Calculator Used in CFA Exam

A professional simulator for BA II Plus™ and HP 12c functions

Period	Beginning Balance	Interest Earned	Payment	Ending Balance

Table 1: Detailed breakdown of periods based on the calculator used in CFA exam logic.

What is a Calculator Used in CFA Exam?

The calculator used in CFA exam refers to the specific financial computing devices permitted by the CFA Institute during Level I, II, and III examinations. Unlike many other professional certifications, the CFA Institute maintains a strict policy regarding electronic devices to ensure fairness and academic integrity. Candidates are limited to two specific models: the Texas Instruments BA II Plus (including the Professional version) and the Hewlett Packard 12c (including various anniversary and platinum editions).

Understanding how to leverage the calculator used in CFA exam is not just a logistical requirement; it is a core competency. These devices are designed to handle complex Time Value of Money (TVM) calculations, net present value (NPV), internal rate of return (IRR), and statistical analysis that would be impossible to solve manually within the exam’s tight time constraints. A common misconception is that any scientific calculator can be used; however, using an unapproved device will lead to immediate disqualification and voiding of exam results.

Calculator Used in CFA Exam Formula and Mathematical Explanation

The mathematical engine behind the calculator used in CFA exam is primarily based on the General TVM Equation. This equation links the five variables found on the top row of a BA II Plus: N, I/Y, PV, PMT, and FV.

The standard formula for the Future Value of a series of cash flows is:

FV = PV(1 + i)^n + PMT [((1 + i)^n – 1) / i] × (1 + i × Type)

Variable Definitions

Variable	Meaning	Unit	Typical Range
N	Total Number of Periods	Integer	1 to 360+
I/Y	Interest Rate per Year	Percentage	0% to 25%
PV	Present Value	Currency	Any
PMT	Annuity Payment	Currency	Any
FV	Future Value	Currency	Any

Practical Examples (Real-World Use Cases)

Example 1: Fixed-Income Bond Valuation

Suppose you are calculating the price of a 10-year bond with a 5% semi-annual coupon and a par value of $1,000. The market yield is 6%. Using the calculator used in CFA exam, your inputs would be:

• N = 20 (10 years × 2)
• I/Y = 3 (6% annual / 2)
• PMT = 25 ($1,000 × 5% / 2)
• FV = 1,000
• CPT PV: Result = -925.61 (The bond price is $925.61)

Example 2: Retirement Savings (Annuity Due)

An investor wants to save $5,000 at the start of every year for 30 years in an account earning 7% annually. Because the payments happen at the start, we set the mode to BGN on the calculator used in CFA exam.

• N = 30
• I/Y = 7
• PV = 0
• PMT = -5,000
• CPT FV: Result = $510,364.51

How to Use This Calculator Used in CFA Exam

1. Select your target variable: Decide if you want to calculate Future Value, Present Value, or the Payment amount.
2. Input known data: Enter the number of years, interest rate, and any existing balance. Note that for the calculator used in CFA exam, cash outflows (like investments) are usually entered as negative numbers.
3. Adjust Compounding: Change the P/Y setting to match your scenario (e.g., 12 for monthly).
4. Toggle Mode: Choose “End” for regular payments and “BGN” for payments at the beginning of the period.
5. Review the Chart: The visual representation shows how your investment grows through both principal additions and interest compounding.

Key Factors That Affect Calculator Used in CFA Exam Results

• Compounding Frequency: Increasing the frequency (e.g., from annual to monthly) increases the effective interest rate, impacting the FV significantly.
• Cash Flow Direction: In the calculator used in CFA exam, the sign convention matters. If PV and FV are both positive, the calculator may return an error as it assumes one must be an inflow and the other an outflow.
• Payment Timing: Annuity Due (BGN) results in higher Future Values than Ordinary Annuities because each payment earns interest for one additional period.
• Interest Rate Volatility: While the calculator assumes a static I/Y, real-world results vary with market fluctuations.
• Inflation: The calculator provides nominal results. To find real values, the inflation rate must be subtracted from the nominal rate.
• Taxation: CFA exam questions often require calculating after-tax cash flows before inputting them into the TVM buttons.

Frequently Asked Questions (FAQ)

Can I use a TI-84 or other graphing calculators?

No. The only approved calculator used in CFA exam models are the TI BA II Plus and the HP 12c. Graphing calculators are strictly prohibited.

How do I clear the memory on a BA II Plus?

Press [2nd] then [CLR TVM] to clear the time value of money variables. It is crucial to do this before every new problem.

What is the “Error 5” message on the BA II Plus?

This typically occurs when the calculation is mathematically impossible, often due to incorrect sign conventions (e.g., PV, PMT, and FV all having the same sign).

Which calculator is better for the CFA exam?

The TI BA II Plus is more popular due to its intuitive algebraic entry system. The HP 12c uses Reverse Polish Notation (RPN), which is preferred by some veteran finance professionals.

Do I need to bring a backup calculator?

While not required, the CFA Institute allows you to bring a backup calculator used in CFA exam (must be one of the approved models) and loose batteries into the testing room.

Can the proctor clear my calculator?

Yes, proctors may inspect your device and reset the memory before the exam begins.

How many decimal places should I set?

Standard practice for the calculator used in CFA exam is to set it to 9 decimal places (floating) by pressing [2nd] [FORMAT] 9 [ENTER].

What does P/Y mean?

P/Y stands for Payments per Year. Ensure this is set to 1 unless the problem specifically dictates otherwise, as many candidates find it easier to manually adjust N and I/Y.