CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

A father will have to make the first payment of his son's college tuition of $100,000 in 8 years time. How much does he need to invest now to be able to pay this amount if the interest earns 10 % compounded annually?
A. 46,650.74
B. 46,319.35
C. 64,319.35
Explanation: Using Texas Instruments BA II Plus:
100000 ± FV: FV = - 100,000.00
8 N: N = 8.00
10 I/Y: I/Y = 10.00
CPT PV: PV = 46,650.74

Using Hewlett Packard 12 C:
F CLEAR FIN: 0.000000000
F CLEAR REG: 0.000000000
8 N: 8.00000000
10 i: 10.00000000
100000 CHS FV: - 100,000.000
g END: - 100,000.000
PV: 46,650.73802

User Contributed Comments 2

User Comment
chuong What is the first payment mean??? then the second payment. May I misunderstand that the father will make 8 payments of 125,000 in 8 years??
smillis There is just one single payment that will grow to the total needed.

In other words, how much does the father need today for that one sum to grow to $100,000?
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