Can you tell me how to calculate this in my calculator?

[mcarthur724]

I just bought the TI BA II Plus Professional calculator and did my first formula from Foundations 1a and I can't figure out how to enter it into the calculator to come up with the right answer. It seems straight forward, but I can't come to the correct amount. The formula below is from the BT website, and I come up with .2975, before calculating the SQRT. Then when I take the SQRT of .2975 I get .5454. But as you can see below the correct amount should be .132. Could someone help?

Volatility of portfolio = SQRT[50%^2*10%^2 + 50%^2*20%^2 + (2)(50%)(50%)(0.01)] = 13.2%

 

[T.Flockert]

I think you use the standard chain-setting. change to algebraic operating system with:

2nd format 'arrow down' 'arrow down' 'arrow down' 'arrow down' 2nd set 2nd quit

and try again. Most calculators use this system.

 

[David Harper CFA FRM]

cpaguy7:

I think T.Flockert is right. If you ensure the calculator is set to Algebraic Operating System (AOS), then the formula above should produce a variance of 0.0175 with SQRT() ~= 13.2%

to set AOS on TA BAII+:
2nd Format
up arrow
2nd Set

if you don't have AOS, you can still use parens:
.5^2 * .1^2 +
open parens "("
.5^2 * .2^2
close parens ")"
+
open parens "("
2*.5*.5*.01
close parens ")"
= 0.0175

David

 

[mcarthur724]

Would you recommend setting the calculator mode to AOS during the FRM exam? Considering the types of calculations in the exam would this mode make the most sense, or is it just a matter of preference?

 

[David Harper CFA FRM]

I would only because I cannot think of, or am simply not aware of, the advantage to the non-AOS setting; i.e., IMO the majority of used formulas follow AOS.
That said, FWIW, when i write/work practice questions, I use AOS but I insert the parenthesis anyway, every time ... for me personally, "over-using" the parens reduces the odds of an error - David