- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 1. Rates and Returns
- Subject 4. Annualized Return

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**CFA Practice Question**

What is the value after three years of $1,000 invested at a 6% annual rate, if interest is compounded monthly?

A. $ 1,191.02

B. $ 1,196.68

C. $ 1,197.22

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**User Contributed Comments**
8

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

jesshujia |
could anyone tell me how to get that result? |

noonah |
jess, compounded monthly means interest rate is 6pct/12=0.5pct. Three years=3*12=36months. Plug all no's into equation. |

Shelton |
1000 * (1+0.06/12)^36 = 1196.68 (C) |

toxoplasmosis |
I got the result using the formula but got a different one with the BA II plus.Is my calculator having prob.? |

bsm9 |
Yes, my BA 11 plus gave something completely different when I did the following: n=3 i/y=6% PV=-1000 PMT=0 P/Y=12 C/Y=12 SOLVE FV |

mpasternack |
Make sure you clear TVM in your calculator if you are getting the wrong answer when solving for TVM questions (2nd, CLR TVM for BA II Plus) |

jrojasut09 |
@bsm: make sure you're converting the interest rate from nominal to effective. The effective rate of 6% compounded monthly is 6.1678. |

clafuente |
@bsm I/y=6%/12 N=36 Pv=-1000 CPT FV |