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SAVING
TIPS!
 EfficientLearning.com/FRM

Time-Saving BA II Plus™ Settings 2nd INV HYP COMPUTE ENTER SET DEL INS BGN RAD

Most FRM® candidates use the BA II Plus™ calculator, because

of its intuitive and easy to learn keystrokes.
QUIT SET DEL INS
This short overview explores optimal settings for the FRM® CPT ENTER ON|OFF
exam and points out some useful time value of money (TVM)
and amortization (AMORT) calculations. By learning some 2ND
xP/Y
CF
P/Y
NPV
AMORT
IRR
BGN CLR TVM
simple keystrokes, you can answer questions faster with more N I/Y PV PMT FV
accuracy on exam day. K RAND

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Review the GARP calculator policy for the FRM exam here HYP SIN COS TAN !

INV ( )
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LN 7 8 9
ROUND DEPR % BRKEVN nCr

Optimal Calculator Settings STO 4

DATE
5
ICONV
6
PROFIT ANS

RCL 1 2 3
There are two recommended calculator formats. CLR WORK MEM FORMAT RESET

To access the BA II Plus™ format options: CE|C 0 .

• Press 2nd [FORMAT]

The default number of decimal places for the

display is 2. To change the number of decimal
points to 9 for floating decimal, which is optimal for
the FRM® exam:
• Press 9 ENTER
NOTE: Only the display is affected by decimal
settings. The calculator’s internal records keep as
many as 13 places after the decimal, as needed.
Next, use the up arrow button to scroll up to the
display showing with Chn or AOS. The factory
default is Chn. To change to the optimal AOS
(algebraic operating system):
• Press 2nd [SET]
TOP TIP: AOS recognizes the hierarchy of
operations, so exponents will be calculated first,
followed by multiplication and division, then
addition and subtraction. This is ideal for the FRM®
exam because the AOS setting minimizes the need
for the use of brackets or the need to break down
calculations into smaller sub-calculations.
• Press 2nd [QUIT]
This will exit the format function and the display will
show 0.
TIP: The calculator will revert to the factory
defaults when you remove the battery. You should
buy a spare battery (type CR2032) and keep it
handy in case your battery goes flat. All models
of the standard BA II Plus, including the newest
ones, require a screwdriver to replace the battery.
The Professional version does everything that
the standard BA II Plus does, however, it has a
removable slot on the back cover to replace the
battery. We recommend the BA II Plus Professional
version because of the ease of replacing the
battery. It will cost about double the price, but the
convenience and piece of mind are worth it.
NOTE: The proctors can inspect your calculator at
any time during the exam, not just when you check
in. If you are somehow caught with an unapproved
calculator, a violation report will be written and
your answer sheet will not be graded.

