CFA Level 1: Semiannual Deposit Calculation

Semiannual Deposit Calculation

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Question

What semiannual deposit is needed to accumulate $8,000 in 5 years if the account pays 7% per year, compounded semiannually, assuming that the first deposit is made in 6 months and also assuming that the account already has $1,250 in it today?

Answers

Explanations

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A. B. C. D. E.

E

On the BAII Plus, press 10 N, 7 divide 2 = I/Y, 1250 PV, 8000 +/- FV, CPT PMT. On the HP12C, press 10 n, 7 ENTER 2 divide i, 1250 PV, 8000 CHS FV, PMT.

Note that the answer this time is a positive number. This means that the $531.63 is a deposit in addition to the $1,250 original deposit. The $5,000 is entered as a negative number, because the $1,250 and the $531.63 are deposits and the $8,000 is a withdrawal. Make sure the BAII Plus has the value of P/Y set to 1.

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