Introduction of Financial

Calculator
Approved Calculators for use during CFA
Program Exams
Texas Instruments BA II Plus BA II Plus Professional
BASIC BUTTONS

1. CE|C Clear Data on the screen

2. Backspace
3. Scroll Up and Down (Toggle Within Function)
4. 2ND Works like SHIFT key
5. ENTER Enter Value
6. SET To set different modes (of functions)
BASIC BUTTONS

7. CPT Compute value

8. STO Store value​
9. RCL Recall Value​
10. MEM Memory of stored value​
11. ANS Last computed answer​
12. +|- Make number negative or positive
How to Reset Calculator?

2ND +|- (RESET) ENTER CE|C

Setting up the Calculator
• Adjusting the Decimal places

2ND (FORMAT) DEC = Set the number to 6 ENTER

• Factory Settings
• DEG/RAD - Degree/Radiance
• US /EUR - Date Format
• Chn/AOS - Chain Method(Serial Order)/Algebraic Operating System (BODMAS)
• Eg- 2 + 4 x 5 = AOS will show 22 while Chn will show 30
MATHS FUNCTIONS
• yx To the power
• 1/x Reciprocal
• x½ Square root
• x2 Squared
• % 1/100

Any Number (yx, 1/x, x½, x2, % )

Examples (Make sure you calci is set to Chn Mode)
1) 8^3 = 512
2) 10^2.5 = 316.227
3) 13.86^1/2 = 3.7229
4) ½ + (3*5) - (4/5)+ (8^1.2) - (16^{1/5}) = 25.0846
MATHS FUNCTIONS
• nPr Permutations​ (order matters)
• nCr Combinations​ (order does not matter)

N 2ND - (nPr) R =

N 2ND + (nCr) R =
Compute the probability of drawing 4 green balls from a bag of red and
green balls if the probability of selecting a green ball in any given
attempt is 0.3. You will draw 7 Balls in total from the bag.
Formula
P(x) = nCr pr . (1-p)(n-r)
Inputs : x= 4 , n= 7, p= 0.3, r = 4
Answer : 0.0972
 TIME VALUE OF MONEY FUNCTIONS
(Always draw a Timeline)

• N Total no. of periods (Not years)

• I/Y Rate per period
• PV Present Value
• PMT Regular Annuity Amount
• FV Future Value
Before you begin solving questions, set P/Y (Payments per year) and C/Y(Compounding periods per year) to 1

2ND I/Y (P/Y) Set P/Y to 1 and C/Y to 1 ENTER

Inflows – Positive sign
Outflows – Negative sign
Future Value of Single Cash Flow (Annual
Compounding)
Sam Invests $1000 into an interest bearing security that pays 5% per annum
for 6 years. How much would his investment be worth at the end of the 6
years?

Solution:
6=N
5 = I/Y
-1000 = PV
0 = PMT
CPT FV = 1340.0956
Compounding Periods
Using the rate of return 10% with a range of compounding periods
given below, compute PV of $1000 invested 3 years from now

1. Annual Compounding
• FV = (-)1000, PMT = 0, N= 3, I/Y = 10
• CPT PV $751.3148

2. Semi Annual Compounding

• N - (3 X 2) = 6
• I/Y - 10/2 = 5
• CPT PV $746.2154
Compounding Periods
Using the rate of return 10% with a range of compounding periods given
below, compute PV of $1000 invested 3 years from now

3. Quarterly Compounding
• FV = (-)1000, PMT = 0, N= (3 X 4) = 12 , I/Y = 10/4 = 2.5
• CPT PV $743.5559

4. Monthly Compounding
• N - (3 X 12) = 36
• I/Y - 10/12 = 0.8333
• CPT PV $741.7397
5. Daily Compounding
• N - (3 X 365) = 1095
• I/Y - 10/365 = 0.0274
• CPT PV $740.8487
Future Value of Single Cash Flow
(Compounding More than once a Year)
Kate invests $1000 into an interest bearing security that pays 5% per
annum (Compounded quarterly) for 6 years. How much would her
investment be worth at the end of the 6 years?

Solution:
6 X 4 = 24 – N
5 / 4 = 1.25 - I/Y
(-)1000 - PV
0 – PMT
CPT FV – 1347.351
Interest Conversion (ICONV)
• Convert Nominal rate into Effective rate.
• NOM Nominal Rate
• C/Y No of coupons received during the year
• EFF Effective rate

• Formula:
EAR = (1+r/m)^m -1
Effective Annual Rate (EAR)
Kate invests $1000 into an interest bearing security that pays 5%
per annum (Compounded quarterly) for 6 years. We calculated the future
value as $1347.351.What is her effective annual rate of return?

