CFA CFA Level 1 On the TI BA plus II , when calculating , APR and APY for given the PV and NPV (after a year)

On the TI BA plus II , when calculating , APR and APY for given the PV and NPV (after a year)

  • This topic has 3 replies, 3 voices, and was last updated Oct-17 by EffEss.
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    • k10111v
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      When N is equaled to 12 , we get APR and APY when N is set 1 , can somebody explain , how the monthly compounding effect is not being considered by setting N to 12(for APR) and how is considered when N is set to 1(for APY)? What is I/Y on the calculator?

    • k10111v
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      correct npv to fv, sorry.

    • vincentt
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      APR is a simple interest calculation (monthly rate * 12) whereas APY is a compounded rate ( (1 + monthly rate) ^ 12 )

      I/Y refers to interest rates for each period.

      For example, APR = 12%; APY = 12.68%

      To get APY:

      1. 12% / 12 months = 1% per month

      Compound the monthly 1% rate by 12 months = 1.01 ^ 12 = 12.68%

      or

      2. N = 12 (the amount of period)
      I/Y = 1 (rates for each period – 1% )
      PV = -1 (Let’s use 1 for simplicity; use negative if you want your FV to look good-> positive)
      CPT -> FV = 1.1268

      1.1268 – 1 = 0.1268 = 12.68%

      Another method to convert from APR to/from APY is to use the ICONV function (2ND + 2)

      APR -> APY (use arrow up or down to move to the next settings and use ENTER to save it)
      1. NOM = 12 (this is the nominal rate)
      2. C/Y = 12 (this is the total period)
      3. CPT EFF and you should get 12.68

      or

      APY -> APR
      1. EFF = 12.68
      2. C/Y = 12
      3. CPT NOM = 12

      Hope that helps.

    • EffEss
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      @vincentt‌ Thanks for the explanation, I did mix up APR and APY as well.

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