CFA Level 1: Account Balance Calculation

Account Balance Calculation

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Question

How much is in your account in 5 years, if you start with a balance of $1,000 and add $3,500 in 18 months and add an additional $1,000 in 48 months, if the money earns interest at 6% per year, compounded monthly?

Answers

Explanations

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A. B. C. D. E.

Explanation

Solve this question by working three compound interest problems. On the BAII Plus, press 60 N, 6 divide 12 = I/Y, 1000 PV, 0 PMT, CPT FV, which yields

$1,348.85. Then press STO 1. Then press 42 N, 3500 PV, CPT FV, which yields $4,315.61. Then press + RCL 1 = STO 1. Then press 12 N, 1000 PV, CPT FV, which yields $1,061.68. Then press + RCL 1 = for the final answer. On the HP12C, press 60 n, 6 ENTER 12 divide i, 1000 PV, 0 PMT, FV. Then press STO 1.

Then press 42 n, 3500 PV, FV. The press RCL 1 + STO 1. Then press 12 n, 1000 PV, FV. Then press RCL 1 + for the final answer. Note that the answer will be a negative number. Make sure the BAII Plus has the value of P/Y set to 1. Note that the $3,500 deposit is 42 months away from the end of the 60-month time period.

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