CFA Level 1: Compound Interest Calculation

Compound Interest Calculation

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Question

Johnny deposited a check he received from his Aunt when he was 10 years old into an account paying 10% per year, compounded monthly. If the original check was for $100, how much does Johnny have in his account today, 50 years later?

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Explanations

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A. B. C. D. E.

E

There are 600 months in 50 years (50 x 12). On the BAII Plus, press 600 N, 10 divide 12 = I/Y, 100 PV, 0 PMT, CPT FV. On the HP12C, press 600 n, 10 ENTER

12 divide i, 100 PV, 0 PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.