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Free CFA-Level-I Exam Braindumps (page: 247)

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PDF with 3963 Questions

What is the future value of $450 per year for 10 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 7% per year, compounded annually.

  1. $6,652.62
  2. $6,217.40
  3. $3,381.85
  4. $3,160.61
  5. $4,951.85

Answer(s): A

Explanation:

Recognize that this question is an annuity due situation, since the first cash flow occurs immediately or at the beginning of each period. Annuities where the first payment occurs 1 period from today (or at the end of each period) are called "ordinary" annuities. This requires placing the calculator into "Begin" mode prior to solving the question. NOTE: Be sure to place the calculator OUT OF annuity due mode after this question before going on to subsequent questions, or you will get the wrong answers! On the BAII Plus, press 2nd BGN. If the display shows END, then press 2nd SET and then 2nd Quit. This will place the BAII Plus into annuity due mode (you can tell this because the BAII Plus will display BGN in small letters). Now press 10 N, 7 I/Y, 450 PMT, 0 PV, CPT FV. Place the calculator back into End mode (for ordinary annuities) by pressing 2nd BGN and then if the calculator is displaying BGN, press 2nd SET and 2nd Quit. The BGN letters should disappear from the display.
On the HP12C, press BlueShift END, which is the blue function on the front of the 8 digit key. This places the HP12C into Begin mode (the HP12C shows the word BEGIN in the display when in this mode). Then press 10 n, 7 i, 450 PMT, 0 PV, FV. To place the HP12C back into ordinary annuity mode (or END mode), press BlueShift BEG (the blue function written on the front of the 7 digit key). Note that the answer is displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.



If you deposit $10,000 into an account paying 8% per year, compounded semiannually, how much do you have in the account in 10 years?

  1. $15,403.52
  2. $21,911.23
  3. $24,800.00
  4. $22,667.70
  5. $25,938.48

Answer(s): B

Explanation:

On the BAII Plus, press 20 N, 8 divide 2 = I/Y, 10000 PV, 0 PMT, CPT FV. On the HP12C, press 20 n, 8 ENTER 2 divide i, 10000 PV, 0 PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.



How many deposits of $250 a month, beginning next month, are needed before an account has $200,000 in it, assuming it had a balance of $0 at the beginning and that interest is 6% per year, compounded monthly?

  1. 319.48
  2. No solution/Error
  3. 322.69
  4. 800.00
  5. 66.79

Answer(s): C

Explanation:

One of the two dollar amounts must be entered as a negative number and the other as a positive number or an error will result. On the BAII Plus, press 6 divide 12 = I/Y, 0 PV, 250 PMT, 200000 +/- FV, CPT N. On the HP12C, press 6 ENTER 12 divide i, 0 PV, 250 PMT, 200000 CHS FV, n. Note that the HP12C returns a result of 323. Make sure the BAII Plus has the P/Y value set to 1.



If you deposit $2,500 into an account paying 6% per year, simple interest, how much is in the account in 18 months?

  1. $2,651.04
  2. $2,725.00
  3. $2,750.19
  4. $2,349.38
  5. $225.00

Answer(s): B

Explanation:

Since the question asks for how much is in the account, the simple interest earned should be added to the original deposit to find the answer. On the BAII Plus, press 2500 x 0.06 x 18 divide 12 = + 2500 =. On the HP12C, press 2500 ENTER 0.06 x 18 x 12 divide 2500 + to see the answer.






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