A client requires £100.000 from now

CFA Level I Quant
#1

Q. A client requires £100,000 one year from now. If the stated annual rate is 2.50% compounded weekly, the deposit needed today is closest to:

  1. £97,500.
  2. £97,532.
  3. £97,561.

https://gyazo.com/406ada74f40bc6225af132c0b0a56acc

Basicly I did this way and got the right answer, someone please tell me if it`s fine:

I found EAR first (1+0,025/48)48 -1 * 100

I assumed we have 48 weeks in a year because we usually have 4 weeks a month so 4*12 = 48

Got EAR = 2,5308431

I set the EAR as i

100.000 CHS FV

1 N

0 PMT

ask FV, got: £97.531,62753

which is second answer,

is it fine?

#2

No its not. If there’s actually 52 weeks in a year why would you assume 48? You don’t have exactly 4 weeks every month, it’s usually 4 weeks and some fractional amount of another week.

#3

Ok I got your point (I assumed all months with 4 weeks)

EAR is now: 2,530896077

now i = 2,530896077

n = 1

fv = 100.000 CHS

pmt = 0

asked pv = 97.531,62403

Only difference was in decimal thorugh, same answer…

#4

Ya, it’s close enough. But what if you have another question with many more years? Given, it has to be a larger number of years but it’s safer to do things the correct way.