CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

You expect to receive annual payments of $425 per year forever. If these payments can be invested at the rate of 11% per year, what is the present value of this perpetuity?
Correct Answer: $3,863.64

PV = 425/0.11

User Contributed Comments 4

User Comment
Ratego PV=A/r
A=425
r=.11
8thlegend After going through 11 of these problems, I wished that all the CFA questions were like these.
Yrazzaq88 BA calculator:
PMT = -425
I/Y = 11%
N = 100

=3863.52
assiduous Another way to look at it....
Suppose you were living off of interest. If your money was invested at an annual rate of 11%, how much money would you need TODAY in order to yield $425 every year forever?

The answer is always:
[desired amt per period] / [rate of return per period]
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