CFA Level 1 Exam: Compound Interest Calculation

How Much Will Your $900 Deposit Grow After 10.5 Years?

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Question

How much would an original deposit of $900 grow to be after 10 and a half years, if the deposit earns interest at 6.5% per year, compounded quarterly?

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Explanations

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A. B. C. D. E.

D

On the BAII Plus, press 42 N, 6.5 divide 4 = I/Y, 900 PV, 0 PMT, then press CPT FV. On the HP12C, press 42 n, 6.5 ENTER 4 divide i, 900 PV, 0 PMT, then press

FV. Note that N = 42 quarters (10.5 x 4 =) and the answer is displayed as a negative number. Make sure that the BAII Plus has the P/Y value set to 1.