Page 14 - 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
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: Alternatively, END mode:

• BGN mode -2nd] [BGN] [2nd] [SET] [2nd] [QUIT] • N = 3; I/Y = 10; PMT = –100;
• N = 3; I/Y = 10; PMT = –100; • CPT→ PVAO = $248.69
• CPT → PVAD = $273.55

PVAD = PVAO × (1 + I/Y)
= $248.69 × 1.10 = $273.55