CFA Practice Question

[archived_user]

Is there a quick way to do Question 19 on page 342 Reading 6: Time Value of Money on the ba ii plus (as opposed to typing all those numbers in and compounding)? And how would you do it? Thanks in advance.

 

[archived_user]

I don’t have access to the LI materials. Can you describe the problem generally?

 

[archived_user]

It depends on what qualifies as quick to you.
The straightforward, relatively quick calculation is:
((4,000(1.02)2 + 8,000)(1.02)2 + 7,000)(1.02)2 + 10,000
Alternatively, you can put in these cash flows:
0, 4000, 0, 8000, 0, 7000, 0, 10000
Compute NPV with i = 2%. Using that value as PV, compute the FV after 8 periods.

 

[archived_user]

You can also use the TVM worksheet to calculate the FV of each individual deposit:
2nd CLR TVM
P/Y=C/Y=1, PMT=0 for all payments
For the first deposit:
6 N, 2 I, PV=-4000 CPT FV 4,504.6496
Repeat for all other deposits, changing N and PV as appropriate. You can store the FVs in memory and sum them up.
It’s not very quick, but saves you the time of doing the compounding.