# HP 12c (platinum) - How to Perform Interest Rate Conversions

This document explains the procedures used to convert between nominal, and annual effective interest rates.

## Converting a Nominal Rate to an Effective Rate

Given a nominal interest rate and the number of compounding periods per year, this procedure computes the effective annual interest rate:

- Press
**g**, then**END**and**f****CLEAR****FIN** - Key in the annual nominal rate as a percentage, then press
**ENTER** - Key in the number of compounding periods per year, then press
**n,****[ï¿½]**, then**i** - Key in
**100**then press**CHS**,**ENTER**, and then**PV** - Press
**FV**, then**[+]**to obtain the effective annual interest rate

## Examples of converting a Nominal Rate to an Effective Rate

Following are examples of converting nominal rates to effective rates compounded quarterly, monthly, and daily.

### Example 1

What is the effective annual interest rate if the annual nominal rate of 5 ï¿½ % is compounded quarterly?

Keystrokes

Display

Explanation

Press **g**, then **END**

Set to end mode

Press **f**, then **CLEAR FIN**

Clear the financial registers

Type in **5.25**, then press **ENTER**

5.25

Nominal rate

Press **4**, **n**, **[ï¿½]**,then **i**

1.31

Quarterly interest rate.

Type **100**, then press **CHS**, then **ENTER**

Press **PV**, **FV**, then **[+]**

5.35

Percentage effective rate.

### Example 2

What is the effective annual interest rate if the annual nominal rate of 7% is compounded monthly?

Keystrokes

Display

Explanation

Press **g**, then **END**

Set to end mode

Press **f**, then **CLEAR FIN**

Clear the financial registers

Press **7**, then **ENTER**

7.00

Nominal rate

Press **12**, **n**, **[ï¿½]**, then **i**

0.58

Monthly interest rate.

Press **100**, **CHS**, then **ENTER**

Press **PV**, **FV**, then **[+]**

7.23

Percentage effective rate.

### Example 3

What is the effective annual interest rate if the annual nominal rate of 7% is compounded daily?

Keystrokes

Display

Explanation

Press **g**, then **END**

Set to end mode

Press **f**, then **CLEAR FIN**

Clear the financial registers

Press **7**, then **ENTER**

7.00

Nominal rate

Press **365**, **n**, **[ï¿½]**, then **i**

0.02

Daily interest rate.

Press **100**, **CHS**, then **ENTER**

Press **PV**, **FV**, then **[+]**

7.25

Percentage effective rate.

## Converting an Effective Rate to a Nominal Rate

Given an effective interest rate and the number of compounding periods per year, this routine calculates the nominal interest rate.

- Press
**f**, then**CLEAR FIN** - Key in the number of periods per year, then press
**n** - Key in
**100**, press**ENTER**, then**PV** - Key in the effective annual rate as a percentage, then press
**[+]**,**CHS**,**FV**, then**i** - Press
**RCL**,**n**, then**[ï¿½]**to obtain the annual nominal rate

## Example of converting an Effective Rate to a Nominal Rate

Find the nominal rate if the effective rate is 5.35% compounded quarterly.

Keystrokes

Display

Explanation

Press **f**, then **CLEAR FIN**

Clear the financial registers

Type **4**, press **n**, then **100**

Press **ENTER**, then **PV**

100.00

Type **5.35**, press **[+]**, then **CHS**

-105.35

Press **FV**, then **i**

1.31

Percent quarterly interest rate

Press **RCL**, **n**, then **[ï¿½]**

5.25

Percent nominal interest rate

## Converting a Nominal Rate to a continuous Effective Rate

This procedure converts a nominal annual interest rate to the continuous effective rate.

- Press
**1**, then**ENTER** - Key in the nominal rate as a percentage then press
**[%]** - Press
**g**,**ex**, then**ï¿½%**

## Example of converting a Nominal Rate to a Continuous Effective Rate

What is the effective rate resulting from a 5 ï¿½% passbook rate with continuous compounding?

Keystrokes

Display

Explanation

Type 1, then press ENTER

1.00

Type 5.25, then press %

0.05

Press g, then ex

1.05

Press [ï¿½%]

5.39

Continuous rate