CFA Practice Question

There are 410 practice questions for this study session.

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

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
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