Solution: (shorter way)

{2ND} {2} (ICONV)
NOM = 5 % (ENTER)
C/Y = 4 (ENTER)
EFF = CPT 5.0945
Calculate the EAY of 13% if compounded annually, semi annually,
quarterly and daily.

Annually = 13
Semi Annually = 13.4225
Quarterly = 13.6476
Daily = 13.8802
Continuous Compounding Rate
• Ln Natural logarithm of Base e
• ex Exponential Function

Any Number LN
Any Number 2ND LN (ex)
Using the rate of return 10% compute PV of $1000 invested 3 years from
now ,compute PV with continuous compounding frequency.

Formula
PV = FV/er*t

Calculator Key Strokes

0.1*3 = 0.3 {2ND} {LN} (ex) = 1.3499
{1/X} {x} 1000 = 740.8182
TIME VALUE OF MONEY FUNCTIONS

• BGN Beginning Mode (Cash flows received at Bgn of each period)​

2ND PMT (BGN) 2ND ENTER(SET)

• CLR TVM Clear the data from TVM buttons​
Future Value of an Annuity (First Payment
starts one period later)
You plan to invest $20,000 per year in a stock index fund for the next 30
years (starting one year from now). Historically, the fund has earned 9%
per year on an average. Assuming that you earn 9% per year, how much
money will you have at the time of your retirement after making the
last payment?
Solution
0 – PV
(-)20,000 – PMT
30 – N
9 – I/Y
CPT FV = 2,726,150.77
Future Value of Annuity (First Payment starts
immediately)
What is the future value of an annuity that pays $350 per year at the
beginning of each of the next 5 years, commencing today, if the cash flow
can be invested at the annual rate of 10%?

Solution
Set Calci on BGN Mode
0 – PV
(-)350 – PMT
10 - I/Y
5–N
CPT FV = $2350.4635
Future Value of Annuity (First Payment starts
immediately)
What is the future value of an annuity that pays $350 per year at the beginning
of each of the next 5 years, commencing today, if the cash flow can be invested
at the annual rate of 10%?
Solution
Set Calci on END Mode
0 – PV
(-)350 – PMT
10 - I/Y
5–N
CPT FV = $2136.7850
Since we are using the END mode and the annuity of $350 that was paid at t = 0
needs to be compounded one more time. Hence, 2136.785*1.10 = $ 2350.4635
Future Value of Annuity (First Payment starts
immediately)
Your company offers you a retirement benefit plan in the form of an annuity
with 20 payments of $200,000 a year with the first payment starting today.
The interest rate at your bank is 7% per year compounded annually. What is
the future value of the annuity offered by your company after 20 years if
reinvested into your bank account?
Solution
Set Calci on BGN Mode
0 – PV
200,000 – PMT
7- I/Y
20 – N
CPT FV = 8,773,035.357
Present value of an Annuity (First payment
starts one period later)
A Financial asset pays $15,000 per year for the next three years, with the first
payment starting one year from now. If you require a return of 12% from this
investment, what is the present value of this financial asset?

Solution
0 – FV
15,000 – PMT
12 - I/Y
3–N

CPT PV = -36,027.469
Present value of a Perpetuity (First payment
starts one period later)
A Financial asset pays $15,000 per year indefinitely, with the first payment
starting one year from today. If you require a return of 12% from this
investment, what is the present value of this financial asset?

Solution
CPT PV -$125,000
10,000 – N
Calculating the Mortgage Installment
You are planning to purchase a $880,000 house by making a down payment
of $80,000 and borrowing the remainder with a 30-year fixed rate mortgage
with monthly payments. The first payment is due at t=1. Current rate is
quoted at 4.8% with monthly compounding. What will be your monthly
mortgage installments?

Solution
0 – FV
800,000 – PV
4.8 / 12 = 0.4 - I/Y
30 X 12 = 360 – N
CPT PMT –4197.322
CASH FLOW FUNCTION (CF, NPV, IRR)
• Uneven cash flows throughout the life cycle.
• CF0 Initial Cash outflow
• C01 Cash flow at year 1
• F01 Frequency of C01
• C02 Cash flow at year 2 and so on
• Keep on pressing down arrow to enter all the cash flows (Make sure to enter value before
moving to next year's cash flow.

