Page 12 - FINAL CFA SLIDES JUNE 2019 DAY 2

LOS 6.e: Calculate and interpret the FV & PV Session Unit 2: The Time Value of Money
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

Example: FV of an annuity due: What is the future value of an annuity that pays $100 per year at the
beginning of each of the next three years, commencing today, if the cash flows can be invested at an
annual rate of 10%?

Answer:
• BGN mode ([2nd] [BGN] [2nd] [SET] [2nd] [QUIT],
• Then, N = 3; I/Y = 10; PMT = –100;

• CPT → FV = $364.10

Alternatively, FVAD = FVAO × (1 + I/Y)

FVAD = FVAO × (1 + I/Y) = 331.00 × 1.10 = $364.10

END mode:
• N = 3; I/Y = 10; PMT = –100;
• CPT → FVAO = $331.00