The Time Value of Money

CFA Level I Quant
#1

To whom who can help.

I am having a bit of trouble understanding how this time value of money works in Question 19. My question is related to P.340 in Level 1 / Volume 1 of CFA Program Curriculum.

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I seek your advice to guide me how to work it out. Thanks a lot.

#2

Hi,

This is a simple question and you should really master these f you want to pass.

First, find the annualized rate ((1+0.04)/2)^2-1 = 4.04%

second, just put every cash flow a the end of year 4

4000*(1+0.0404)^3+8000*(1+0.0404)^2+7000*(1+0.0404)+10 000 = 30 447