The most common question I receive from students are related to the use of the BAII Plus calculator. Especially on questions where there is monthly compounding with a nominal interest. Instead of calculation the monthly effective interest rate, below is a tip to make your calculation faster.
First let’s explore the P/Y key. To use it, press 2ND and I/Y. With the up and down arrow keys your will be able to enter the number of payments per year of your loan (P/Y) and the compounding periods per year (C/Y). Using this, your will no longer need to complicate your life with the differences between nominal and effective interest rates.
Let’s take this one step further…
With an example you will learn how to find the payment, interest, principal repaid and principal balance of any loan and in any period of the loan.
Example: A client has a car loan of $15,000 with an interest rate of 6% paying monthly for 4 years.
Determine the payment, interest, principal paid and principal balance of the 24th payment.
Step 1: Find the monthly payment

CPT PMT = $352.28
CPT PMT = $352.28
Step 2: use AMORT
· Press 2ND and PV to get AMORT
· P1 = 24, then use the down arrow key
· P2 = 24, then use the down arrow key
BAL = 7948.34
PRN (principal repaid) = 310.98
INT = 41.30
Now determine the total amount paid in capital and interest during the whole second year.
Use the same instructions as above, but in Step 2: P1=13 and P2=24
BAL = 7948.34
PRN (principal repaid) = 3631.31
INT = 596.00
Remember that your financial calculator is not just a tool to help you pass your CFP exam, but it is also a great vehicle to showcase your skills and impress your clients. Mastering the amortization function on the BAII plus calculator will allow you to have a spontaneous loan conversation with anyone on the fly.
Comments