- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Time Value of Money in Finance
- Subject 2. Fixed Income Instruments and the Time Value of Money

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**CFA Practice Question**

The state lottery you just won will make annual payments of $152,000 for the next twenty years. What is the present value of your prize at a discount rate of 8%?

A. $ 1,492,358.41

B. $ 1,523,323.25

C. $ 1,634,516.01

**Explanation:**To calculate the present value of a stream of payments, use the formula:

PV = Payment * (1 - (1 / (1 + R)

^{N}) / R

where: N = the number of periods (payments), R = the interest rate per period

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**User Contributed Comments**
5

User |
Comment |
---|---|

vrabez |
What are steps for the annuity on a financial calculator? |

malikhwa |
On BA11 PlUS 2nd (CLR WORK) 20 (N) 8(1/Y) 152000(PMT) (CPT)(PV) |

CFAlearner |
Typing that in I get $2,798,957.60 where am I going wrong? |

enje |
Use CF CF C01 = 152000 F01=20 NPV I=8 (down arrow) then CPT = 1492,358.41 |

Shaan23 |
STUPID STUPID....calculator was in BGN mode |