CFA CFA Level 1 FV issue driving me nuts

# FV issue driving me nuts

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• ensenmason
Participant
• CFA Level 2
0

This may seem basic and it should be but…

Schweser has a FV example, in part, calculate the future value of -1,000 over 5 years. Solution is given as
PV = -1,000; I/Y = 10; N = 5; CPT FV = -1,610.51

All well and fine except my BA II reports the solution as 1,610.51, no negative. I checked with an online calculator and it backs up Schweser. What gives?

• 5

The negative sign is basically used to indicate cash inflow and outflow. Don’t worry too much about it in FV except when calculating the rate. If I remember correctly the sign matters then. I think the reason is you are entering a negative in your calculator already. This is why the answer is coming out as a positive. I think what Schweser is trying to say is to spread out an outflow over 5 years which is why they are showing the negative sign in the answer. Did you check the errata sheet by any chance?

• 4

@CFAcharterwannabeâ€Œ beautifully put.

@ensenmason
â€Œ The calculator calculates it as an investment, i.e. you’re telling it you’ve PAID IN \$1000 at the start, so at the end you should be PAID OUT \$1,610. So the signs are opposite to each other (i.e. you enter in -1000, FV comes out as +1610).

Since you’re simply calculating the future value of a payment, the signs are the same.

So I’d use conceptual knowledge to double-check on what the signs should be. Just treat it as cashflow as @CFAcharterwannabeâ€Œ and you’ll be alright ðŸ™‚

• 4

@fabian thanks just glad I didn’t mess up.