- CFA Exams
- 2021 CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. The Time Value of Money
- Subject 5. The Future Value and Present Value of a Series of Uneven Cash Flows

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**CFA Practice Question**

The following end-of-month payments of $400, $700, and $300, respectively, are due. Given a stated annual interest rate of 3.60 percent, the minimum amount of money needed in an account today to satisfy these future payments is closest to ______.

B. $1,327

C. $1,368

A. $1,391

B. $1,327

C. $1,368

Correct Answer: A

The monthly interest rate is 3.6/12 = 0.3. The present value is $1,391.48 = $400.00/(1 + 0.3%) + $700.00/(1 + 0.3%)

^{2}+ $300.00/(1 + 0.3%)3.Using a financial calculator: CF1 = 400, CF2 = 700, CF3 = 300, I= 0.3 Compute PV, PV = 1,391.48

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**User Contributed Comments**
7

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

tomalot |
Method one gives a NPV of 1,322.709. Method 2 seems correct. Confused! |

lordcomas |
Does anyone has an idea where to find a tutorial for using cashflows with the TI BAII plus? |

bwhitele |
Why is the solution using i = 0.3 and not 0.36? |

myron |
because it's the monthly interest rate @bwhitele |

ashish100 |
Yeah, issue as lordcomas. How do i add the "I" on BAII plus? Thanks in advance. |

IvanRios |
3.6%/12months = .3/per month. That is why I = 0.3 |

Sagarsan88 |
I get an npv of 1396.11...i used the CF method on calc....any clue why the nos don't match...thank you |