Financial Calculators

Joel Hasbrouck

http://www.pages.stern.nyu.edu/~jhasbrou

In the Foundations of Finance course, you'll be using your financial calculator a lot. Here are some things that you might want to consider.

• Buy and learn to use a calculator before the first test.
• Stick with one calculator. It’s too confusing to switch among different keyboard layouts, menus etc.
• The basic trade-off in calculators is power vs. simplicity. Power comes at the expense of drill-down menus and complicated sequences of key strokes that may be difficult to remember.
• My own preference is for simpler calculators.

For the Foundations of Finance course, I recommend the Hewlett-Packard 10bII.Good alternatives include the HP-12C and the Texas Instruments BA II plus (roughly the same price).

FAQ's

Isn't the HP 17bii better?

About the only thing it does better than the 10B (for purposes of the Foundations course) is interest rate conversions. A question like: "10% compounded semiannually is equivalent to what rate compounded monthly?" can be answered in one step on the 17bii (if you remember how to set up the calculation). You’d use a few more keystrokes on the 10bII, but I don't consider this a significant advantage.

But we're going to be doing the yield to maturity on a bond. The 17bii has this built in, but the 10bII doesn't.

The YTM function on the 17bii is not a general purpose YTM function. It is designed to compute the YTM according to one convention for US semiannual bonds only. You will never need to use the 17bii YTM function in this class.

When I take upper level finance courses, will I wish I had a 17bii?

If a problem can't be solved on a 10bII, you'll probably want to do it in Excel.

Is the HP 12c a good choice?

I personally like it, but most students don't. Although it is sold as a business calculator, it doesn't have one very common time-value-of-money function. It can't go back a forth between annual percentage rate (APR) and effective annual rate (EAR) with a single key stroke. (The HP 10bII and TI BAII do have this ability.) You can still solve APR/EAR conversions, but the calculations are more involved. The good news about the 12c: It has an extremely legible display. It tolerates abuse well: My first one lasted about twenty years.

I have a programmable scientific calculator. Will this do?

Generally, no. Some financial problems don't have "closed form solutions", i.e., answers that can be expressed as simple formulas. To get an internal rate of return, for example, a financial calculator makes guesses and then refines them. Unless this functionality is built in, it's very difficult to program.