Tuesday, April 20, 2010

Principles Level: Setting up your calculator

(Note: this tip applies to Expert Level candidates as well, but I presume that if you passed your Principles Level exam you must have had the calculator set the way you expect it to work!)

I generally recommend that candidates make sure to check two settings in particular on their calculators prior to the exam:

- precision
- order of operations

With respect to precision, my recommendation is that you set the number of decimal places that your calculator uses to the maximum value possible. I think it is better for you to see the answer in as "pure" a form as possible, and then you can choose to round or truncate your result, as necessary. For the Texas Instruments BA II Plus, for example, you can set the number of decimal places anywhere from 0 to 9 places.

As for order of operations, keep in mind that there are two different methods:

- chain (essentially left to right)

- algebraic

The chain mode of operation means that the calculator will perform calculations as they are entered (i.e., a literal "left to right" mode).

The algebraic mode of operation uses the following hierarchy:

1. Parentheses
2. Exponents
3. Multiplication and Division
4. Addition and Subtraction

People often use the acronym PEMDAS (Please Excuse My Dear Aunt Sally) to help them remember the hierarchy under the algebraic mode. Another (less witty) form of the mnemonic device is BEDMAS (Brackets Exponents Division Multiplication Addition Subtraction). Use whatever works!

To illustrate the difference between chain mode and algebraic mode, consider the following expression: 3 + 5 * 4.

Under chain mode, the solution is 32. (Obtained by first adding 5 to 3 to get 8, then multiplying 8 times 4).

Under algebraic mode, the solution is 23. (Obtained by multiplying 5 times 4, then adding 3).

I hesitate to give a recommendation with respect to mode of operations - you should use whatever makes sense for you. Personally, I can't see why anyone would use the chain mode unless that is the way their brain works - and if it works, I don't see a reason to change.

Most financial calculators default to the chain mode, whereas scientific calculators tend to default to the algebraic mode. All of the "allowed" calculators for your CIPM exams are financial, of course. Thus, given that (I think) most people tend to think and use in algebraic mode, you probably need to change your calculator's settings to get it to work the way you want it to on the exam.

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