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Time Value of Money34
Using the Interest Conversion Menu
Find the effective rate of a 36.5% nominal rate compounded daily. See Table 3-6. See
Figure 3 for help with navigating through the menu.
Note: in TVM Standard, C/YR is the same number as P/YR in TVM calculations, since most
interest calculations are based on the same number of payments and compounding periods
per year, and interest rate conversions are commonly linked to a subsequent TVM calculation.
This feature is provided for your convenience, but this means modifying one number also
modifies the other when you are calculating in TVM Standard.
The IConv menu permits you to solve for C/YR, but the result is not always a positive integer.
TVM calculations, however, require C/YR to be an integer larger than zero. If you attempt to
perform a TVM calculation without a valid value for C/YR or P/YR, an invalid P/YR error (ER:
Invalid P/YR) will occur.
If you set C/YR to 0, the resulting interest conversions are calculated assuming a continuous
compounding. As stated above, 0 is not a valid value for P/YR or C/YR when used in TVM
calculations, and you will have to reset it to a valid value before performing TVM calculations.
To reset the menu items to their default values, with any item of the Interest Conversion menu
displayed press
:x. With IConv displayed, press I to reset, or O to
cancel. To exit the menu, press
O once again.
Table 3-6 Interest Rate Conversion Example
Keys Display Description
:&
Opens the IConv menu, starting with the current
value of the nominal percentage rate
36.
5I
Inputs 36.5 as the nominal percentage rate.
>
Scrolls to compounding periods per year, C/YR.
Default value is 12.
360
I
Inputs 360 as the value for the number of
compounding periods per year.
>=
Scrolls to the variable for the effective rate and
calculates it. A 36.5% nominal rate
compounded daily equals an effective rate of
44.02%.