Brief Tutorial for the Texas Instruments BAII PLUS

John Stansfield

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• Publié par: Arne
• Nombre de lectures: 282
• Langue: English

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Brief Tutorial for the Texas Instruments BAII PLUS Part One
By John Stansfield, CFA, Ph D, MBA, and calculator enthusiast.
The Texas Instruments BAII PLUS is the only calculator for the well-dressed finance geek. Seriously
it’s the only one for a serious student of finance. Unfortunately the manual runs 142 pages. This
document is not meant to replace that book but rather to give you a look around the tool box.
Our first chapter this semester (Chapter 4 of the book) is all about the time value of money. After
reading this chapter and going to class, you should be able to:

1. Use the Time Value of Money (TVM) keys
a. Get into the habit of checking the
payments per year
b. Know what to do with the begin/end
mode
2. Use your cash flow keys to solve for
a. IRR
b. NPV
c. Realize that you have to specify the
correct periodic rate in your cash
flow menu
3. Use the interest rate conversion menu
4. Use the amortization menu

This document is intended to give you a “Fast Start” on these functions of your calculator.

This tutorial is designed to get you comfortable and familiar with the following:
• The Time Value of Money keys: N , I/Y , PV , PMT, and FV , their associated second
functions: [×P/Y], [P/Y], [AMORT], [BGN] and [CLR TVM].
• The cash flow menu: CF , NPV , and IRR .
• The interest rate conversion menu: [ICONV].
• How to clear out the whole calculator 2nd [RESET] ENTER 2nd [QUIT].
• and how to clear out parts: [CLR TVM], [CLR WORK].
We will start with [RESET].

BEFORE YOU CAN DO ANYTHING WITH THIS CALCULATOR YOU MUST LEARN THE
RITUAL OF CALCULATOR PURIFICATION.
Press the 2nd button (it’s the second from the top on the left hand side). It’s colored yellow or light
green on your calculator. Press the [RESET] key (it’s “behind” the +/– key). Now your calculator will
ask you if you’re serious about resetting it: the display will read “RST ?” and the “ENTER”
annunciator will be lighted. Hit the ENTER key and your calculator will display “RST” and 0.00. To
get out of this menu (or any menu) press 2nd [QUIT].
What this does is to reset all of your default settings and clear all data. Now your calculator is set the
same as the day it came out of the package.
You should get into the habit of resetting or clearing the registers of your calculator on every problem.
If you don’t, your calculator might give you the wrong answer because you left some data in there
somewhere. “Clearing” just your last entry is done with CE/C , clearing the time value of money keys
is [CLR TVM], and clearing the cash flow menu is done with [CLR WORK].
1I wrote this tutorial for you to be able to follow along with your calculator out. When you begin a
new section please enter 2nd [RESET] ENTER 2nd [QUIT] so that your calculator will look like
mine and (hopefully) you will get the same answers as me.
If you are ever frustrated that you can’t get your calculator to work properly please enter
2nd [RESET] ENTER 2nd [QUIT] and start over.
Flogging you calculator without performing the ritual purification is a waste of time.

I The Time Value of Money Keys

Notice the third row of keys. The keys are N , I/Y , PV , PMT, and FV .
These keys are related by the following formula:
PMT
PMT FVrPV=− + NNr ()11+ r ()+ r
That formula is in my study guide on chapter 4 (and 5) and by the way, r = I/Y.
Basically, if you enter values for any four of these variables, the calculator will compute the fifth. The
next five examples solve for are N , I/Y , PV , PMT, and FV when the fact pattern of the problem
gives the values of the other four variables.

Here’s what the variables mean:
N The number of payments made (e.g. for a 30-year mortgage with monthly payments, N = 360)
I/Y The interest rate expressed as an APR (again, this is r in the above formula)
PV The present value
PMT The periodic payment
FV The future value

Before we can do these problems we may need to do a little housekeeping. Perform the ritual
calculator purification and enter 2nd I/Y. Your calculator will display either P/Y = 12.00 or P/Y =
1.00. It depends on when your calculator was manufactured. Old, stale, filthy disgusting used
calculators have a default of 12 payments per year. New tasty fresh calculators have a default of one
payment per year. Seriously one type isn’t better than another—just get into the habit of making the
payments per year match the problem at hand. Set it to 12 payments per year for a monthly car loan
and two payments per year for a bond that pays interest semiannually. More on this topic later in
section 1a Setting the Number of Payments per Year.
For now, just so you can follow along with the first few problems, enter 12 and press ENTER . Your
calculator will display P/Y = 12.00; to get out of this menu, hit the [QUIT] key (i.e. 2nd CPT.)

