Page 13 - 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: If you deposit $1,000 in the bank today and at the beginning of each of
the next three years, how much will you have six years from today at 6% interest?

Step 1:

• Compute FV of the annuity due at the end of Year 4 (FV4).
• BGN mode: FV4: N = 4; I/Y = 6; PMT = –1,000;
• CPT → FV = $4,637.09 Step 2:

. • Find FV4 two years from Year 4.

• FV6: N = 2; I/Y = 6; PV = –4,637.09;
• CPT → FV = $5,210.23

Or 4,637.09(1.06)2 = $5,210.23