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- This topic has 3 replies, 2 voices, and was last updated 7 years ago by  John Moffat. John Moffat.
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- May 4, 2018 at 6:39 pm #450114Hi Sir. I have a question. What is the amount to be invested today to receive $2,000 per annum for 9 years starting with the first receipt beginning in 4 years’ time. The interest is assumed to be 5% per annum. 
 A. $10,600
 B. $11,200
 C. $11,700
 D. $12,200The answer is B which is (AF 5% 11 years – AF 5% 3 years) x $2,000 = (8.306 – 2.723) x $2,000 =$11,166 (nearest is $11,200) But shouldn’t the answer be C sir? 
 (AF 12 years – AF 4 years) x $2,000 = (9.394 – 3.546) x $2,000 = $11,696 (nearest $11,700)Thank you sir. May 5, 2018 at 9:01 am #450176Assuming that you have copied everything correctly, then neither answer is correct! The first receipt is in 4 years time. There are 9 receipts in total, so the last receipt is in 12 years time. Therefore we need the total factor for years 4 to 12. We get this by taking the total factor for 1 to 12 (the 12 year annuity) and subtracting the total for 1 to 3 (the three year annuity). 
 So: (8.863 – 2.723) x 2000 = 12,280Do check that you have copied the question correctly. (And do watch my free lectures on this. The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.) May 5, 2018 at 9:07 am #450183Thank you so much sir! Brilliant!! Yes i copied the question correctly. Unfortunately the suggested solution and my understanding was wrong at the beginning. But now I have fully understood Thanks so much! 🙂 May 5, 2018 at 9:28 am #450197You are welcome 🙂 
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