Present Value Calculation | Annual Cash Flows | CFA Level 1 Exam Preparation

Present Value Calculation for Annual Cash Flows: $300, $1,200, $2,500

Prev Question Next Question

Question

What is the present value today of these annual cash flows: $300, $1,200, $2,500? Assume the first cash flow occurs 1 year from today and an interest rate of 9% per year, compounded annually.

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E.

A

You could solve this question using 3 different compound interest problems, but it is easier to solve them using the calculator's cash flow functions. On the BAII

Plus, press CF 2nd CLRWork 0 ENTER DownArrow 300 ENTER DownArrow DownArrow 1200 ENTER DownArrow DownArrow 2500 ENTER DownArrow

DownArrow 2nd Quit. Then press NPV 9 ENTER DownArrow CPT. On the HP12C, press these keys: 0 BlueShift CFo 300 BlueShift CFj 1200 BlueShift CFj 2500

BlueShift CFj. Then press 9 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure that the BAII Plus has the P/Y value set to 1.

Prev Question Next Question