CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

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

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
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