CFA Practice Question

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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

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.
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