- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Time Value of Money in Finance
- Subject 2. Fixed Income Instruments and the Time Value of Money
CFA Practice Question
You have $10,000 in a savings account. You wish to make a withdrawal of $1,769.84 at the end of every year for the next 10 years. After the tenth withdrawal, the account will have a zero balance. How much must the savings account pay in interest per year?
A. 12%
B. 11%
C. 7%
Explanation: By calculator: PMT = $1,769.84; n = 10; PV = -$10,000.00; CPT i = 12%
User Contributed Comments 1
| User | Comment |
|---|---|
| Kuki | FV of $10000 for 10 yrs = PV of annuity of $1769.84 for 10 yrs. Equate the two and find r Answer r = 12.06% |