formulas – 50Formulas – 53Nominal – Effective YieldsAfter Tax Yield –Tax Equivalent YieldSquares, nths, Square Roots,nth RootsStore and RecallStandard Deviation –Population/SampleStandard Deviation of atwo-asset PortfolioWeighted Return, Beta,or DurationGeometric Mean –Time Weighted ReturnDurationMultiple DividendGrowth RatesInternal Rate of Return –More Frequent thanAnnual CompoundingFuture Value ofSerial PaymentsDifferent Compoundingand PaymentsAppendix A:Answer Sheet toPractice QuestionsHP 10bII – 64HP 12c – 66TI BAII – 68HP 17bII – 71HP 10bII – 65HP 12c – 67TI BAII – 70HP 17bII – 73HP 10bII – 66HP 12c – 68TI BAII – 70HP 17bII – 73HP 10bII – 68HP 12c – 70TI BAII – 72HP 17bII – 75HP 10bII – 69HP 12c – 71TI BAII – 73HP 17bII – 76HP 10bII – 71HP 12c – 73TI BAII – 75HP 17bII – 78HP 10bII – 72HP 12c – 74TI BAII – 77HP 17bII – 80HP 10bII – 74HP 12c – 76TI BAII – 81HP 17bII – 82HP 10bII – 75HP 12c – 77TI BAII – 81HP 17bII – 84HP 10bII – 77HP 12c – 79TI BAII – 83HP 17bII – 86HP 10bII – 79HP 12c – 80TI BAII – 85HP 17bII – 87HP 10bII – 80HP 12c – 82TI BAII – 86HP 17bII – 89HP 10bII – 81HP 12c – 83TI BAII – 88HP 17bII – 90HP 10bII – 83HP 12c – 85TI BAII – 89HP 17bII – 92 2011 Keir Educational ResourcesHP 10bII – 3800-795-5347

INTRODUCTIONPractical Applications for your Financial CalculatorThe need for this book has been long apparent from the face of anxiety that accompanies afinancial calculator. Students who wear this face are typically learning to use the many functionsof a financial calculator for the first time to prepare for professional exams. Unfortunately,students can display a surprising lack of proficiency just weeks before an exam. Perhaps theyhave procrastinated or maybe they took a calculator class at the beginning of their studies andhave forgotten the basics by the time the exam rolled around. In either case, it has become acrippling defect in their exam preparation. Their focus is on the calculator, diverting attentionfrom study, wasting precious time, and preventing them from connecting their knowledge withthe techniques of the calculator.In the construction of this book, the aim has been to strike a balance between the academicconcepts of time value of money and the technical aspects of a calculator manual, to produce abook and course that is user-friendly and relevant to students’ needs. We sought to use languagestudents can understand so the lessons lead to practical applications students will face on examsand in their professional lives. In other words, we wanted to create the book we wish we hadbeen handed when we purchased a calculator.The book can be used as a “stand-alone” calculator study guide or in conjunction with thecurriculum of a Certificate Program or University Degree. It follows the same format as the twoonline calculator classes that Keir Educational Resources offers: The Basic Financial CalculatorClass and the Formulas Class.Each of the four calculators that the book covers – HP 10bII, HP 12c; TI BAII Plus, andHP 17bII – has its own section, so there is no need for the student to flip back and forth to findthe pertinent information. The keystrokes are typed in bold “key fonts” so there is no need tosquint to see if there was a comma “separator” or not. The language is straight forward. Whentechnical terms need to be explained, they are done simply and translated into words that theinstructor or other students are likely to use. Each individual calculator section is broken into 4chapters: 1 – Intro: The Basics; 2 – Time Value of Money; 3 – CFP Formulas and CH. 4 –Investment Calculations.The introductory chapter covers the basics of the calculator. Some items are very elementary,such as turning the calculator on and off or changing the batteries. Others are simple butinvaluable, for example, introducing the student to the most important keys and their functions orclearing the calculator. We also explain some of those seemingly inexplicable things that happento your calculator (Where did that comma come from?) and how to correct it, and in the worstcase scenario, how to reset the calculator.Chapter 2 teaches the basics of Time Value of Money and how to use the calculator to solve foreach of the variables. We work straight across the keyboard. And the sections are marked verysimply (Solving for N; Solving for PV). There is no question as to where the student has to gofor the information. We work through each variable with problems that are based upon 2011 Keir Educational ResourcesHP 10bII – 4800-795-5347

