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CFA Practice Question

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. 

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

“Mmmmmm, something…” - H. Simpson

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.

Simplify the complicated side; don't complify the simplicated side.

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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.

“Mmmmmm, something…” - H. Simpson