CFAI reading 15: Question 13: How do you calculate the required return? The answer doesn’t show how to do this. The starting value is 1,235,000. The ending value after 18 years is 2,000,000. 26K must come out of the fund each year. How do you calculate return? Can you do this using calculator? If I use calculator and input -1235 as PV, 2000 as FV, -26 as PMT, 18 as N, I don’t get the answer shown in the book.
Hi, You are doing everything right. Just when you enter the payments, do not enter them as negative and you will get the same answer as the book.
PMT is +ve when FV is +ve
Coolness. By the by, if you use the HP clauclator you wont get the same answer.
why don’t we enter the -ve sign for the 26,000 that we have to pay annually? i thought that if it’s an outflow (we pay) the sign is -ve for pmt. in another scenario, if we get bond coupons as payments, we enter +ve numbers for pmt.