For this calculation, though, the payment amount will be positive because it represents how much Marco will receive at the beginning of each year.īecause Marco is opting to remain invested through his retirement, he expects to have more than $1.8 million to leave to his beneficiaries. Once again, because the present value is being invested or “spent”, it will be entered as a negative number. This time, we don’t have to adjust to monthly amounts so the calculation should be more straightforward. How much money will be left over after 20 years? With his new portfolio, Marco estimates that he will earn approximately 5% a year. However, Marco intends to leave the money invested but wants to reduce the risk of his portfolio. If Marco earned no return on his nest egg, he would have nothing left over in this scenario. Let’s assume that Marco was able to save up exactly $2 million by retirement and now wants to figure out how much money will be left over assuming he will live for another 20 years and will withdraw $100,000 at the beginning of each year. (Payments can be reset to the end of each month by using the END modifier on the 8 button.)īecause his money is compounding for just a bit longer, he needs to save a bit less money each month. If instead, Marco was to invest his money at the beginning of each month, we can make a quick adjustment by using the BEG modifier on the 7 button to see how much he would need to save each month. Marco will need to save at least $1,472.89 a month to hit his goal by retirement. We can change the sign by using the CHS button.įinally, we find the missing piece of the equation by hitting the payment button. The current savings should be entered as a negative number because that’s essentially how much is being invested or “spent” at time zero. Next, we’ll need to enter an adjusted interest rate, except this time we’ll divide the number by 12.įinally, we have to enter in Marco’s current savings and his goal by retirement. Since we need to find a monthly amount, there are a few adjustments that will need to be made.įirst, we’ll enter the 18 years and adjust to monthly periods by using the 12x modifier on the n button. If he currently has $750,000 saved up, and assuming he can earn a 7% annual rate(compounded monthly) on his investments, how much will Marco need to put away at the end of each month to reach his goal? Finding payment amountĮxample: Marco is currently 47 years old and hopes to retire in 18 years with a $2 million nest egg. If you are looking for more exam-style CFA questions, simply register an account at. For those familiar with the Texas Instruments BA-II Plus, a great drill would be to try to do the same calculations shown in this article with the BA-II Plus. In this blog post, we will focus on the HP-12C for those wanting to learn or refresh their memory on the basic steps involved in the most important calculations required for the CFA exams. Finally, some believe the HP-12C looks a bit sleeker than the Texas Instruments BA-II Plus, but calculator appearance may not be a priority when taking the exam. Since most people are unfamiliar with RPN, the HP-12C may have a somewhat steeper learning curve than the BA-II Plus. There are no parentheses buttons on an HP-12C calculator as the order of operations is implied by the order of inputs. In other words, instead of calculating the sum of three and four by entering 2+2=, you would do so by inputting 2enter2+. Secondly, the HP-12C uses Reverse Polish Notation (“RPN”), which means that operators follow their operands. First of all, a new Texas Instruments BA-II Plus ($30) is a bit cheaper than a new HP-12C ($45-50). If you’re unfamiliar with both calculators and have to choose which one to buy, there are a few factors to keep in mind. If you have one of each calculator but plan to use the BA-II Plus as your primary calculator then it may still be a good idea to try and borrow another BA-II Plus from a friend or co-worker to use as a backup in the unlikely event that you’ll need it. Ideally, you should choose your calculator before you begin studying so you use the same calculator as you work through examples and practice tests. In most cases, it probably makes sense to choose the calculator you’re the most comfortable with so you spend less of your valuable study time dedicated to learning calculation steps. Trained users of either calculator can perform all necessary tasks in relatively the same amount of time so there is no obvious best choice in terms of exam viability. Analysts may use either a Texas Instruments BA-II Plus or HP-12C (or the various editions of either calculator) when taking the CFA exams.
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