The cmplete BA II plus Guide

1. Meet the “Fab Five” Keys

These five keys interact with each other. Usually, the exam gives you 3 or 4 of them, and you have to solve for the missing one. Let’s break them down:

• N (Number of Periods): This is how long the deal lasts. It is the number of years multiplied by the payments per year.
• I/Y (Interest per Year): This is your interest rate. Important Warning: Enter this as a whole number. If the rate is 5%, type 5, NOT 0.05.
• PV (Present Value): What is the money worth today? This is usually your loan amount or your initial investment.
• PMT (Payment): This represents recurring cash flow, like a monthly car payment, a mortgage check, or an annuity payout.
• FV (Future Value): What will the money be worth later? This is your savings goal or the payoff amount at the end of a loan.

🚨 The Golden Rule: Cash In vs. Cash Out

This is where everyone messes up. The calculator thinks like a bank account, so you have to be specific about the direction the money is moving.

• Money entering your pocket (Inflow): Enter as a Positive number (+).
• Money leaving your pocket (Outflow): Enter as a Negative number (-).

Rookie Mistake: If you enter the Loan Amount as positive and the Monthly Payment as positive, the calculator will give you an “Error 5.” Why? Because you can’t receive a loan and receive payments at the same time. One of them must be negative!

2. Real World Example: The Car Loan

Let’s say you want to buy a used Toyota for $20,000. The bank offers you a 5-year loan at 6% interest, paid monthly. How much is your monthly payment?

Step 1: Clear the junk! Always press 2nd then [CLR TVM] before you start. This is mandatory.

Step 2: Enter the knowns

• N: 5 years times 12 months equals 60. Press N.
• I/Y: 6% interest is just 6. Press I/Y.
• PV: You get the car (value) right now, so that’s positive. Type 20000 and press PV.
• FV: You want the loan to be zero at the end. Type 0 and press FV.

Step 3: Solve for X Press CPT (Compute) and then press PMT.

Result: You will see -386.65. Note: It’s negative because that is money leaving your pocket every month.

3. The “Scary” Truth: Amortization

So, you’re paying $386.65 a month. But how much of that is paying off the car, and how much is just lining the bank’s pockets with interest?

This is called Amortization. Here is how to check it on your calculator without doing a giant spreadsheet.

The Setup: Keep the data from the car loan example above stored in the calculator. Do not clear it!

The Steps:

1. Press 2nd then [AMORT] (it’s right above the PV key).
2. Screen shows P1 (Start Period): Enter 1 and press ENTER.
3. Screen shows P2 (End Period): Let’s check the first year (12 months). Enter 12 and press ENTER.
4. Use the Down Arrow to see the truth:
   • BAL: This is the Balance. It shows how much you still owe after 1 year.
   • PRN: This is Principal. It shows how much actual debt you paid off.
   • INT: This is Interest. It shows how much money you threw away on interest expenses.

Why this matters: This feature saves your life in Accounting and Real Estate exams when they ask, “What is the interest expense in Year 2?” You don’t need a formula; you just need the AMORT key.

Summary Checklist

• Always press 2nd + [CLR TVM] before starting.
• Money Out must be a Negative number.
• Interest (I/Y) must be a whole number (7, not 0.07).
• Use Amortization to see the breakdown of Principal vs. Interest.

Now go crush that Time Value of Money quiz!