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CFA Level I Question

How do you solve for r? Can you show all your work?

((5)/(1+r)) + ((5+100)/(1+r)2) = 101.7

Thanks!

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Multiply everything by (1 + r)2:

[5 / (1 + r)](1 + r)2 + [(5 + 100) / (1 + r)2](1 + r)2 = 101.7(1 + r)2

5(1 + r) + 105 = 101.7(1 + 2r + r2)

5 + 5r + 105 = 101.7 + 203.4r + 101.7r2

101.7r2 + 198.4r − 8.3 = 0

Then, use the quadratic formula:

r = [198.4 ± √(198.42 − 4(102.7)( −8.3))] / [2(101.7)]

= 4.0974%, −199.1810%

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

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

Although it’s nice to know how to do this manually, you don’t need to do this manually during the exam, the calculator does all the heavy lifting.

Atomic_Sheep wrote:
Although it’s nice to know how to do this manually … .

Many here would disagree with you on this point.

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

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

That was my nice way of saying don’t waste your time :P.

Atomic_Sheep wrote:
That was my nice way of saying don’t waste your time :P.

They most definitely would agree with you on that one.

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

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

Your calculator is the only friend you will be allowed to bring in to the exam room.

“Mmmmmm, something…” - H. Simpson

Is there a way quicker way to solve the equation?

Pancake_ wrote:
Is there a way quicker way to solve the equation?

No.

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

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

Pancake_ wrote:

Is there a way quicker way to solve the equation?

Manually?  Oh, heck no.  S2000magician is on the money there.

Calculatorally?  Oh my heavens, yes.  There is lovely TVM and CF functionality that will free up oodles of time and neurons!!!!

“Mmmmmm, something…” - H. Simpson