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Time Value of Money Worksheet
The time value of money (TVM) worksheet is an
invaluable tool for pricing a bond based on the
bond’s yield-to-maturity (YTM). It also allows you to
calculate the YTM of a bond quickly.
The TVM worksheet keys used to price a bond are:
N for the number of periods of discounting
I/Y for the interest (discount) rate per period
PV for the present value of the future cash flows
PMT for the periodic coupon (must be the same
for each period)
FV for the par value at the bond’s maturity
Let’s explore how you can use the TVM worksheet
to price a 5-year $1,000 par value bond paying a
6% coupon on a semi-annual basis when the yield
to maturity is 4% (or 2% semi-annual). The price
of the bond is calculated as the present value (PV)
of its future cash flows, which include the periodic
coupons and par value at maturity.
Check that the P/Y setting for number of payments
per period is 1.
• Press 2nd [P/Y] 1 ENTER to set P/Y to 1 (this
should be your default setting)
• Press 2nd [QUIT] to exit the P/Y function.
This setting requires you to input the periodic cash
flows and discount rate into the calculator (this
could be a monthly, semi-annual or annual figure
depending on the question) so that the bond’s cash
flows can be discounted correctly.
For the 5-year, $1,000 par value bond above, the
semi-annual (periodic) coupon is 3% (half of the
annual coupon of 6%) of par value or $30. The semi-
annual yield to maturity (discount rate) is 2% and
there are 10 semi-annual periods in the 5 years to
bond maturity.
• Press 2nd [CLR TVM] to reset all of the TVM
inputs to zero.
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TIP: You should perform this step before each TVM
calculation. Note that you cannot clear the TVM
worksheet using 2nd [CLR WORK].
• Press 10 N to input the number of the semi-
annual periods.
TIP: Do not press [ENTER] when inputting data into
the TVM worksheet.
• Press 2 I/Y to input the semi-annual YTM.
TIP: Input the yield as a percentage figure, not a
decimal.
• Press 30 PMT to input the semi-annual
coupon.
• Press 1000 FV to input the par value of the
bond at maturity.
• Press CPT PV to calculate the bond’s price.
The display shows the answer PV = -1,089.82585.
The negative sign indicates that an investor would
be prepared to pay $1,089.83 for the 5-year bond
today in order to receive the bond’s semi-annual
coupon and par value cash flows over the next 5
years.
Alternatively, an exam question might ask you
to calculate the YTM of a bond. Suppose that the
bond is a 5-year $1,000 par value bond paying a 6%
coupon on a semi-annual basis, currently priced at
$918.89. The semi-annual coupon is $30 and there
are 10 semi-annual periods (as before).
• Press 2nd [CLR TVM] to reset all of the TVM
inputs to zero.
• Press 10 N to input the number of the semi-
annual periods.
• Press 918.89 +/- PV to input the bond’s
current price.
TIP: Enter the bond’s price as negative number. As
previously explained, the negative sign denotes
what an investor would be prepared to pay for the
bond today.
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• Press 30 PMT to input the semi-annual
coupon.
• Press 1000 FV to input the par value of the
bond at maturity.
• Press CPT I/Y to calculate the bond’s YTM
on a semi-annual basis.
The display shows the answer I/Y = 4.000013523
(recall that this is a percentage figure, not a
decimal). Since the cash flows were input on a semi-
annual basis, the answer represents the bond’s YTM
on a semi-annual basis. The bond’s YTM would be
quoted as 8% (twice the semi-annual YTM).
Amortization Worksheet
The amortization (AMORT) worksheet is used
together with the TVM worksheet to simplify the
analysis of amortizing securities such as fixed rate
mortgages and high coupon bonds. Accessing the
AMORT worksheet allows you to quickly calculate
the outstanding principal of a mortgage/bond and
the amount of principal repaid at any point in time
prior to maturity.
Consider a 25-year $100,000 repayment mortgage
with monthly payments in arrears. If the fixed
rate on the mortgage is 6%, you can use the TVM
worksheet to calculate the constant, monthly
payments required to repay the mortgage over
25 years. There will be 300 monthly payments
(beginning a month after the mortgage is taken out)
and the monthly mortgage rate is 0.5% (1/12 of the
annual fixed rate of 6%).
TIP: Keep P/Y at 1 and remember that you are now
applying monthly discounting with monthly cash
flows.
• Press 2nd [CLR TVM] to reset all of the TVM
inputs to zero.
• Press 300 N to input the number of the
monthly periods.
• Press 0.5 I/Y to input the monthly mortgage
rate.
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• Press 100000 PV to input the amount of the
mortgage loan received.
Leave FV at zero since a repayment mortgage does
not have a balloon payment at maturity.
• Press CPT PMT to calculate the monthly
repayment.
The display shows the answer PMT = -644.3014015,
which is the amount that will be repaid by the
borrower each month for 25 years.
An exam question may require you to calculate the
mortgage loan principal outstanding after 6 months
and/or the amount of principal repaid in the sixth
month only. This is a time consuming calculation
if done from first principles but is quickly achieved
using the AMORT worksheet.
Once you have calculated the monthly repayment
above using the TVM worksheet (an alternative
question may give you the monthly repayment and
ask you to calculate the mortgage rate), you can use
the AMORT function.
• Press 2nd [AMORT] to access the AMORT
worksheet.
TIP: You do not need to clear the display before
accessing the AMORT worksheet.
The display shows P1 = 1 (default value if you have
not used the worksheet before). P1 denotes the start
point for the range of payments that you want to
calculate while P2 (which you will access using the
down arrow) denotes the end point. For example, if
you want to determine the mortgage loan principal
outstanding at the end of the sixth month and the
amount of principal repaid in the sixth month only,
you would set P1 = 6 and P2 = 6. Alternatively, if you
want to determine the amount of principal repaid
in the fifth and sixth months, you would set P1 = 5
and P2 = 6 (the calculator would also determine the
mortgage loan principal outstanding at the end of
the sixth month in this case).
To answer the question above, let’s enter values for
P1 and P2 now.
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• Press 6 ENTER to input the P1 value.
• Press the down arrow to display the P2 value
(this shows the value for P2 that was used
most recently).
• Press 6 ENTER to input the P2 value.
• Press the down arrow.
The display shows BAL = 99,123.29656. This is the
mortgage loan principal outstanding after 6 months.
• Press the down arrow.
The display shows PRN = -147.9451927. This is
the amount of principal repaid in the sixth month
only. Note that this is not the same amount as
the monthly repayment of 644.30 because each
monthly repayment consists of a combination of
interest and principal repayment. The amount
of mortgage interest in the sixth month is the
difference between these two amounts.
• Press the down arrow.
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The display shows INT = -496.3562088. As discussed,
this is the amount of mortgage interest in the sixth
month.
If you want to determine the total amount of principal
and/or mortgage interest paid in the fifth and sixth
months, use the up arrow to return to the P1 display.
• Press 5 ENTER to input the P1 value.
Leave the P2 value unchanged at 6, then scroll down
to check the values for BAL, PRN and INT. The BAL
value is unchanged since it displays the mortgage
loan principal outstanding after 6 months. The PRN
display now shows PRN = -295.1543397 representing
the amount of principal repaid in the fifth and sixth
months. Similarly, the INT display now shows INT =
-993.4484633 representing the amount of mortgage
interest paid in the fifth and sixth months.
The TVM and AMORT worksheets will enable you
to answer these types of exam questions quickly
and accurately, so be sure to put in plenty of
practice before your exam day!
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