annualized returns and then more frequent compounding. We apply those lessons to some of themore complex TVM problems the student will encounter.Chapter 3 covers all of the formulas that are currently found on the CFP CertificationExamination. We explain not only what the symbols mean, but their use and the investmentconcepts they are used for. We “demystify” the formula sheet and make it accessible.Chapter 4 then uses the formulas and shows the necessary keystrokes associated with them in thecontext of investment planning. We also cover formulas commonly found on exams but notincluded on the formula sheet. Chapter 3 and 4 are the perfect way for students to start theirinvestment classes. The chapters offer students concepts and applications before getting into the“meat” of the class, allowing the instructor more time for other issues.For those who are familiar with their calculator, the language may at some times seemrudimentary, and students may notice that occasionally there are “unnecessary” steps in acalculation. These teaching techniques are employed to get students into “good habits” at thebeginning of their studies. In our experience from working with students at different levels oftheir careers, these habits will resolve basic problems and prove beneficial to them in the longrun.All of the calculators in this book have many more functions than we discuss in this text. Wehave purposely limited our coverage to the functions and calculations that are most critical at thebeginning of a student’s professional career. There is no good reason to confuse issues at thestart of an individual’s study process. As students master the basics of the calculator, they willhave the necessary tools to explore more complex uses.Finally, to the students using this book, our present interest is for you to become successful.Your interest, compounded with the time you put into your studies, will hopefully increaseexponentially to a future whose value is achievement of your goals. As you begin yourprofessional voyage, our wish is that your triumphs increase in serial installments and yourcareer smoothes out the uneven cash flows of life. That would be our greatest payment. 2011 Keir Educational ResourcesHP 10bII – 5800-795-5347

Sample for HP 10bII calculatorChapter 4Investment CalculationsIn this chapter, you will encounter some additional calculations that you can use duringinvestment analysis, whether for product selection or performance. You will start off with somecalculation tools that will be incorporated later into larger problems.Nominal and Effective Interest RatesIn previous sections, you learned about the need to set your calculator to the correctcompounding periods before entering the interest rate. The interest rate you have been inputtingis the “nominal” rate. What is happening inside your calculator is that the nominal rate is beingconverted to the effective rate.When compounding occurs once per year, the nominal and effective annual rates are identical. Ifcompounding occurs annually, the interest is calculated and added to the principal annually, andthat is why annual nominal and effective rates are the same. If, on the other hand, compoundingoccurs, for example, on a monthly basis, the interest is calculated and converted to principal afterone month has elapsed, again after two months, three months, etc. You saw that more frequentcompounding resulted in higher future values.The effective annual interest rate is defined as the annual rate that would produce, in onecompounding period, the same amount of interest as does the nominal annual rate with itscompounding frequency. For instance, a 9 percent nominal annual rate when compoundedquarterly produces 465.42 of interest in one year on a 5,000 deposit. Thus, the effective annualinterest rate was ( 465.42 5,000 ) 9.3084 percent.In almost all instances, you will just have to set your calculator to the proper periods per year,enter the nominal annual rate, and let the calculator do the work for you. But there may be timeswhen it is necessary to calculate the effective yield given the nominal rate and number ofcompounding periods or vice versa.Convert Nominal Rate to Effective RateProblem: What is the effective rate if an investment pays 9% compoundedmonthly?You will use your gold shift key to find the answer. 2011 Keir Educational ResourcesHP 10bII – 6800-795-5347