CFA, General ramblings, Jokes / Funny Stuff

Time Value of Money

I was doing some research for CFA when I saw this “sample question”. The question is pretty easy. However, it’s the answer that’s awesome. Many of you who will be reading this post won’t know what I am talking about, of course.

 

Time Value of Money Sample CFA Exam Question

Larry Ellison, CEO of Oracle, is deciding how much to tip at his local Benihana. He comes to the conclusion that the fried rice was so delicious and the onion ring volcano flamethrower so impressive, that he is going to tip with a large interest bearing note. The note will have a future value (FV) pf $9,107,369. The rate of interest on it is 9%, and it compounds monthly until it comes to term 6 years in the future. What is the present value (PV) of the interest bearing note? Bonus what does the number spell out on your calculator when your calculator is vertically inverted?.

A) $5,318,007
B) $5,318,009
C) $5,318,008
D) Β₯256

Explanation:

The correct answer is C. The questions gives us this informtion

FV = 9107369; I/Y = 9/ 12 = .75; N = 6 οΏ½ 12 = 72.

Using your non-HP12C but still CFA approved calculator you should utilize these key strokes to achieve success:

-9107369 [FV] [Enter] .75 [I/Y] [Enter] 72 [N] [Enter] [CPT] [PV]

*Bonus Answer is contained within the comments.

 

If you are intelligent enough, you can see that Option C spells out as “boobies” or as “Oo boobies” -correct up to two decimal places.

Advertisements
Standard

4 thoughts on “Time Value of Money

  1. Weird this post hasn’t had any comments for so long.I think it’s because not many people must’ve understood it,myself included πŸ˜›

    I did get the “Boobies” part though.I’m good at these things πŸ˜€

  2. Yeah you are right. I wasn’t really expecting any comments to this one :)It has to do with a certification exam that i will be taking this year. But thank you for your comment!

  3. hey im not doing CFA but i just thought ill use the 6th grade math formula of compound interest πŸ˜›

    which is Interest = Prinicipal.(1+ Rate of interest/100)^time and Amount = Interest + Prinicipal

    Here Amount is 9107369 and Principal is in question Interest is 9/100×12 and time is 6×12.

    So fiting this in the formula the answer comes to C using a regular calculator πŸ™‚

    May be i should try CFA lol

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s