Finding Present value (PV) using PV Tables

CFA Level I
#1

Discount rate = 12% per annum
Monthly payment = 500
Period = 3 years

How to find Present value (PV) using PV tables when above figures are given. I am asking this question because the PV factors provided in PV tables are for different periods when the payment is done yearly and not monthly

#2

Do you have a financial calculator?

1 Like
#3
  1. Is the interest compouned monthly or annually?
  2. Do the payments occur at the beginning of the month or the end of the month?
#4

  1. Interest is compounded monthly

  2. Payments occur at the end of the month. Please let me know how calculation would be different , if it is beginning of the month

I have financial calculator but want to know how manual calculation can be done by referring to PV Table.

#5

I would look for a 1% table and 36 payments.

From first principles:

PV = 500 * [1 - 1.01^(-36) ]/ 0.01

= 500 * 30.107505
= 15,053.752

On the BAII

P/Y 12 C/Y 12
END
N 36 I 12 PMT 500 CPT PV (you should get 15053.75 or thereabouts)

Final note: CFAI does not let you bring PV tables into the exam, but they let you bring in an approved calculator!!!

#6

Thank you so much. This helps