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  • This topic has 4 replies, 4 voices, and was last updated Feb-23 by Avatar of hhamadhhamad.
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    • Avatar of pcunniffpcunniff
      Participant
        • CFA Level 1
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        Why on this question are you taking 4000 by the power of 6 vs 8? Refer to the solution below. I am confused as to why they are using 6 vs the power of 8. Can someone help?

        A saver deposits the following amounts in an account paying a stated annual rate of 4%, compounded semiannually:

        Year End of Year Deposits ($

        1) 4,000

        2) 8,000

        3) 7,000

        4) 10,000

        Q. At the end of Year 4, the value of the account is closest to:

        $30,432$30,447$31,677

        B is correct. To solve for the future value of unequal cash flows, compute the future value of each payment as of Year 4 at the semiannual rate of 2%, and then sum the individual future values, as follows:

        YearEnd of Year Deposits ($)FactorFuture Value ($)

        1 4,000(1.02)^6 =4,504.65

        2 8,000(1.02)^4 =8,659.46

        3 7,000(1.02)^2 = 7,282.80

        4 10,000(1.02)^0 = 10,000.00

        Sum =30,446.91

      • Avatar of cfachriscfachris
        Participant
          • CFA Level 3
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          2
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          Because at the END of year 1, 2 semi annual periods have actually passed, so there are 3 years left to end of year 4, i.e. from end of year 1 to end of year 4 is 3 years, i.e. 6 semi annual periods.

        • Avatar of pcunniffpcunniff
          Participant
            • CFA Level 1
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            end of year deposits ughh got it. Thanks

          • Avatar of IsabelTysonIsabelTyson
            Participant
              • FRM Part 1
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              0
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              thanks for the explanation

              spin the wheel

            • Avatar of hhamadhhamad
              Participant
                • CFA Level 1
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                0
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                I tried to solving it by the BA calculator through cf button, but it doesn’t show the right answer; I got a total of A. $30,432. can someone explain?

                 

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