Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 17 of 27
At the end of 15 years, you wish to have accumulated $500,000. You plan to accumulate this money by making annual deposits of $10,003.93 into a money market account. All deposits will be made at the beginning of each year. What interest rate must the account pay each year?
B. 12%
C. 14%
A. 8%
B. 12%
C. 14%
User Contributed Comments 12
User | Comment |
---|---|
tawi | Can't seem to work this out |
KD101 | If you did question - 4 and got answer to 14 years - I would have ruled out the other choices as for both FV is same and Annuity is only approx. 10% higher in this Question - so the interest rate could be approx. slightly more than 10% lower - hence 16 to 14% is more likely than other. |
Mario612 | Can someone tell me the keystrokes to get this answer. |
Mario612 | on the BA II Plus calculator |
Done | On TI BAII+ [2nd]BGN [2nd]SET [2nd]QUIT FY= -500,000 N= 15 PMT= 10,003.93 [CPT] [I/Y] The answer come to 14% |
HBomb | I haven't as yet bought a financial calculator so does anyone know how to do this the old fashioned way by using the formula? I simplify it down to the point where 49.98 = {(1+r)^15}/r but can go no further as i dont know how to get the denominator and numerator r's together. Cheers for any help on this matter. |
gullan | This is just some change to explanation by user *Done* PMT should be negative as payments are made and FV should be pocitive. However answer will remain the same in both the cases. |
rivers | HBomb 10,003.93 x ((1.14^15/.14)-1) x 1.14 = 500,049 i just picked one and substituted, very long way to do it but never fails to get the right answer (if you are not using one of these calculators) |
josie491 | need to set calculator to BGN mode first. Pls look out for key words "beginning of each year" or "end of each year". Calculator mode BGN = beginning of each year. END = end of each year. |
VikramJ | Rivers and HBomb, I dont have my financial calc at work so I've been using Excel for these and plugging in. Using the formula you wrote, I actually get a answer of 570,000. You have to be careful about the parentheses - most importantly putting the brackets around the [(1+r)^N-1]. I used =10003.93*(1.14^15-1)/0.14*1.14 to get 499,999 |
mcbreatz | I keep tripping myself up with these beginning v ending questions. The way the question is phrased wouldn't using n as 15 give you the interest rate to find a value of 500,000 at the beginning of year 15 vs the end of year 15? |
Yannetta | how to calculate it using end mode on texas? |

You have a wonderful website and definitely should take some credit for your members' outstanding grades.

Colin Sampaleanu
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® 2025 Level I Curriculum, Volume 1, Module 2.