Computing Loans on the Texas Instruments BA II PLUS

Introduction
The Texas Instruments BA II Plus is a must have tool in the world of finance. It allows users to
compute complex financial formulas by simply entering a select number of known values.
Finance majors rely heavily on the BA II Plus due to its usefulness regarding bonds. However,
you do not have to be a Finance major to appreciate the applications of the TI BA II Plus. You
can use the calculator to perform a variety of calculations including, but not limited to, finding
the total interest on a mortgage, determining a monthly car payment at a given interest rate, or
seeing how long it would take to pay off a credit card.

The Finance Keys (Time value of money keys)

In order to perform financial calculations, you should familiarize yourself with the row of grey
keys on the TI BA II Plus. These keys are in the highlighted yellow box in Figure 1. These keys are
unique to a financial calculator. They allow users to create and edit worksheets that the
calculator will use to perform the necessary calculations. The following table shows the keys
along with their primary and secondary functions.

*Note: Keys can be used as both an input and an output, depending on what is being calculated.

Key Primary Secondary function

function

N Number of Payments per year

periods

I/Y Interest per Number of

year payments per year

PV Present value Amortization

PMT Payment Beginning payment

FV Future value Clear table

The Basics
Turning Calculator On

To turn the calculator on or off, press the [ON/OFF] button located on the top right of the
calculator. Turning the calculator off clears the current display. When it is turned back on, the
display will show the default setting which reads {0.00}. Anything in the display will not be
saved. However, anything entered in a worksheet will remain there even after the calculator
has been powered off.

*Note: If battery is replaced all worksheets will be erased as well.

The 2nd Key

The 2nd key is one of the most important

features to understand in order to
effectively use the BA II Plus. Figure 2
shows where the key is located on the
calculator.

Most keys on the calculator perform more

than one function. The 2nd key allows users
to alternate between those functions. A 2nd
function is written in small yellow print
directly above the corresponding key. To
use a second function first press the [2nd] key. After the key is pressed, a small indicator that
reads 2nd will appear in the top left hand side of the display. While the indicator is still on the
display, press the key that corresponds to function that is desired. The table under the Financial
Keys heading gives multiple examples of secondary functions.

Resetting Calculator

Before beginning a new worksheet, it is a good idea to reset the calculator to ensure all values
are properly erased. Any extraneous value could significantly through off a calculation. To reset
the calculator, press the [2nd] [RESET] [ENTER].

The calculator can also be reset by gently pressing a pointed object into the small hole in the
back of the calculator labeled RESET.

*Note: to cancel a reset, press [2nd] [QUIT].

Changing Number of Decimal Places

The calculators default setting is to show two digits following the decimal. For most calculations
two decimal places are sufficient. However, when you are calculating percentages, you may
want your answer to include more digits after the decimal in order to get a more precise
answer.

To see how many digits are displayed press the [2nd] [FORMAT]. After these are entered, the
display will read: {DEC= 2}. To change the number of digits, enter the desired number of
decimal places followed by the [ENTER] key.

*Note: The calculator can display a maximum of 10 digits. Attempting to include more digits will result in an error
message.
Performing Computations
Computing Payments and Generating an Amortization Schedule

Use the following table to compute a monthly payment on a loan.

To Press
Reset calculator [2nd] [Reset] [ENTER]

* Note: Remember, before performing any financial

calculation on the TI BA II it is recommended that you
reset you calculator to default settings

Enter payments per year [2nd][P/Y] {Value} [ENTER]

Return to default calculator mode [2nd][QUIT]
Enter total number of payments {Value}[N]
Enter interest rate {Value}[I/Y]
Enter total loan amount {Value}[PV]
Compute payment [CPT][PMT]

*Note: Your answer will be negative. This is because the calculator recognizes a monthly payment as a
cash outflow.

To find the interest expense, generate an amortization schedule using the steps in the following
table:

To Press
Start amortization worksheet [2nd] [AMORT]
Select beginning period {value} [Enter]
Select ending period [Down Arrow] {value} [ENTER]
Display Selected range [Down Arrow]
*Note: At this point the down arrow and up arrow allow
the user to scroll between the following 3 options:
1. Remaining loan balance
2. Principle paid during period
3. Interest paid during period

Example:

Assume you are looking to buy a new car. You are pre-approved for a $15,000 auto loan with a
4% interest rate. You decide you want to have the car paid off in 4 years. What would be the
monthly payment?
Solution: Following the steps from the table on page 4 you can use the BA II to determine what
your loan payment would be.

To Press
Reset calculator [2nd] [Reset] [ENTER]

* Note: Remember, before performing any financial

calculation on the TI BA II it is recommended that you
reset you calculator to default settings

Enter payments per year [2nd][P/Y] {12} [ENTER]

Return to default calculator mode [2nd][QUIT]
Enter total number of payments {48}[N]
Enter interest rate {4}[I/Y]
Enter total loan amount {15,000}[PV]
Compute payment [CPT][PMT]

The answer is $338.69 per month. Follow the amortization table to determine total interest
paid.

To Press
Start amortization worksheet [2nd] [AMORT]
Select beginning period {1} [Enter]
Select ending period [Down Arrow] {48} [ENTER]
Display Selected range [Down Arrow]
Balance= 0
Principle= 15,000
Interest= 1,256.91

Compute Payoff Date of a loan

The following table shows how you compute the length of time it would take to pay off a loan:

To Press
Reset Calculator [2nd] [Reset] [ENTER]
Enter payments per year [2nd][P/Y] {Value} [ENTER]
Return to default calculator mode [2nd][QUIT]
Enter Interest rate {Value} [I/Y]
Enter Total amount due {Value} [PV]
Enter monthly payment {Value} [PMT]
Enter Desired ending balance (future value) [0] [FV]
Compute number of payments remaining [CPT] [N]
Example:

Assume you have a credit card with a balance of $5,000 that has an interest rate of 15%. If you
decide to pay $100 per month and don’t add any additional charges, how long will it take to pay
the card off?

To Press
Reset Calculator [2nd] [Reset] [ENTER]
Enter payments per year [2nd][P/Y] {12} [ENTER]
Return to default calculator mode [2nd][QUIT]
Enter Interest rate {15} [I/Y]
Enter Total amount due {5,000} [PV]
Enter monthly payment {100} {+/-} [PMT]
*Note: Since a payment is a cash outflow, you must
change the payment to negative in order to arrive at
the correct answer.
Enter Desired ending balance (future value) [0] [FV]
Compute number of payments remaining [CPT] [N]

Your answer should be 78.96 months. Obviously, you can’t have a fractional month, so you
round up to 79 months. To determine how much money you paid in interest, use an
amortization schedule.

To Press
Start amortization worksheet [2nd] [AMORT]
Select beginning period {1} [Enter]
Select ending period [Down Arrow] {79} [ENTER]
Display Selected range [Down Arrow]
Balance= 0
Principle= 5000
Interest= 2895.53
Troubleshooting
Problem Possible Issue Solution
Answer displayed isn’t A value is entered Check inputs, fix if necessary,
reasonable incorrectly and recalculate
Display shows error message There is an incorrect value Reset calculator and restart
entered in the worksheet process
Display is blank Battery isn’t working Manually reset calculator. If
properly display still doesn’t work
replace battery