THE FINANCIAL CALCULATOR

Transcription

1 Starter Kit CHAPTER 3 Stalla Seminars THE FINANCIAL CALCULATOR In accordance with the AIMR calculator policy in eect at the time o this writing, CFA candidates are permitted to use one o two approved calculators during the CFA exam. Candidates may choose either the (HP) or the TIBA2 (TI). The complete AIMR calculator policy can be ound in the AIMR Study Guide and on the AIMR web site at It is extremely important to ollow the AIMR calculator policy as unauthorized calculators will be coniscated at the exam center. Many problems that are encountered by inancial analysts can be perormed most easily by using unctions that are built into inancial calculators. It is recommended, thereore, that CFA candidates obtain one o the approved inancial calculators and learn how to use it to perorm these investment and business-related calculations. Both the HP and the TI calculators are capable o perorming all the unctions required on the CFA exam. The primary dierences between the two are the method o keying computations and the cost. The HP uses a unique entry sequence or simple arithmetic where the numbers are keyed irst ollowed by the operator. For example, the equation 2 2 would be keyed in as 2, enter, 2, to arrive at 4. The TI uses the more traditional approach o keying the irst number, then the operator, then the last number. For example, 2 2 would be keyed as 2,, 2, = to arrive at 4. The TI has a lower retail price than the HP. It is critical that the candidate be comortable with the inancial calculator. Thereore, i you are more amiliar with traditional calculators, you may preer the TI. Most o the more complex inancial unctions are perormed in virtually the same way or both calculators. This chapter provides instruction or both currently approved calculators. Most inancial calculators utilize the same ormats or investment analysis. For that reason, this chapter can be applied to a variety o calculators. Candidates should check AIMR publications requently or any changes in the calculator policy to ensure compliance. While both calculators have a broad range o unctions, it is not necessary to learn all o them. Indeed, doing so would waste valuable time that could be put to better use in preparing or the CFA exam itsel. Consequently, it is recommended that candidates concentrate on learning only those basic calculator unctions that may be useul or the CFA exam. This text is limited to this goal but should not be considered a replacement or the manuacturer s instruction manual. 133

2 Stalla Seminars Starter Kit TURNING THE CALCULATOR ON AND OFF ON/OFF INSTRUCTIONS TIBA2 Press the On key to turn the calculator ON Press the ON/OFF key to turn the calculator ON or OFF. or OFF. When the calculator is ON, nothing should appear on the on the display screen except numbers. I any other alphanumerics appear on the display screen, they should be purged. Reer to the calculator manuacturer s instruction manual or directions on how to remove speciic unwanted alphanumeric characters orm the display screen and/or the meaning o such characters. When the calculator is ON, nothing should appear on the on the display screen except numbers. I any other alphanumerics appear on the display screen, they should be purged. Reer to the calculator manuacturer s instruction manual or directions on how to remove speciic unwanted alphanumeric characters orm the display screen and/or the meaning o such characters. 134

3 Starter Kit Stalla Seminars THE KEYBOARD The table below describes some o the important eatures o the keyboards o the and TIBA2 calculators, as well as the nomenclature that will be used throughout this text in describing keystrokes. KEYBOARD FEATURES AND KEY NOMENCLATURE Many o the keys on the (HP) calculator can perorm one o three unctions. Each unction is identiied in one o three ways: 1. On the top ace o the key itsel (in white). 2. On the slanted ace o the key (in blue). 3. On the keyboard directly above the key (in gold). The unction identiied on the top ace o a key (in white) is activated by simply pressing the key itsel. The unction identiied on the slanted acing o a key (in blue) is activated by pressing the (blue) key g immediately beore pressing the key itsel. The unction identiied on the keyboard directly above a key (in gold) is activated by pressing the (gold key) key itsel. immediately beore pressing the In this text, the key to be depressed when perorming a calculation will be identiied by the unction it is perorming in the context o the problem being solved (which may be depicted on the calculator in white, blue or gold lettering) and not necessarily by the (white) lettering that appears on its top ace. For example, consider the ollowing key: PRICE y x x TIBA2 Most o the keys on the TIBA2 (TI) are dual unction. Each key has a number or unction on its ace with a dierent unction listed above the key (in white). The unction/number on the ace o each key is activated by pressing the key itsel. The secondary unction (in white) is activated by pressing the key ollowed by the key directly below the secondary unction (in white). For example, to compute the natural logarithm o 5 depress the ollowing keys: 5 LN and the display will show To compute the antilog (e x ) o depress the ollowing keys: e x LN and the display will show I, in a given problem, this key will be used to calculate the natural logarithm o a number, the keystroke will be denoted as: I it will be used to ind the antilogarithm o a number, the keystrokes will be denoted as: LN This notation will be used throughout this text. e x This key can perorm one o three unctions: 1. It can raise a number (y) to some power (x); 2. It can ind the square root o a number (x); 3. It can ind the price o a bond. 135

