Hello and welcome! In this video we’ll be

solving basic compound interest problems using BA II Plus

calculator Example 1: What is the future value of

six hundred dollars invested at 8 percent per annum

compounded semiannually for four years in six months. To do this

we need to use the time value of money buttons stated

here. First let’s clear time value of money by pressing 2nd clear Time Value of Money to clear whatever has been stored

in these entries. Next we need to set the

compounding periods per year so we go to 2nd P/Y and in this case it’s compounded

semiannually so we set P/Y to 2 ENTER, scroll down and ensure that C/Y is also said to

2 The we press 2ND QUIT to leave

that mode Next we want to input N so this investment is made for four

years and six months which is 4.5 years K so we do 4.5 times the P/Y so P/Y in this question is 2 so we multiply that by two. We get a 9. Basically we will have 9 total compounding periods in four and a half

years interest rates per annum eight-percent is entered by pressing I/Y. So

we press 8 I/Y and then present value is six hundred

dollars so we put that in as 600 present value And in this case we don’t have payments but

because we cleared our time value of money we don’t need to

bother about payments we can just move on but if you didn’t clear time

value of money you have to do 0 payments to make sure no payment is included and then finally you can

compute future value so the future value is 853 dollars and ninety nine cents. Notice that the future value is negative. This is because we entered a positive present value Now one of them will be positive. The other will be will be negative because money is moving in and out. Some people prefer to set P/Y to 1 so N could be the number of years. So

in that case you have something like this 2ND P/Y set that to 1, ENTER scroll down, make sure you set C/Y

back to 2 ENTER, 2ND QUIT and then you can set N to four and a

half years 4.5 N, and if you compute future value you get exact same result as before. Let’s look at another example. Example 2 what is a present value of seven

thousand five hundred dollars due in nine years if interest is six

percent per annum compounded monthly. So begin by setting P/Y. 2ND P/Y it’s compounded monthly so we enter 12, ENTER Scroll down you can see that C/Y

is automatically set to 12 as well 2ND QUIT. For N we have nine years, compounded monthly, so we have nine times

twelve total combining periods, that’s 108 N, interest rate is six percent per

annum so we press 6 I/Y. If you did not clear time value of

money at the beginning just like I didn’t you can just do 0 PMT and then a future value of 7500 so

7 5 0 0 future value and then compute present value. So the present value is 4376.50 and like I said before some people prefer to set P/Y to 1

so if you want to do that’s the 2ND P/Y 1 ENTER scroll down and make sure C/Y is set to 12 ENTER, 2ND QUIT and then make sure N is set to nine years and then compute present value you get the same result as before. Let’s

look at one more example. Example 3: How many years will

it take 300 to grow to $450 if interest is 4.5 percent compounded

quarterly So this time you want to find the number of

years. We will be computing N. So again we start by setting P/Y.

2ND P/Y is compounded quarterly so we set the

P/Y to four ENTER scroll down, ensure that C/Y is also

set to 4, 2ND QUIT so the interest rate IS 4.5 percent so

we have 4.5 I/Y. The present value is 300 300 but this time we have to make sure

we make one of present value or future value

negative. So we make the present value negative K and there is no payment so if you

didn’t clear time value of money make sure do 0 payment future value is 450, we input that as positive 450 future value and then we compute N so N is 36.24 quarters. So it takes 36.24 quarters to grow to 450 if interest rate is 4.5 percent compounded

quarterly. But want to find this in years so to do

so we just divide the N value by P/Y P/Y was set to 4 so we just divide this result by four divided by four and that’s it 9.06 years. So it takes 9.06 years for $300

to grow to 450 at 4.5 percent compounded quarterly Again if you prefer to set P/Y to 1 2ND P/Y 1 ENTER scroll down. You have to set C/Y to 4

because it’s compounded quarterly ENTER. So in in that case if you compute

N you will just get the number of years so I’m going to quit this and compute N. There you go. So it give us 9.06 years. That’s basic examples in compound interest. Thanks for watching.

Thank you soooooo much for your video. May God bless you. I was struggling to use my Financial calculator, but your videos have saved me!

Thank you sir…. I really appreciate your time and help!

God bless you Sir. May you be rewarded greatly

why should set one of pv and fv to negative

When calculating Annuity values in a previous video you said that P/Y and I/Y coincide or are the same for simple annuities. Although this isn't an annuity calculation I'm having a problem understanding why you put 2 in for both P/Y and I/Y. You said that P/Y means the payments and I/Y is the number of times the interest is compounded… In this problem there aren't any payments so can you further explain why 2 is entered? I originally put 1 in thinking that was correct. I understand that 2 should be put in for I/Y because you stated that is the number of times the interest in compounded (which the problem clearly states semi annually (or two)) Please further explain. Thanks!

I think i get it now by watching your video over and over. Is it true that you can set I/Y and P/Y to 1 and just divide the interest rate by 12 for your i/y button? (assuming you use nx12 too)

This was extremely helpful !! I was so confused about the connection between p/y, c/y, and N… This video made it very clear. Thanks a lot brother!!

Thank you so much Joshua (: Keep up the great work!

Thanks for the finance videos. Your concise and straight to the point explanations are very appreciated. Many people making videos on the same topics take forever to explain, and don't provide good examples. Subscribed. Keep up the good work Joshua.

Thanks!

Perfect start for my preparation 🙂 Thank you for sharing.

really informative, thanks!

Thank you so much for this easy to understand and concise video. It has helped me get more comfortable with my BAII Plus and ready for my exam! 🙂

Doesnt he have to divide the 8% by 2? thought you did that for compounding problems?

thanks for the vid man really helped me out, i hate the BA II it is such a fucking awful piece of shit so i thank you my good dark friend for the help

very very good work!!

Getting the same answers without all the c/y p/y craziness. Ill use those in the annuity dues. or others.

Spent nearly an hour and a half trying to figure this out on my own. I'm so glad I found you! Thank you SOOO much for posting this! Solved it for me easily and in only a few minutes. I only knew how to do annual interest. Didn't even know there was a C/Y option until tonight.

thanks for the help man! you're a life saver!!

Priceless information. Thanks

Very clear and concise. Thank you for taking the time to create this video. Much appreciated.

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Thanks Joshua!

Great tutorials thank you. Quick question…switching p/y and c/y seem arbitrary as you can simply divide the annual interest rate by number of compounding periods…my question is if one does switch p/y and c/y to 2, as in the first example in this video, why would you have to convert years to number of compounding periods i.e. 4.5 to 9?

really helps!!! thanks, man!

Hi, thanks for the video. Is there a way to do the same with continuous compouding?