CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

Andrea Palmer has saved $25,000 in her bank account. She is thinking of moving it to a money market account that pays a fixed 3.75% stated annual rate, compounded monthly. If Andrea continues to save $600 per month from her salary at the end of every month for the next three years, how much money will she have after three years?
A. $50,912
B. $50,796
C. $46,917
Explanation: Andrea has $25,000 today and will save $600 monthly at the year's end. The latter is an annuity. The future value of both can be computed in one step on a financial calculator. Interest = 3.75/12 = 0.3125%, since compounding is monthly. In the BGN mode: PV = 25,000; N = 36; I/Y = 0.3125; PMT = 600; CPT FV = 50,796.

User Contributed Comments 11

User Comment
mc25456 Why the BGN mode?
timbball it's not in BGN mode.
rrichmondo Should be switched to the end mode as the payments are at the end of each month
Joel1980 BGN mode gives the wrong answer. Payments are made end of month, so stick with END mode.
kellyyang can anyone teach how to set END mode at BAII plUS! Thanks!
JimmyP kellyyang

2nd then Enter
2nd PMT

Changes from BGN to END or vice versa
cebus JimmyP: you got the order mixed up...although I'm sure kellyyang already figured that out
thekobe kelly think it this way:
25,000 to be invested during three years monthly compounding so we have 27,971 at the end of year 3, and an annuitie of 600 during 3 years so the fv value is 22,824.18 so we add together these two quantities to get 50795.98
lawlee thekobe can you please explain how you got the 22,824.18 numbe
lawlee got it now
lawlee Why the PV amount is not negative?
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