Q: A saver deposits the following amounts in an account paying a stated annual rate of 4%, compounded semiannually:
Year** End of Year Deposits ($)**
Q. At the end of Year 4, the value of the account is closest to:
I enter CFo = 0 , C01 = 4,000 F01 = 1 …… C04 = 10,000 F04 = 1 I = 4/2 = 2 I am getting 27,445.63
Someone please help me solving this on a financial calulator
Looks like you calculated the present value, not the future value. What’s 27445.63 * 1.02^8?
You were right, I calculated the NPV, but even after computing NFV in BA II Plus Prof., my answer was 29708.03200
And I tried solving it the other way around, by multiplying 27445.63 * 1.02^8, but still the answer is not correct.
To use 2%, you have to insert 0 cashflows between times 1,2 3, and 4
CF0=0, C01=0 F01=1 C02=4000 F02=1, C03=0 F03=1, C04= 7000 F04=1, etc.
Alternatively, you could use I=4.04 = 1.02^2-1 in your first post.
Answer is B using either method.
I just showed a mate today this problem lol
I would first convert the i using EAR formula:
in HP12C: 0,04 enter 2 / 1 + 2 yx 1 - 100x
You would get i = 4,04
4000 CHS g CFj
8000 CHS g CFj
7000 CHS g CFj
10000 CHS g CFj
f NPV = 25.986,14192
PV = 25.986,14192 CHS
i = 4,04
N = 4
PMT = 0
FV = 30.446,90696
The EAR is not 4.04%; it’s 2.0184% (= [1 + (2% / 12)]12 − 1).
Edit: wrong TVM question. Sorry.
Can you explain why?
Because as we are compounding semianually I think the number of compounding periods its divided and elevated by 2 and not 12…
If the EAR is 2,0184% how would you solve the rest of the question?
You must be thinking of another TVM question: lotsa them flying around these here parts today!!!