CFA Practice Question

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CFA Practice Question

Which of the following amounts is closest to the end value of investing $100,000 for 5 years at an effective annual interest rate of 12% compounded annually.

A. $182,212
B. $172,000
C. $176,234
Correct Answer: C

End value = 100,000(1+0.12)5 = $176,234.17

User Contributed Comments 12

User Comment
KD101 If compunded annually, no need to adjust for effective rates
jimlis BAII - enter 100,000 and hit PV;enter 12 and hit I/Y;enter 5 and hit N;hit CPT then FV.
chuong Another way using BAII to calculate through the Effective annual rate
Nominal rate = 60 (12% x 5 years
C/Y = 5
-> Effective rate = 76,234.17
Ending vaue = (1+ 76,234.17) x 100,000 = 176,234.17

Nathan The fastest way for such a simple problem is to use (1 + 0.12) ^ 5 and you can immediately see which of those answers is your answer, 1.76234, with a decimal adjustment.
mordja Just use the TVM functionality.

PV -100,000
N 5
I/Y 12

result is 176,234.17.
amarchinta I am getting 176,170 by doing TVM in BA II Plus as suggested by mordja?
johntan1979 There is no way you can get 176,170 by following exactly. Only possibility is your calculator is faulty or you forgot to clear your TVM before attempting this.
mbowa Guys, what an i missing?, if i use the T1 BA calculator & hit the buttons ur recommending, i get 105,738.814...Am i doing anything wrongly?
Rachelle3 do this ( 1 + 0.12) ^5 = 1.7623416832 simple!
Rachelle3 (1 + rate ) to the power of the years
Chl4072 NOM=?
nadiahalus Thanks, dear Jimlis and Mordja. The quick and correct approach was used!
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