- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 1. Rates and Returns
- Subject 4. Annualized Return
CFA Practice Question
You have $1,000 to invest today. In order for your $1,000 investment to grow to $1,593.85 at the end of 8 years, the money must be invested at what interest rate?
B. 7%
C. 8%
A. 6%
B. 7%
C. 8%
Correct Answer: A
Rate = (1593.85/1000)1/8 - 1 = 6%
User Contributed Comments 17
| User | Comment |
|---|---|
| Laurel | Need to figure out how to input exponents (1/8) into calculator. |
| NConroy | 1\8 = 0.125 |
| KD101 | Why exponent , it is power of (1/8) - just use brackets to do it |
| jaan | Its very easy just 1593.85 /1000 =15.9385 then press Yx (1/8)= - 1 *100 = 6% |
| mark72 | On the TI BAII Plus: PV = 1000 FV = -1593.85 N = 8 Compute I/Y = 6.000 |
| nads2007 | Great help mark72 |
| Crown01 | Just take 1.59385 and three time stroke square-root key. ->1.06 ->6% interest |
| SriSri | Why not PV=-1000 and FV=+1593.85, you invest 1000 so - and receiving 1593.85 in future so +. Please help confused here with BAii cal |
| midwest | i am following mark72's explanation, which is how i originally tried to solve for the problem...however, when I press CPT I/Y I get "Error 5" - can anyone help me with this? |
| midwest | oh, nevermind...I wasn't using the (-) sign for FV |
| Mavizo | I used mark7's method but still I keep getting 30 as an answer. Can somebody help please!!! |
| fedha | try clearing the calculator press 2nd OUIT 2nd [CLR TVM] This might help clear any worksheet material still saved. Then follow mark72 |
| mwali | Iam having a problem like midwest. I keep getting error 5 even after using (-) for FV. Can Someone help am getting nervous. |
| allenlush | do not forget to clear your calculator before doing a TVM problem. With BAII+ : 2nd CLR TVM (-) 1,000 -> PV 1,593.85 -> FV 8 -> N CPT I/Y = 6 It doesn't matter you put the negative sign (-) on PV or on FV. |
| Huricane74 | If you want to calculate this using a formula, use the: Growth rate Formula: r = [ (FV / PV ) ^ (1/n) ] - 1 |
| elsaharty | Please, how to can make ( )^1/8 on HP12c |
| EmmaTberry | I am having the same problem as Mwali and Midwest. I have cleared the calculator and am inputting everything as everyone has suggested and keep receiving error 5 as an answer (on BAII Plus) Have had no issues computing anything else, only problem is trying to compute I/Y. Anybody know how to fix this? |