- 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
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:
where: N = the number of periods (payments), R = the interest rate per period
PV = Payment * (1 - (1 / (1 + R)N) / R
where: N = the number of periods (payments), R = the interest rate per period
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 |