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Free CFA-Level-I Exam Braindumps (page: 119)

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PDF with 3963 Questions

If you need $25,000 in 10 years, how much must you deposit today, if your money will earn 6% per year, compounded annually?

  1. $25,000
  2. $13,959.87
  3. $2,320.01
  4. $44,771.19
  5. $23,200.08

Answer(s): B

Explanation:

On the BAII Plus, press 10 N, 6 I/Y, 0 PMT, 25000 FV, CPT PV. On the HP12C, press 10 n, 6 i, 0 PMT, 25000 FV, PV. Note that the answer will be shown as a negative number.



How much would you have in a savings account 12 months from now if you start with a balance of $3,000 today, make a deposit of $1,000 in 6 months and make another deposit 6 months after that of $500? Assume that interest accrues at 6% per year, compounded monthly.

  1. $4,684.42
  2. $4,777.55
  3. $4,715.41
  4. $4,500.00
  5. $2,500.00

Answer(s): C

Explanation:

Find the answer to this question by solving a couple of compound interest problems. Move the $3,000 to month 12, then move the $1,000 forward 6 months to month 12, then add $500. On the BAII Plus, press 12 N, 6 divide 12 = I/Y, 3000 PV, 0 PMT, CPT PV. Then press STO 1. Then press 6 N, 1000 PV, CPT FV. Then press + RCL 1 =. Make this number positive by pressing +/- and then press + 500 = to see the answer. On the HP12C, press 12 N, 6 ENTER 12 divide i, 3000 PV, 0 PMT, FV. Then press STO 1. Then press 6 N, 1000 PV, FV. Then press RCL 1 +. Make this number positive by pressing CHS and then press 500 + to see the answer. Make sure that the BAII Plus has the value of P/Y set to 1.



Suppose you are modeling long-term interest rates, and you believe that supply of corporate debt is a major contributing factor. Suppose you believe that the probability that rates will rise if supply of corporate debt rises is 60%; if the supply of corporate debt stays constant, you believe that there is a 35% chance of increasing interest rates; if the supply of corporate debt falls, you believe that there is a 5% chance of rates increasing. You think that the likelihood of corporate debt increasing is 50%; of staying the same is 40%; of dropping is 10%. What is the unconditional probability of interest rates rising?

  1. 55.4%.
  2. 44.4%.
  3. 44.5%.
  4. 55.5%.

Answer(s): C

Explanation:

We use the total probability rule: P(A), the unconditional probability, = P(A|S_1)*P(S_1) + P(A|S_2) *P(S_3) + P (A|S_3) *P(S_3), where the S_i represent mutually exclusive and exhaustive events. So the likelihood of interest rates increasing is 0.60 * 0.50 + 0.35 * 0.40 + 0.05 * 0.10 = 0.30 + 0.14 + 0.005 = 0.445.



If you deposit $1,111 a year, beginning next year, for 20 years into an account paying 7% per year, compounded annually, how much is in your account after that last deposit?

  1. $50,598.15
  2. $47,003.98
  3. $45,545.99
  4. $30,118.37
  5. $48,304.12

Answer(s): C

Explanation:

On the BAII Plus, press 20 N, 7 I/Y, 0 PV, 1111 PMT, CPT FV. On the HP12C, press 20 n, 7 i, 0 PV, 1111 PMT, FV. On the BAII Plus, make sure the value of P/Y is set to 1. Note that the answer is displayed as a negative number.






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