{NPV} I {ENTER} {Down Arrow} {CPT} NPV

{IRR} {CPT}
• Unconventional Cash flows
Calculate the NPV of an investment project with an initial cost of $5000
and positive cash flows of $1600 at the end of the year 1, $2400 at the
end of the Year 2 and $2800 at the end of Year 3. Use 11% as discount
rate.
Keystrokes:
CF0 = -5000 {ENTER} Down
C01 = 1600 {ENTER} Down
C02 = 2400 {ENTER} Down
C03 = 2800 {ENTER}
NPV – I= 11 – {ENTER} Down
{CPT} NPV – 436.6711
Calculate NPV of an investment with an initial outlay of $10,000 and no
cash inflows for the first 3 years, thereafter $7500 for 2 Years and $
3000 in the last year. Discount Rate = 12%

Answer = $541.9804
DESCRIPTIVE STATISTICS (DATA, STAT)
1. DATA
• XO1 X values
• YO1 Y values
2. STAT
• LIN/Ln/EXP/PWR/1-V (2ND – ENTER{SET})
• N = No of observations
• Mean of X
• Sx = Std dev of X (Sample)
• Sigma x = Population Std Dev
• a = Intercept
• b= Slope
• r= correlation
Calculate population standard deviation of x and y, sample standard
deviation of x and y, slope (b), intercept (a) and correlation co-efficient
using the following information given below in the LIN Mode. Hence,
given the equation y=a+bx. Calculate the value of y' if x= 10.
X 5 9 13 7
Y 10 35 30 15
DEPRECIATION FUNCTION (DEPR)
• SL/SYD/DB/DBX (2ND – ENTER{SET})
• LIF = Life of asset
• M01 = Month from which the asset starts depreciating
• CST = Cost
• SAL = Salvage
• YR = Year
• DEP= Current year Depr
• RBV= Remaining Book Value
• RDV = Remaining Depreciable Value
A machinery costs $5000 with a salvage value of $500 and useful life of
10 years. Calculate the depreciation charged, remaining book value and
remaining depreciable value at Year 1 and Year 7.

Keystrokes:
LIF = 10 {ENTER}
CST = 5000 {ENTER}
SAL = 500 {ENTER}
YR= 1 {ENTER}
YR =7 {ENTER} - For year 7
BOND FUNCTION (BOND)
• SDT = Settlement Date (Date of purchase of Bond)
• CPN = Annual Coupon rate
• RDT = Redemption Date
• RV = Redemption Value (% of par value)
• ACT/360 (2ND – ENTER{SET})
• 1/Y 2/Y (2ND – ENTER{SET})
• YLD= Yield
• PRI= Price of Bond
• DUR= Duration of Bond
Compute the price of a semi-annual bond with settlement date of 31
January, 2015 and redemption date of 31 January 2025. The bond is based
on Actual/actual day count method with a coupon rate of 8%, redeemable at
100% of par value . Assume yield is 9.25% and it is a 10 year bond.

Keystrokes:
SDT = 31.0115 {ENTER}
CPN = 8 {ENTER}
RDT = 31.0125 {ENTER}
RV = 100 {ENTER}
Format Actual Day {ACT}
2/Y (Because semi-annual bond)
YLD = 9.25 {ENTER}
CPT PRI – 91.957 (in %)
Valuing a Bond (Using TVM function)
A fixed rate bond with face value of $ 1,000,000 pays a coupon of
$50,000 per year (5% coupon rate), with a tenor of 8 years. Given that
the current market yield is 6% per annum, what is the value of this
bond?

CPT PV (–)937,902.06
MISCELLANEOUS FUNCTIONS
1. DATE
• DT1
• DT2
• DBD = Days between Dates
• ACT/360
• Useful in Fixed Income (Accrued Interest)
• How to enter Date?
Eg- 05 August, 2023 = 05.0723 (EUR) / 07.0523 (US)
MISCELLANEOUS FUNCTIONS
2. PROFIT
• CST = Cost
• SEL= Selling Price
• MAR = Margin
3. BRKEVN
• FC= Fixed Cost
• VC= Variable Cost per unit
• PFT = Profit required
• Q = Quantity required
• P = Price per unit
MISCELLANEOUS FUNCTIONS
4. % change
• OLD
• NEW
• %CH
5. ROUND
6. RAND – Generate any number between 0 to 1
7. Other functions – AMORT