CFA Practice Question

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CFA Practice Question

You have $1,000 to invest today. In order for your $1,000 investment to grow to $1,593.85 at the end of 8 years, the money must be invested at what interest rate?

A. 6%
B. 7%
C. 8%
Correct Answer: A

Rate = (1593.85/1000)1/8 - 1 = 6%

User Contributed Comments 17

User Comment
Laurel Need to figure out how to input exponents (1/8) into calculator.
NConroy 1\8 = 0.125
KD101 Why exponent , it is power of (1/8) - just use brackets to do it
jaan Its very easy just 1593.85 /1000 =15.9385
then press Yx (1/8)= - 1 *100 = 6%
mark72 On the TI BAII Plus:
PV = 1000
FV = -1593.85
N = 8
Compute I/Y = 6.000
nads2007 Great help mark72
Crown01 Just take 1.59385 and three time stroke square-root key. ->1.06 ->6% interest
SriSri Why not PV=-1000 and FV=+1593.85, you invest 1000 so - and receiving 1593.85 in future so +. Please help confused here with BAii cal
midwest i am following mark72's explanation, which is how i originally tried to solve for the problem...however, when I press CPT I/Y I get "Error 5" - can anyone help me with this?
midwest oh, nevermind...I wasn't using the (-) sign for FV
Mavizo I used mark7's method but still I keep getting 30 as an answer. Can somebody help please!!!
fedha try clearing the calculator
press 2nd OUIT 2nd [CLR TVM]
This might help clear any worksheet material still saved. Then follow mark72
mwali Iam having a problem like midwest. I keep getting error 5 even after using (-) for FV. Can Someone help am getting nervous.
allenlush do not forget to clear your calculator before doing a TVM problem. With BAII+ :

(-) 1,000 -> PV
1,593.85 -> FV
8 -> N
CPT I/Y = 6

It doesn't matter you put the negative sign (-) on PV or on FV.
Huricane74 If you want to calculate this using a formula, use the:
Growth rate Formula:
r = [ (FV / PV ) ^ (1/n) ] - 1
elsaharty Please, how to can make ( )^1/8 on HP12c
EmmaTberry I am having the same problem as Mwali and Midwest. I have cleared the calculator and am inputting everything as everyone has suggested and keep receiving error 5 as an answer (on BAII Plus)
Have had no issues computing anything else, only problem is trying to compute I/Y. Anybody know how to fix this?
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