CFA Level 1 Exam: Compound Interest Calculation

Calculate Compound Interest for CFA Level 1 Exam

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Question

If you deposit $5,000 today and make an additional deposit of $3,000 in 3 years, how much is in the account 6 years from today, if the money earns interest at 8% per year, compounded annually?

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A. B. C. D. E.

D

This question requires the solution of two problems. Find the FV of the original $5,000 deposit which equals $7,934.37, then find the FV of the $3,000 deposit 3 years from now which equals $3779.14, and add the two together. On the BAII Plus, press 6 N, 8 I/Y, 5000 PV, 0 PMT, CPT FV. Then press STO 1. Then press 3

N, 3000 PV, CPT FV. Then press + RCL 1 = for the answer. On the HP12C, press 6 n, 8 i, 5000 PV, 0 PMT, FV. Then press STO 1. Then press 3 n, 3000 PV, FV.

Then press RCL 1 + for the answer.