BA II Plus and HP 12C guide for CFA Level I

Your choice applies across the whole site: every worked example, checkpoint and formula card shows the keystrokes for the calculator you pick here.

Which calculator

CFA Institute allows exactly two models in the exam: the Texas Instruments BA II Plus (including the BA II Plus Professional) and the Hewlett Packard 12C (including the 12C Platinum, the Platinum 25th anniversary edition, the 30th anniversary edition and the 12C Prestige). Anything else can void your result. Calculator covers, keystroke cards and spare batteries are allowed in the room; manuals are not (calculator policy).

Both do everything Level I needs. The BA II Plus uses ordinary algebraic entry and has worksheets that prompt you for each input; CFA Institute's own calculator guide calls it the most popular choice among candidates, with a lower learning curve. The HP 12C uses Reverse Polish Notation (RPN): you enter the numbers first and then the operation, with no equals key. If you already use one, keep it. If you are buying, the BA II Plus is the easier start. Whichever you pick, use the same one for every practice question from week one, so the keystrokes are automatic by exam day.

Settings to change first

Do this once, when you get the calculator, and check it again before every mock exam. Most wrong answers that come from the calculator come from one of these.

1. Decimal places

Both calculators show two decimals out of the box. Set four, so rates and statistics are not rounded on screen before you compare them with the answer choices. This changes the display only; both calculators keep full precision inside, except in the amortization functions (see below).

2. Payments per year (P/Y and C/Y)

The BA II Plus has a P/Y (payments per year) and a C/Y (compounding periods per year) setting, and it divides I/Y by them. If P/Y is 12, typing 6 for I/Y makes the calculator use 0.5% a period, and every answer is wrong without any warning. TI's current guidebook lists 1 as the value after a reset, but a calculator that was ever set to 12 for monthly loans stays that way, so check yours. Set P/Y to 1: then N is the number of periods and I/Y is the rate per period, and you convert annual rates yourself (5% a year paid semiannually is 2.5 for I/Y and twice the years for N). Entering P/Y also sets C/Y to the same value. Every keystroke on this site assumes P/Y = 1.

The HP 12C has no P/Y setting. Its n and i are always the number of periods and the rate per period, which is the same convention. It has two shortcuts for monthly problems: g 12× multiplies the number on screen by 12 and stores it in n, and g 12÷ divides by 12 and stores it in i.

3. Payments at the beginning or the end (BGN and END)

Ordinary annuities, loans and bond coupons pay at the end of each period, which is the default (END). An annuity due, such as rent paid in advance, pays at the start (BGN on the TI, BEG on the HP). When you switch to it, the display shows BGN on the TI or BEGIN on the HP. Switch back as soon as you finish the question; leaving it on is a classic way to get the next five questions wrong.

4. Order of operations: AOS on the BA II Plus

The BA II Plus ships in chain mode (Chn), which works through a calculation in the order you type it: 3 + 2 × 4 gives 20. In AOS mode (algebraic operating system) it follows the normal order of operations and gives 11. Switch to AOS so formulas behave the way they look on paper. The HP 12C has no such setting: in RPN you control the order yourself.

5. Resetting and clearing

A full reset on the BA II Plus puts every setting back to the factory defaults, including two decimals, chain mode and P/Y, so redo steps 1 to 4 after one. Separately, clear the worksheet before every question, so old inputs do not leak into new ones. On the HP 12C, f CLEAR FIN clears the five financial registers, f CLEAR REG clears all registers including cash flows, and f CLEAR Σ clears the statistics.

6. Signs: money out is negative

Both calculators use a cash flow sign convention: money you pay out is negative, money you receive is positive. If you enter a present value and a future value with the same sign, the calculator cannot find a rate and shows Error 5 (the same code on both calculators). Enter the price you pay as negative with +|- on the TI or CHS on the HP, after typing the number.

Time value of money

The five keys are the same idea on both: N (n) periods, I/Y (i) rate per period in percent, PV, PMT and FV. Enter any four and compute the fifth. On the TI you press CPT and then the key you want; on the HP you just press the key.

Present value of an annuity

5,000 a year for 10 years at 7%, paid at the end of each year. The full working is in Annuities and loan payments.

