CFA EOC R9 Q13 A ii

[kjames05]

Current portfolio value = 1235000
Future value needed = 2000000
N = 18
Annual cash outflows = 26000
On BA2+
N = 18, PV = 1235000, FV = 2000000, PMT = -26000, CPT I/Y
Returns an error
What am I doing wrong?

 

[ink]

put a minus for PV. This reflects that you made an investment (outflow). PMT should also be a +, because this reflects that you had a return on investment (inflow).
Bsically, take a cashflow in/ cashflow out perspective when you input the numbers.

 

[cpk123]

Determine IN and OUT correctly
and have the right signs
Remember your input portfolio is 1235000 - so
PV = -1235000
YOu need 2 Million
So FV= +2000000
And you are paying (OUT) 26000 per period
So PMT = +26000
Now Calculate I/Y
4.42739
Have a convention for how you would treat Inputs and outputs to your CF Calculator consistently.

 

[kjames05]

Thanks cpk