- 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**

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

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**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. |