Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Basic Question 0 of 24
You anticipate that you will receive $4,500 at the end of 5 years. If you had the money today, it could be invested at a rate of 5% per year. What is the present value of the money?
B. 5,743.27
C. 21,428.57
A. 3,525.87
B. 5,743.27
C. 21,428.57
User Contributed Comments 19
| User | Comment |
|---|---|
| Laurel | The calculation showed FV=PV(1+r)n How did the FV end up being multiplied by the PV? Why is the 1 divided by the interest rate instead of added to it? |
| Deano | This is rediculous - you cannot rearrange the formula to get PV=FV(1/r)n, they are two completely different formulae. |
| Deano | Actually - DOH! It's simple just rearrange to PV = FV/(1+r)^N this works, really easy actually... |
| Iyer | You dont even have to apply the formula[for this particular question]. I looked at the 4 choice, I know PV should be lower than FV ( at a positive 5% rate]. Since B,C,D are all greater than 4500 they are all wrong. Hope this was useful :) |
| vivi | Good tip Iyer. The formula is : PV = FV (1 + r) ^-n. You're discounting back (negative) since PV is the value at point A and FV is the value at point B. This is the same as : PV = FV (1 / 1 + r)^ n. |
| KD101 | I agree with Iyer - I always first try to eliminate answers and then see if only one is left - and then apply formulas |
| jimmymh | hey guys, it's easier to plug it in the calculator and find the answer. |
| Will1868 | No kidding go by an HP12c and save the headache |
| jimlis | BAII - enter 4500 and hit FV;enter 5 and hit I/Y;enter 5 and hit N;then hit CPT and PV. |
| kaliokale | Dun even use your calculator. You can tell the answer is A by just looing at the numbers. |
| SamehHassan | without the calc, you can tell it is A as it is the only value is less than the future value on the question. others are greater amount. |
| CRickert | You guys are funny. This is day one stuff in any Intro to Finance class. Time to take a break. |
| TammTamm | Why even learn the formula when you can input the numbers in the calculator. FV=4500 I/Y=5 N=5 Compute PV answer: 3525.87 |
| Crown01 | PV<FV therefore, in exam hall, just choose A, -> save your time. :) |
| jabran | why even compute. The first answer is the only logical answer (PV < FV). |
| owot | good 1......... jabran, dats wot i was wandering too |
| jorgeman81 | exactly in the exam you don't have much time, for sure no time to calculate the formula just to input the values in the BAII or the HP, and if you can guess the answer without using the calculator that's even better |
| Kaloyan | unless the rate is negative. Then PV got to be bigger than FV. haha |
| johntan1979 | Lots of wise-***es but the passing rate remains around 40% annually. Go figure. |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
explain the assumptions and justify the selection of the two-stage DDM, the H-model, the three-stage DDM, or spreadsheet modeling to value a company's common shares;
describe terminal value and explain alternative approaches to determining the terminal value in a DDM;
calculate and interpret the value of common shares using the two-stage DDM, the H-model, and the three-stage DDM;
explain the use of spreadsheet modeling to forecast dividends and to value common shares;
evaluate whether a stock is overvalued, fairly valued, or undervalued by the market based on a DDM estimate of value.
CFA® 2025 Level II Curriculum, Volume 3, Module 21.