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I am using the BA II Plus Texas Instruments calculator.

When I want to calculate an EAR for example, my calculation would be as follows:

(1 + r/m )^m -1 = EAR

So in my calculator, using 5 decimal places I press:

1 + ( .03 / 365 ) =

This give me the answer:

1.00008

Then without pressing anything else, I press:

y^x 365

Which gives me the answer of:

1.03045

This is the wrong answer since the correct answer to 1.00008^365 is actually 1.02963

Is there something wrong with my calculator? The operations seem to be exactly the same...

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1 Answer 1

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The answer as it turns out is quite straight forward.

When using the complete equation, the calculator works out the answer with the full number of decimal places i.e. 1.00008219^365 = 1.03045259

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