- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Time Value of Money in Finance
- Subject 2. Fixed Income Instruments and the Time Value of Money
CFA Practice Question
You have $10,000 in a savings account, paying 5% per year. You wish to make a withdrawal of $709.52 at the end of every year. After all the withdrawals are made, the account will have a zero balance. How many withdrawals can you make?
A. 25
B. 17
C. 11
Explanation: By calculator: PMT = $709.52; i = 5%; PV = -$10,000.00; CPT n = 25
User Contributed Comments 8
User | Comment |
---|---|
lisa606 | I'm not getting this, even though I'm entering the same things into my calculator. i have it set on end. Can anyone help? |
egghead | End of this year is a beginning of the next and vice versa. I'm usually using this principles vs. switching to "end" or "bgn" mode. |
Winner | Make sure you're entering the payment value as a positive and and PV as negative and that should work. |
achu | USE PV as NEG entry ("invested flow"), like Winner says !! |
doriva | this works too: PV=10000 PMT=-709.52 I=5 FV=0 N=? |
uformula | long ways,,,using the annuity equation, when I try to get the ln of -.7047, i get an error. is it not possible solving using the equation? |
uformula | Sorry I meant that I end up getting (using the formula)... .586613 = (1.05)^n Ln .586613/Ln1.05 = -10.932...what gives? |
PeterL | I did that too and just assumed it meant 11...wrong. We must be using the wrong formula. |