Interest Conversion Worksheet

The Interest Conversion worksheet converts interest rates between nominal rate (or annual percentage rate) and annual effective rate. • To access the Interest Conversion worksheet, press & v. • To select interest conversion variables, press # or ".

Interest Conversion Variables

Variable	Key	Display	Variable Type
Nominal rate	& v	NOM	Enter/compute
Annual effective rate	#	EFF	Enter/compute
Compounding periods per year	#	C/Y	Enter-only

Note: The calculator categorizes variables by their method of entry.

Comparing the Nominal Interest Rate of Investments

Comparing the nominal interest rate (annual percentage rate) of investments is misleading when the investments have the same nominal rate but different numbers of compounding periods per year.

To make a more valid comparison, convert the nominal interest rate (NOM) to the annual effective interest rate (EFF) for each investment.

•

The nominal interest rate (NOM) is the interest rate per compounding period multiplied by the number of compounding periods per year.

•

The annual effective interest rate (EFF) is the compound annual interest rate that you actually earn for the period of time stated.

Resetting Variables

•

To reset all calculator variables and formats to default values, including the Interest Conversion worksheet variables, press & } !.

Variable	Default
NOM	0
EFF	0
C/Y	1

•

To clear the NOM and EFF variables and reset default values without affecting C/Y, press & z in the Interest Conversion worksheet.

Converting Variables

You can convert a nominal rate to an annual effective rate or vice versa.

Entering Values for Nom and EFF

Enter a value for NOM or EFF as an annual rate.

Converting Interest Rates

1.

To access the Interest Conversion worksheet, press & v. The current NOM value appears.

2.

To clear the worksheet, press & z.

3.

Enter a value for the known interest rate (either NOM or EFF).

4.

To enter a value for a known variable, press # or " until NOM or EFF is displayed, key in a value, and press !.

5.

Press # to display C/Y. If necessary, change the value and press !.

6.

To compute a value for the unknown variable (interest rate), press # or " until NOM or EFF is displayed, and then press C. The calculator displays the computed value.

Example: A bank offers a certificate that pays a nominal interest rate of 15% with quarterly compounding. What is the annual effective interest rate?

To	Press	Display
Select Interest Conversion worksheet.	& v	NOM=	Current value
Enter nominal interest rate.	15 !	NOM=	15.001
Enter number of compounding periods per year.	# # 4 !	C/Y=	4.001
Compute annual effective interest rate.	" C	EFF=	15.877

Answer: A nominal interest rate of 15% compounded quarterly is equivalent to an annual effective interest rate of 15.87%.