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 15 of 27
Your rich aunt has offered to give you $150 at the end of each of the next 30 months. You plan to put the money into your savings account, which pays an interest rate of 5.5% per year compounded monthly. How much do you expect to have at the end of the 30 months?
B. $4,747.50
C. $4,812.26
A. $4,500.00
B. $4,747.50
C. $4,812.26
User Contributed Comments 13
| User | Comment |
|---|---|
| Hamma | This is what i did: =150*[1+(0.055/12)]^30 =172.0567... confused.. anyone can comment? |
| jminard | Hamma:
you are calculating the future value of ONE payment only, but the question asks for the sum of 30 payments! |
| lna1717 | =150*((1+5,5/12%)^30-1)/5.5%/12=4812.26 |
| stefdunk | BAII p/y=12, c/y=12 i/y = 5.5 pmt = -150 n = 30 cpt fv = 4,812.26 |
| monicaATL | also... if you don't want to switch your settings on your BA II... i/y=0.4583 (5.5%/12) n=30 pmt=-150 =4,812.24 |
| mansi | why are we not calculating the EAR here?? |
| smillis | Let's say we do use EAR... EAR = (1+.055/12)^12-1=5.64% N=30 months i=5.64%/12 (monthly compounding) pmt= -150 FV=4820.56 hmm...is the difference a more "accurate" interest rate used? Comments? |
| JKiro | smillis - I prefer using EAR this way: {1+r)^n - 1; r=rate;n=# of compounding periods in a year: (1+0.055)^(1/12) -1 = 0.447; using HP12c: 150[CHS][PMT]; 0.45[i](rounded); 30[n]; [FV]= 4812.02 |
| hillrat | If you don't use a calculator what is the actual formula? Is this essentially an annuity? |
| Raok | I like the word rich aunt |
| BMore | Here's the formula I used: FV = 150 * (((1+(.055/12))^30)/(.055/12)) - 1 |
| nabada0419 | FV=150 * [(1+.055/12)^30-1]/(.055/12)= 4812.261132 |
| plammar71 | Cy 12 py12 |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
calculate and interpret the present value(PV) of fixed-income and equity instruments based on expected future cash flows
calculate and interpret the implied return of fixed-income instruments and required return and implied growth of equity instruments given the present value (PV) and cash flows
CFA® 2024 Level I Curriculum, Volume 1, Module 2.