- CFA Exams
- 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**

If your discount rate is 8% per year, calculate the present value of the following cash flows.

End of year 2: $3,000

End of year 3: $7,300

End of year 1: $2,200

End of year 2: $3,000

End of year 3: $7,300

A. $10,404

B. $11,239

C. $9,876

**Explanation:**The present value = 2,200/1.08 + 3,000/(1.08

^{2}) + 7,300/(1.08

^{3}) = 10,404.

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**User Contributed Comments**
4

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

geet |
why do they use the effective rate of interest instead of the effective rate of discount....there different.....i=d/1-d |

Pooh |
using calculator: CF feature CF0=0 cf1=2200 cf2=3000 cf3=7300 NPV, I=8, compute NPV->10404.02 |

achu |
syllabus is imprecise regarding 'discount rate' and interest rate. Geet is right: in other contexts the discount rate is not the interest rate. |

djleggins |
Attention: if you start with CF0 instead of CF1 you receive "B" as the correct answe |