CFA Practice Question

There are 410 practice questions for this study session.

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 ______.

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

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
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