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Free CFA-Level-I Exam Braindumps (page: 289)

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PDF with 3963 Questions

If you owe $2,000 today and pay for it by making 20 monthly payments with the first payment made immediately (today), what is the size of this monthly payment, if interest accrues at 7% per year, compounded monthly?

  1. $193.55
  2. $191.63
  3. $209.48
  4. $105.62
  5. $106.24

Answer(s): D

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 20 N, 7 divide 12 = I/Y, 2000 PV, 0 FV, CPT PMT. 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 20 n, 7 ENTER 12 divide i, 2000 PV, 0 FV, PMT. 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 value of P/Y set to 1.



How much would you have in a savings account 12 months from now if you start with a balance of $1,000 today, make a deposit of $2,000 in 6 months and make another deposit 6 months after that of $3,000? Assume that interest accrues at 6% per year, compounded monthly.

  1. $6,000.00
  2. $5,500.00
  3. $6,122.43
  4. $7,684.42
  5. $5,777.55

Answer(s): C

Explanation:

Find the answer to this question by solving a couple of compound interest problems. Move the $1,000 to month 12, then move the $2,000 forward 6 months to month 12, then add $3,000. On the BAII Plus, press 12 N, 6 divide 12 = I/Y, 1000 PV, 0 PMT, CPT FV, which yields $1,061.68. Then press STO 1. Then press 6 N, 2000 PV, CPT FV, which yields $2,060.76. Then press + RCL 1 =. Make this number positive by pressing +/- and then press + 3000 = to see the answer. On the HP12C, press 12 N, 6 ENTER 12 divide i, 1000 PV, 0 PMT, FV.
Then press STO 1. Then press 6 N, 2000 PV, FV. Then press RCL 1 +. Make this number positive by pressing CHS and then press 3000 + to see the answer.



A portfolio consists of a six-year annuity paying $250 a year and a perpetuity that pays $300 a year. The payments start at the end of the year. With a discount rate of 9% per year, the portfolio is worth:

  1. $5,210
  2. $3,333
  3. $4,454
  4. $4,768

Answer(s): C

Explanation:

The value of the perpetuity is 300/0.09 = 3,333. The annuity is worth (250/0.09)*(1-1/(1.09^6)) = 1,121 The portfolio is thus worth 1,121 + 3,333 = 4,454



If all the plots on a scatter diagram lie on a straight line, what is the standard error of estimate?

  1. Infinity
  2. None of these answers
  3. 0
  4. +1
  5. -1

Answer(s): C

Explanation:

The standard error of estimate basically measures the difference between the points and the straight line.






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