HP 10bII - Compounding and Payment Periods Differ

First Bank
Keys:
Display:
Description:
(Gone
c]
6.70
Stores
nominal
rate.
(Om
5]
4.00
Stores
quarterly
compounding
periods.
SES
6.87
Calculates
annual
effective
rate.
Second
Bank
(оја/о/еја
ст]
6.65
Stores
nominal
rate.
CQ
12.00
Stores
monthly
com-
pounding
periods.
Qe
6.86
Calculates
annual
effective
rate.
Third
Bank
(GC
6.63
Stores
nominal
rate.
GXeXo)
De
360.00
Stores
compounding
periods.
Qe
6.85
Calculates
annual
effective rate.
First
Bank
offers
a
slightly
better
deal
since
6.87
is
greater
than
6.86
and
6.85.
Compounding and Payment Periods Differ
The TVM application assumes that the compounding
periods and the payment periods are the same. Some loan
installments or savings deposits and withdrawals do not
coincide with the bank’s compounding periods. If the
payment period differs from the compounding period,
adjust the interest rate to match the payment period
before solving the problem.
5: Time Value of Money Calculations 73