- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Time Value of Money in Finance
- Subject 1. Time Value of Money
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/(1.082) + 7,300/(1.083) = 10,404.
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 |