Problem 1
Let’s start with an auto loan with monthly payments. If you borrow $20,000 for 36 months at 5 percent
APR, what will be the size of your monthly payment?
Please enter 2nd [RESET] ENTER 2nd [QUIT].
N 36
I/Y 5 (again, this is r in the above formula)
PV 20,000
CPT PMT
FV Leave blank (or enter zero if it makes you feel better)

2Now if you hit CPT and PMT the calculator will display PMT = –599.42
What that means is that if the bank gives you $20,000 today, you have to give the bank $599.42 at the
end of every month for the next three years. Your calculator has had a bit of economic training, that’s
why this answer is negative. You see, money going away from you is negative and money coming at
you is positive. Just like in real life.
If you didn’t get a payment of $599.42 your calculator might still be in one payment per year. To fix
that enter 2nd I/Y enter 12 and press ENTER . Your calculator will display P/Y = 12.00; to get out of
this menu, hit the [QUIT] key.

Let’s clear out our calculator and try another one.

Problem 2
How about saving for retirement? How much money will you have after 30 years if you invest $180
per month into an IRA that earns 8 percent APR?
Please enter 2nd [RESET] ENTER 2nd [QUIT].
N 360 = 30 × 12
I/Y 8
PV Leave blank
PMT –180
CPT FV

Now if you hit CPT and FV the calculator will display FV = 268,264.70
By the way, if your calculator displays FV = 49,550.11 it’s not because you’re a bad person. It’s
because you did a bad thing—you failed to perform the ritual purification. You should get into the
habit of resetting your calculator or clearing your calculator on every problem. If you don’t clear out
your calculator it might give you the wrong answer because you left some data in there somewhere.

If you see FV = 5,955.99 you did 30 months, not 30 years.

Problem 3
Suppose you charge $5,000 on your credit card and want to make a monthly payment of $150 at the
end of each month. If your interest rate is 24% APR, how long will it take you to get out of debt?
Please enter 2nd [RESET] ENTER 2nd [QUIT].
CPT N
I/Y 24
PV 5,000
PMT –150
FV Leave empty
Now if you hit CPT and N the calculator will display N = 55.48. That means that will take 4 years, 8
months to get out of debt:

55.48 months
= 4.62 years
12 months per year

12 months
0.62 years × = 7.48 months (round up to 8 months)
year
3By the way, if your answer is –25.80 you’re doing this wrong. (You need to have payment be a
negative number.) You probably don’t need Stephen Hawking to tell you that negative time is probably
something to worry about. Wide awake and worried.
If N = 237.51 then you didn’t clear out your calculator from the last problem. Try [CLR TVM], this
clears out: N , I/Y , PV , PMT , and FV , but leaves [ P/Y] alone.

Problem 4
What would you be willing to pay for a promise to receive $100 per month for five years?
The interest rate is 5 percent APR. Please enter 2nd [RESET] ENTER 2nd [QUIT].

N 60 = 5 years × 12 payments per year. Try this: enter 5 then [×P/Y] to get 60 then hit N.
I/Y 5
CPT PV
PMT 100
FV Leave empty

Now if you hit CPT and PV the calculator will display PV = –5,299.07. That means that you would
have to pay $5,299.07 today to buy this annuity.

Problem 5
You don’t have this month’s rent check of $350, but your roommate offers to loan you the $350 if you
agree to pay him $375 in one month. What rate of interest is he charging?
Please enter 2nd [RESET] ENTER 2nd [QUIT].

N 1
CPT I/Y
PV 350 your roommate gives you $350 so this is money coming at you
PMT –375 you have to pay your roommate back, so that makes this cash flow negative
FV Leave empty

Now if you hit CPT and I/Y the calculator will display I/Y = 85.71. That means that you should only
agree to this loan if your other options have an APR of at least 85.71%.

By the way if you got “Error 5” as an answer it’s because you didn’t have a negative sign on your
payment. (There’s