CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

You are the landlord of a small office building. The rent is $750 per year, paid at the beginning of each year. You always invest the rent payments at a rate of 6% per year. What will be the accumulated value of the invested payments at the end of 5 years?
A. $5,356.51
B. 4,481.49
C. $3,975.00
Explanation: FV = 750.00(1.06)5 + 750.00(1.06)4 + 750.00(1.06)3 + 750.00(1.06)2 + 750.00(1.06)1 = $4,481.49

User Contributed Comments 6

User Comment
hitutokio Check to see why FVa formula did not get same answer.
wollogo Should give the same answer - remember payment is at the beginning of the year!
Lamkerst BA II PLUS:

BGN
-750 [PMT]
6 [I/Y]
5 [N]
[CPT] [FV]
uformula Why doesn't using the future value of an annuity due make more sense here?
jdcfa987 if we are starting at t=0 wouldnt we use N=6? or even 7? It seems that if we started at t=0, we would have invested rent pmts at t=0, t=1, t=2,t=3, t=4, t=5..the end of year 5 would effectively be t=6 where you have one more pmt. Can someone help?
ttomljenov i've done this with FV calculation as N=5, PMT=750, I/Y=6% and calculate FV = 4,227.82 and then multiply by 1.06
... this is how schweser says BGN TVM calculations should be calculated in END mode
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