- CFA Exams
- CFA Exam: Level I 2021
- Study Session 2. Quantitative Methods (1)
- Reading 6. The Time Value of Money
- Subject 3. The Future Value and Present Value of a Single Cash Flow

###
**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?

B. 7%

C. 8%

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+ : 2nd CLR TVM (-) 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? |