The same payments at the start of each year (an annuity due) are worth one period more of interest: 35,117.91 × 1.07 = 37,576.16. On the calculator, switch to BGN and compute PV again. Then switch back.

Bond price

A 5-year bond with a 3.5% annual coupon, priced to yield 5%. The full working is in Pricing bonds, and yield to maturity is in Bond price and yield to maturity. For semiannual coupons, halve the coupon and the yield and double N, as in periodicity and annualized yields.

Solving for the rate

A zero-coupon bond bought for 82.50 that pays 100 in 5 years. Note the minus sign on the price. More in Implied return and implied growth.

NPV and IRR

For uneven cash flows, use the cash flow worksheet on the TI or the cash flow registers on the HP. A project costs 80 today, returns 25 a year for three years and 30 in year four, and the required return is 9%. When the same cash flow repeats, enter it once with a frequency (F on the TI, Nj on the HP) instead of typing it three times. The full working is in NPV and IRR; the money-weighted return in Money-weighted and time-weighted returns is an IRR too.

On the TI, pressing ↓ after each cash flow moves to its frequency, which defaults to 1, so press ↓ again to skip it when a flow happens once. On the HP, IRR can take a few seconds while the display shows "running".

Loan amortization

Amortization splits a range of loan payments into interest and principal and shows the balance left. Take a 250,000 loan over 300 months at 0.4% a month. First find the payment, then amortize the first 12 payments. The loan itself is worked by hand in Annuities and loan payments.

Two things to know. First, both calculators round to the number of decimals on display when they amortize (the BA II Plus rounds the payment it uses; the HP 12C rounds each amount it works out). The figures above are what you get with four decimals set, shown here to the cent. With two decimals set you may see results a few cents different, which never matters in the exam. Second, on the HP, amortizing changes the n and PV registers (they become the payment count and the balance), so re-enter PV and set n to 0 before you start a new schedule. On the TI, to see the next year, set P1 to 13 and P2 to 24.

Mean and standard deviation

Five annual returns: 8%, −4%, 12%, 3% and 6%. The mean is 5%. The sample standard deviation, which divides by n − 1, is 6%; the population standard deviation, which divides by n, is 5.3666%. Level I uses both, so know which one a question wants. The full working is in Variance and standard deviation.

The HP 12C only computes the sample standard deviation directly. Adding the mean to the data set as one extra value and taking s again gives the population figure; HP's own manual describes this method. Clear the statistics registers before using them again. On the TI, the same STAT screen continues with the sums of X and X², and with 2-variable data (choose LIN) it gives the regression intercept, slope and correlation.

Mistakes that cost marks

• P/Y left at 12 on the BA II Plus. Every rate is silently divided by 12.
• BGN left on after an annuity due question.
• Old values in the worksheet. Clear TVM, cash flows and statistics before each new question. On the TI, a stray value in an unused TVM key (often FV or PMT) changes the answer.
• Same sign on PV and FV when solving for a rate or the number of periods.
• Chain mode on the TI, which ignores the normal order of operations.
• Annual rate with monthly periods. Divide the annual rate and multiply the years by the number of periods per year, both, every time.
• Sample versus population. Read whether the question gives a sample or the whole population before you pick Sx or σx.

Practice until it is automatic

CFA Institute's advice is simple: know the calculator functions the curriculum uses, because familiarity saves time in the exam (Level I exam page). On this site every worked example, checkpoint and formula card shows the keystrokes for your calculator. The formula sheet collects them in one place, and the Time Value of Money module is where most of them first appear. Our study plan puts calculator setup in week one.

Sources

• CFA exam calculator policy, for the approved models and what you can bring.
• CFA Institute, A guide to the BA II Plus and HP 12C (PDF), for the comparison of the two models and the four-decimal tip.
• Texas Instruments BA II Plus guidebook, for the format settings, P/Y and C/Y, BGN and END, AOS and chain mode, reset, and how amortization rounds.
• HP 12C owner's handbook, for amortization, display rounding and the population standard deviation method.

Analyst Dojo is not affiliated with CFA Institute, Texas Instruments or HP.