Theory Part 2

In this video, you will learn how to use the Big Six to solve real math problems. We will go over the process first, and then look at some sample questions in the following lectures. There are 2 things you need to remember about the Big Six. • If you know any 5 of the Big Six values, you can find the sixth one. So for example if you know everything but the payment, you can find it by entering the other 5 values. Or if you know everything but the interest rate, you can find it if all the other 5 values are entered. The second thing to remember is that you can use the Big Six straight up ONLY if the interest rate compounding frequency, P/YR, matches the payment frequency. So, for example if you rate is j12, your P/YR is 12, and the payments are monthly, it’s ok, we can use the Big Six. The frequency of the compounding in this case is monthly and the payments are monthly, they match. But if your rate is given as j2, and the payments are monthly, the frequencies don’t match, and you cannot simply use the Big Six to solve the problem. You will need to convert the rate J2 into J12 first to match the payment frequency. Let’s take a look at how to do this. This is the cheat sheet that you can download from this section’s materials and print out for yourself as you are practicing. It shows the big six on the left (that’s what you use if your compounding frequency P/YR matches the payment frequency). On the right, it shows what to do if those frequencies don’t match. In this case, your interest rate keys I/YR and P/YR are replaced with the interest rate conversion (the NPEPN). So remember that every time you are solving a question take a look at wha your P/YR is. If it matches the payment frequency grea, use the Big Six. If not, you will need to do the NPEPN first. You are probably wondering how this works in practice. Let’s dive into some real examples! Thanks for watching and I’ll see you in the next video!