CFA Level 1: Cash Price Calculation for Monthly Payments

Calculating Cash Price for Monthly Payments

Prev Question Next Question

Question

If you buy an item and pay for it with 60 monthly payments of $75 that begin next month, what was the cash price today, if interest accrues at 11% per year, compounded monthly?

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E.

E

The cash price would be the present value of the payments made using the specified interest rate. On the BAII Plus, press 60 N, 11 divide 12 = I/Y, 75 PMT, 0 FV,

CPT PV. On the HP12C, press 60 n, 11 ENTER 12 divide i, 75 PMT, 0 FV, PV. Note that the answer will be shown as a negative number. Make sure the BAII Plus has the P/Y value set to 1.

Prev Question Next Question