I think my solution is correct, but the output is confusing me.
Hello everyone, I am a newbie for CFA level 1. Currently I am confuse about the answer for the question No.15 at the curriculum (not Schweser Notes) Volume 1 Reading 6, The Time Value of Money. I have my own solution to this question, I think either A or B is the correct answer. Could someone help me to identify where my problem is? Thank you in advance.
Following is the question.
“For a lump sum investment of ¥250,000 invested at a stated annual rate of 3% compounded daily, the number of months needed to grow the sum to ¥1,000,000 is closest to:
Daily interest rate = 0.03/365 = 0.0082%, Solving for N ( in DAYS) on a financial calculator.
PV = -250,000, FV = ¥1,000,000, I = 0.0082, PMT = 0, CPT->N = 16867.27,
- if I calculate the MONTHS by dividing the number of days in a month, let’s say 30:
MONTHS = N / 30 = 562.24,
I should choose B as the correct answer.
- if I calculate the MONTHS by this:
converted to years,
YEARS = N / 365 = 46.21
then converted to months,
MONTHS = YEARS * 12 = 554.54.
I should choose A as the correct answer.
So I am a bit confused, which answer is correct? Could you help me? Thank you.