4 Stalla Seminars Starter Kit I, in a given problem, this key will be used to raise a number (y) to the power (x), the keystroke will be denoted as: I it will be used to ind the square root o a number, the keystroke sequence will be denoted as: g I it will be used to ind the price o a bond, the keystroke sequence will be denoted as: y x x PRICE TIBA2 The TI is designed with two modes o operation, the standard-calculator mode and the promptedworksheet mode. The standard-calculator mode is used or time value o money (TVM) and standard math calculations. The promptedworksheet mode is used or more complex applications such as cash low and bond calculations. In standard-calculator mode only numbers should appear on the display screen with no other symbols or indicators. In worksheet mode both numbers and prompts will appear at the top o the display. Some examples o these prompts are: COMPUTE ENTER I any o these prompts are displayed, this indicates that the calculator is in worksheet mode. It can be returned to standard-calculator mode by pressing QUIT. 136

5 Starter Kit Stalla Seminars CLEARING THE CALCULATOR DISPLAY AND REGISTERS It is recommended that the numerical characters that appear on the display screen (and in various memory registers) be cleared beore beginning to solve each new problem with a calculator. This is because certain unctions store previous answers in the calculator s memory registers and add the latest calculated result to them producing new results. This is useul in some calculator applications, but it can be detrimental at other times. To prevent the answer to one set o calculations rom becoming an input to a subsequent calculation, it is a good practice to begin every new problem by irst clearing the calculator. CLEARING FUNCTIONS TIBA2 To clear the display and numeric registers (restoring them to zero), use the ollowing keystrokes: CLX The display screen should read (the number o zeros ollowing the decimal point is not important). I any other alphanumeric character(s) are displayed, see your calculator manuacturer s instruction manual. To clear only the last entry (used to correct a mistaken entry), press the CLX key. In standard-calculator mode the key will clear the last entry. The entire calculation can be cleared by pressing: CE/C To clear the TVM worksheet and reset the TVM registers (PV, FV, PMT, N, I/Y) to zero press: CE/C CLR TVM CE/C To clear a worksheet while in the prompted worksheet mode, press: CLR Work To return to standard-calculator mode, press: QUIT Finally, to correct the last numeric digit entry, press the key. 137

6 Stalla Seminars Starter Kit SETTING THE DECIMAL POINT ACCURACY TO BE DISPLAYED The amount o decimal point accuracy that is displayed on a calculator can be set. Both the and the TIBA2 can display anywhere rom zero to nine digits ater the decimal point. SETTING THE DECIMAL POINT ACCURACY EXAMPLE TIBA2 Set the calculator to display ive decimal point accuracy. The key ollowed by pressing any number rom 1 to 9 will set the decimal point accuracy. To display 5-decimal point accuracy, press: 5 The number o decimal places displayed can be set by pressing Format ollowed by 0 to 9 and the ENTER key. Note: Some models o the TI allow only 8 decimal places. To display 5-decimal point accuracy, press: Format 5 ENTER Set the calculator to display seven decimal point accuracy. To display 7-decimal point accuracy, press: To display 7-decimal point accuracy, press: 7 Format 7 ENTER 138

7 Starter Kit Stalla Seminars CHANGING THE ALGEBRAIC SIGN OF A NUMBER In many applications, it is necessary to change the algebraic sign o a number that is entered into the calculator. The table below describes how this is done on the HP and TI calculators. CHANGING THE ALGEBRAIC SIGN OF A NUMERICAL ENTRY For example, to display -4: TIBA2 The key changes the sign o the displayed value. To display -4, use the ollowing keystrokes: 4 ENTER To change the value, -4, back to 4, press: The /- key changes the sign o the displayed value. To display -4, use the ollowing keystrokes: 4 /- To change the value, -4, back to 4, press: /- 139

8 Stalla Seminars Starter Kit ARITHMETIC FUNCTIONS The our most common mathematical unctions that are perormed on a calculator are the simple arithmetic unctions o addition, subtraction, multiplication, and division. Presumably, the reader already knows how to use a calculator to perorm these common types o calculations. For completeness, however, these unctions are briely explained by the examples ound in the table below. ADDITION EXAMPLE TIBA ENTER Answer: Answer: ENTER Answer: 26.8 Answer:

9 Starter Kit SUBTRACTION Stalla Seminars EXAMPLE TIBA ENTER Answer: 20.9 Answer: ENTER Answer: 20.7 Answer: ENTER Answer: 50.3 Answer: ENTER Answer: 42.7 Answer: ENTER 34.8 / Answer: Answer: ENTER 58.4 Answer: Answer: ENTER 46.7 / Answer: Answer:

10 Stalla Seminars MULTIPLICATION Starter Kit EXAMPLE TIBA ENTER Answer: Answer: ENTER /- Answer: Answer: ENTER / Answer: Answer: ENTER 56.1 /- 6.8 Answer: /- Answer: ENTER Answer: Answer: (-1.2) (4) 4.8 ENTER /- 4 Answer: Answer: