- 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
A property is bought for $500,000 and sold for $720,000 after 7 years. What rate of interest was earned on the investment over the 7 years?
A. 5.31%
B. 5.32%
C. 5.35%
Explanation: Using Texas Instruments BA II Plus:
500000 ± PV: PV = -500,000
720000 FV: FV = 720,000
7 N: N = 7.00
CPT I/Y: I/Y = 5.35
f CLEAR FIN: 0.000000000
f CLEAR REG: 0.000000000
7 n: 7.00000000
500000 CHS PV: -500,000.0000
720000 FV: 720,000.0000
i: 5.34725241
500000 ± PV: PV = -500,000
720000 FV: FV = 720,000
7 N: N = 7.00
CPT I/Y: I/Y = 5.35
Using Hewlett Packard hp 12 C:
f CLEAR FIN: 0.000000000
f CLEAR REG: 0.000000000
7 n: 7.00000000
500000 CHS PV: -500,000.0000
720000 FV: 720,000.0000
i: 5.34725241
User Contributed Comments 4
| User | Comment |
|---|---|
| TammTamm | Don't forget to round up. I did. :( Simple mistake |
| Joel1980 | Not really interest earnt on the investment... just saying! |
| jpducros | Other solution (not simpler): (720-500)/500=0,44 or +44% in 7 years. Average per year is (1+0,44)^1/7=1,0534 or +5,35% |
| Slav | I get 5.24 with the same inputs |