Page 65 - CFA - Day 1 & 2 Course Notes
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LOS 6.e: Calculate and interpret the Session Unit 2: The Time Value of Money
future value (FV) and present value (PV)
of a single sum of money, an ordinary
annuity, an annuity due, a perpetuity (PV
only), and a series of unequal cash flows.
FV of an Annuity Due PVAD = PVAO × (1 + I/Y)
Example: PV of an annuity due
Given a discount rate of 10%, what is the present value of a 3-year annuity that makes a series of
$100 payments at the beginning of each of the next three years, starting today? The time line for
this problem is shown in the following figure.
Answer: BGN mode -2nd] [BGN] [2nd] [SET] [2nd] [QUIT] on the TI:
N = 3; I/Y = 10; PMT = –100; CPT → PVAD = $273.55
Alternatively, END mode:
N = 3; I/Y = 10; PMT = –100; CPT → PVAO = $248.69
PVAD = PVAO × (1 + I/Y) = $248.69 × 1.10 = $273.55
