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Free CFA-Level-I Exam Braindumps (page: 170)

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PDF with 3963 Questions

You recently purchased a twin-engine plane after landing an ultra-lucrative job on Wall Street. The annual payments on the plane are $8,000 per year and the installment plan extends over 5 years. The payments start today. If your discount rate is 8.5% per year, how much would it have cost you to purchase the plane on an all- cash basis?

  1. $34,205
  2. $40,611
  3. $41,232
  4. $36,429

Answer(s): A

Explanation:

The present value of the installment payments equals 8,000 + (8,000/0.085)*(1-1/(1.085^4)) = $34,205



A normal distribution has a mean of 39 and a variance of 625. The area under the distribution between 50 and 75 equals ________.

  1. 0.745
  2. 0.319
  3. 0.212
  4. 0.255

Answer(s): D

Explanation:

First note that the area between two numbers under a probability distribution is the same as the probability of getting a number between those two numbers. The standard deviation of the distribution equals sqrt(625) = 25.
The z-value of 50 equals (50-39)/25 = 0.44. The z-value of 75 equals (75-39)/25 = 1.44. Using the Normal probability tables, we get P(z < 0.44) = 0.67 and P(z < 1.44) = 0.9251. The area between 50 and 75 is then given by P(0.44 < z < 1.44) = P(z < 1.44) - P(z < 0.44) = 0.9251 - 0.67 = 0.255.



How much would an original deposit of $900 grow to be after 10 and a half years, if the deposit earns interest at 6.5% per year, compounded quarterly?

  1. $1,853.97
  2. $1,254.58
  3. $1,573.42
  4. $1,771.19
  5. $1,837.51

Answer(s): D

Explanation:

On the BAII Plus, press 42 N, 6.5 divide 4 = I/Y, 900 PV, 0 PMT, then press CPT FV. On the HP12C, press 42 n, 6.5 ENTER 4 divide i, 900 PV, 0 PMT, then press FV. Note that N = 42 quarters (10.5 x 4 =) and the answer is displayed as a negative number. Make sure that the BAII Plus has the P/Y value set to 1.



If you deposit $6,000 into an account paying 4% per year, compounded semiannually, how much do you have in the account in 20 years?

  1. $13,248.24
  2. $12,667.70
  3. $14,667.76
  4. $7,403.52
  5. $12,204.65

Answer(s): A

Explanation:

On the BAII Plus, press 40 N, 4 divide 2 = I/Y, 6000 PV, 0 PMT, CPT FV. On the HP12C, press 40 n, 4 ENTER 2 divide i, 6000 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.






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