- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. The Time Value of Money
- Subject 5. The Future Value and Present Value of a Series of Uneven Cash Flows

###
**CFA Practice Question**

What is the present value today of annual cash flows of $1,000, $2,000, and $3,000? Assume that the first cash flow occurs 1 year from today and that the interest rate is 10% per year, compounded annually.

A. $2,754.32

B. $4,104.98

C. $4,815.93

**Explanation:**You could solve this question using 3 different compound interest problems, but it is easier to solve by using the calculator's cash flow functions.

On the BAII Plus:

Press CF 2nd CLRWork 0 ENTER DownArrow 1000 ENTER DownArrow DownArrow 2000 ENTER DownArrow DownArrow 3000 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 10 ENTER DownArrow CPT.

On the HP12C:

Press these keys: 0 BlueShift CFo 1000 BlueShift CFj 2000 BlueShift CFj 3000 BlueShift CFj. Then press 10 i, YellowShift NPV.

The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure that the BAII Plus has the P/Y value set to 1.

###
**User Contributed Comments**
1

User |
Comment |
---|---|

tenny45 |
*Know how to compute CF in Calc* |