- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. The Time Value of Money
- Subject 4. The Future Value and Present Value of a Series of Equal Cash Flows (Ordinary Annuities, Annuity Dues, and Perpetuities)

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**CFA Practice Question**

Rent is $700.00 monthly and is due on the first day of every month. If the stated annual interest rate is 6 percent, the present value of a full year's rent payments is closest to ______.

A. $8,123

B. $8,173

C. $8,203

**Explanation:**Using a financial calculator: PMT = 700, I=0.5, n=12 Compute annuity due PV, PV = 8,173.92

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**User Contributed Comments**
2

User |
Comment |
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idzani |
Keyword: on the first day of everymonth. Set BGN mode. |

JohnOyo |
In the texas calculator I am putting: PMT = -700 N = 12 I/Y = 6/12 = 0.5 CPT PV = 8133.25245 Okay I figured it out... Thanks to the comment above To change to BGN (beginning of period) 2nd BGN to select BGN/END screen 2nd SET to change to BGN (BGN should now show)) Recalculated and got 8173.91871 |