标题: PV on Annuity question [打印本页] 作者: prav_Cfa7 时间: 2011-7-11 18:42 标题: PV on Annuity question
#19 on Schweser Exam 1 morning session.
Q:An investor wants to receive $10,000 annually for ten years with the first payment 5 years from today. If the investor can earn 14% annual return, the amount she will have to invest today is closest to:
A. 27,091
B. 30,884
C. 52,161
A:This problem involves determining the present value of an annuity followed by finding the present value of a lump sum. Enter PMT = 10,000, N = 10, and I = 14. Compute PV = 52,161.16. That is the present value of the 10-year annuity, four years from today. Next, we need to discount that back to present for four years to find the amount of the investment today. Enter FV = −52,161.16, N = 4, I = 14, PMT = 0. Compute PV = 30,883.59.
My question is about drawing the timeline - Do you start at #0 or #1. "4 years from today" at 0 would bring you to year 4 and year 5 for starting at #1.
This really throws me off in getting the right answer - any tips on how to draw the timeline for this one?作者: btcapital 时间: 2011-7-11 18:42
Hi. I did this morning session last night (and this problem, etc.).
I start with second segment and calculate the value of an annuity into my TI BA II Plus.
N=10 Yrs.
PV=0 (he will have no money left after the $10,000 payments end)
PMT = $10,000
INT = 14%
Solve for PV (how much money he needs at start when these payments begin).
Then I take that # and discount it back 5 years (1.14^5) to get the number for today.
How did you do on this practice exam?作者: lc26mizzou 时间: 2011-7-11 18:42
OKay yea that makes sense, thanks! The wording in the answer confused me when it says "4 years from today" and "discount that back to present for 4 years" instead of 5.. still confusing but going your route makes sense.
I got a 61% =(. Frustrating b/c I've been scoring low 70's to low 80's on Q bank tests but blew this one and the CFA mock.
How'd you do?作者: Ionutzakis 时间: 2011-7-11 18:42
I got 75.8% (raw score out of 120, not on a weighted basis). But this includes a 42.8% score (6 out of 18 correct) on the quant section, which I have not even studied yet. I was just giving it my best guess in that section. I will study the quant material this PM/tomorrow.
I got 80%+ on everything except ethics (72%) and derivatives (57%).
I'm worried that the Schweser material seems easier than the EOC material or what might be on the actual exam. Also, I was able to eliminate 1 answer and guess well on the remaining 2 options on several questions (which I marked to review the answer later). I would forget a formula, but still know enough to guess the right answer to a computation problem. Doesn't make me feel good, but I think I will be OK when exam comes.
