CFA Practice Question
If you buy a television for $650 and agree to pay for it with 24 payments of $30 (with the first payment occurring next month), what is the size of the final payment needed at month 24 to completely pay off the television? Assume the interest rate you are being charged is 16% per year, compounded monthly.
A. $51.25
B. $47.54
C. $81.25
Explanation: On the BAII Plus, press 24 N, 16 divide 12 = I/Y, 650 PV, 30 +/- PMT, CPT FV. On the HP12C, press 24 n, 16 ENTER 12 divide i, 650 PV, 30 CHS PMT, FV. The answer is shown as a negative number. Make sure the BAII Plus has the P/Y value set to 1.
User Contributed Comments 20
| User | Comment |
|---|---|
| gruszewski | we've got the agreed payment of 30 plus the remaining sum of 51,25 to be paid at the end of the last month. |
| Alastair | make sure the P/Y is set to 1. |
| julamo | plus the usual $30 payment of course! |
| dealsoutlook | forgot about the $30 pmnt...i know i m going to get this wrong on the exam as well. |
| Kuki | i dont think we need to add the $30 here. the answer already includes that! C is correct.... |
| grezavi | Previous Mock Exam had a question/amswer that required the payment without the last $30, I guess we should flag these type of questions as the ones to look for the trick in |
| StanleyMo | maybe clues lies here: first payment occurring next month |
| ElenaStep | $30 for the last period is already included, why we add this amount again?? |
| ElenaStep | Sorry, disregard my previous post - they are talking about a total cash outflow at t=24, the answer is right. |
| Yohan3109 | Logically this kind of question should be answered using straight forward the calculater and no need to adjust anything. Just be sure setting good key.. |
| kenzo | Why PMT is entered as negative? |
| prajacti | kenzo, because you entered the PV as positive |
| uviolet | my p/y is set to 1 and i use BA II plus. I still get the answer 51.25 with the same entries as given in the answer. any suggestions? |
| uviolet | never mind. got it |
| soukhov | 51,25 - its your debt in the end of 24 period. you need to pay it off in addition to those 24th 30$ |
| tommyguard3 | Thank you for clarifying, it was driving me nuts trying to figure out why it was 81 not 51 |
| mary11 | ops forgot to add the 30... |
| Sheeb | The question is very unclear about paying an additional $30. |
| GBolt93 | Wouldn't it be awesome if this test was just about knowledge and not how well you notice tiny purposefully vague details in a timed test. |
| gunner1993 | is there a way to do this manually? |