CFA Practice Question
What single deposit could you make today in order to have $1,000,000 in 30 years, assuming it earns interest at 11% per year, compounded monthly?
A. $9,523.23
B. $37,441.83
C. $43,682.82
Explanation: On the BAII Plus, press 360 N, 11 divide 12 = I/Y, 0 PMT, 1000000 FV, CPT PV. On the HP12C, press 360 n, 11 ENTER 12 divide i, 0 PMT, 1000000 FV, PV. Note that the answer is displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.
User Contributed Comments 7
| User | Comment |
|---|---|
| lwang014 | "compounded monthly" is the key |
| bawejate | or you can go 36 N FV 1000,000 PMT 0 I/Y 11 P/Y set to 12 PC CPT= 37,441 |
| Frehner | bawejate means 30 N not 36 N |
| kellyyang | 36N is right! You know 30*12=360 N , remember is monthly ! |
| MylesGrenier | I just found the monthly compounded EAY and put that in I/Y. So (1 + [.11/12])^12 - 1 = 11.57188% |
| JeffAu | If you do it the way Bawejate is doing, N needs to be 360 not 36. |
| abs013 | BAIIPlus N= 30 * 12 = 360 I/Y= 11/12 = 0.9167 FV= 1,000,000.00 CPT PV = -37,441.83 |