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Basic Question 10 of 27
You have invested in an annuity that pays you $1,500 per year. Payments are always made at the end of the year. If each payment is invested at the rate of 11% per year, what is the total amount you will have accumulated (payments plus interest) by the end of 12 years?
B. $30,981.87
C. $34,069.78
A. $19,980.00
B. $30,981.87
C. $34,069.78
User Contributed Comments 9
| User | Comment |
|---|---|
| lna1717 | why 1500(1.11)^0 if the first payment occurs at the end of the first period , n from 1 to 12? |
| fuller | for the first payment, the future value is 1,500.00(1.11)^11, for the second one, the future value is 1,500.00(1.11)^10, and for the last one, the future value is 1,500.00(1.11)^0. so the answer is correct. |
| suraj | FV=1500[1.11^12 -1]/0.11=34069.78 FV=PMT[(1+r)^n -1]/r |
| Will1868 | On HP12c: n = 12 i= 11 PMT=1500 Calc. FV = 34,069.78 or D. |
| anish | On BA plus: 12 -> N 11 -> I/Y 1500 -> PMT CPT -> FV = 34,069.78 ;) |
| Kaloyan | A question regarding the use of 12c. If we set the PMT to +1500 dollars, why the FV comes with a negative result of - 34,069.78? Feels like after 12 year we need to pay that amount? |
| nabilhjeily | so why did this one worked and the question before didnt ????? why should we multipy it by 1+r |
| bidisha | Kaloyan, think of - sign as withdrawing/getting. I think of pmt as something we GET, so I enter it with a (-), like -1,500 for this example and the future value comes out positive 34,069.78. |
| ko960531 | Guys, just put (-) sign for PMT like habutally. |
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Learning Outcome Statements
calculate and interpret the present value(PV) of fixed-income and equity instruments based on expected future cash flows
calculate and interpret the implied return of fixed-income instruments and required return and implied growth of equity instruments given the present value (PV) and cash flows
CFA® 2025 Level I Curriculum, Volume 1, Module 2.