CFA Practice Question
How much interest would an original $500 deposit earn at 5% per year after 14 months? Assume monthly compounding.
A. $30.04
B. $29.97
C. $583.33
Explanation: The question only asks for the interest, not the ending balance. (1 + 0.05/12)14 * 500 - 500 = 29.97.
User Contributed Comments 3
| User | Comment |
|---|---|
| Kuki | i would've surely tripped if 529.97 had been listed as an option. |
| tijean25 | I can't get that answer on the BA Ii plus. Can somebody break Dow what keys to press to get to that answer? |
| Sheeb | Sure Tijean25: N=14 I/Y=(5/12)0.4166666 PV= -500 (original deposit) PMT=0 Cpt FV=$529.96 Then you 529.96 - 500 = $29.96 This is how much interest in dollars you have earned. |