Skip to content

BA II PLUS: nominal rate and quarterly settings

A nominal annual quotation and matching quarterly frequencies imply a quarterly rate, not a second annual-rate division.

Omni Finance AcademyBy Omni Finance Academy
On this page

Identify what the entered rate represents

In this fictional exercise the quotation is nominal 6% per year compounded quarterly. The TVM state uses I/Y = 6 and P/Y = C/Y = 4. The worksheet then works with the matching periodic factor. Entering 1.5 as I/Y while retaining those frequencies changes the quotation again.

Set and inspect both frequencies

  1. Choose quarterly payment intervals2ndP/Y4ENTER

    P/Y is four; setting it can also update C/Y.

  2. Confirm quarterly compounding↓4ENTER

    C/Y is explicitly four.

  3. Return to the TVM inputs2ndQUIT

    Enter I/Y = 6, N = 12, PMT = 0 and FV = 10,000; compute PV.

Check the present value

For the receiver’s future inflow of +10,000, the computed PV has opposite sign and magnitude 8,363.874219. The independent magnitude is 10,000/1.015^12. Twelve quarter-length intervals correspond to three years under the stated frequencies.

Avoid entering an effective quotation as nominal

A rate labeled effective annual is another quotation. Convert it consistently or use an explicit per-period model with deliberately chosen settings. The correct rate input depends on what the exercise says, not on a universal convention to always enter a quarterly rate.

Further references