I believe the 2015 CFA's text book has a mis-calculation... Or I'm calculating wrong

CFA Level I Corporate Finance
#1

The part that I bolded below in the answer portion is what I’m questioning. I’m not confused about anything else. Here’s what I enter into my calculator: n=10; I/Y=13.65; PMT=400,000; FV=10,000,000. CPT --> PV= -4,896,931.51. _ Why am I getting a different answer when calculating the Market Value of Debt??? _

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#2

Your calculation looks correct.

Are you sure that the input numbers are correct?

#3

OP: Plz check your values for P/Y and C/Y: they should both be 2. I suspect you have P/Y=C/Y=1.

#4

Thank you!! This is exactly what I was doing wrong!

I instead just did 13.65% / 2 = 6.825% --> This got me the correct answer when solving for P/V

Thanks

#5

Dear Philly91,

Prior before you enter any value or number, you need to set your variable P/Y to 2 as it is a semi-annual payments. Here is the step:

Press [2ND] [P/Y] key in 2 [ENTER]

Then you may enter N = 10; I/Y = 13.65; PMT = 400,000; FV = 10,000,000, press [CPT] [PV] = -7,999,687.644, solving for PV gives the answer $7,999,688.

I hope this can help you.

Regards, Cindy.