Page 71 - 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 Solving Time Value of Money Problems
annuity, an annuity due, a perpetuity (PV When Compounding Periods Are Other
only), and a series of unequal cash flows. Than Annual
Example: FV of a single sum using quarterly compounding
Compute the FV of $2,000 today, five years from today using an interest rate of
12%, compounded quarterly.
Answer:
N = 5 × 4 = 20; I/Y = 12 / 4 = 3; PV = –$2,000; CPT → FV = $3,612.22
