CFA Level I Question

[archived_user]

How do you solve for r? Can you show all your work?
((5)/(1+r)) + ((5+100)/(1+r)2) = 101.7
Thanks!

 

[archived_user]

Multiply everything by (1 + r)2:
[5 / (1 + r)](1 + r)2 + [(5 + 100) / (1 + r)2](1 + r)2 = 101.7(1 + r)2
5(1 + r) + 105 = 101.7(1 + 2r + r2)
5 + 5r + 105 = 101.7 + 203.4r + 101.7r2
101.7r2 + 198.4r − 8.3 = 0
Then, use the quadratic formula:
r = [198.4 ± √(198.42 − 4(102.7)( −8.3))] / [2(101.7)]
= 4.0974%, −199.1810%

 

[archived_user]

Although it’s nice to know how to do this manually, you don’t need to do this manually during the exam, the calculator does all the heavy lifting.

 

[archived_user]

Atomic_Sheep wrote: Although it’s nice to know how to do this manually … .

Many here would disagree with you on this point.

 

[archived_user]

That was my nice way of saying don’t waste your time .

 

[archived_user]

Atomic_Sheep wrote: That was my nice way of saying don’t waste your time .

They most definitely would agree with you on that one.

 

[archived_user]

Your calculator is the only friend you will be allowed to bring in to the exam room.

 

[archived_user]

Is there a way quicker way to solve the equation?

 

[archived_user]

Pancake_ wrote: Is there a way quicker way to solve the equation?

No.

 

[archived_user]

Pancake_ wrote:
Is there a way quicker way to solve the equation?

Manually? Oh, heck no. S2000magician is on the money there.
Calculatorally? Oh my heavens, yes. There is lovely TVM and CF functionality that will free up oodles of time and neurons!!!!