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CFA Institute CFA-Level-I Exam - Topic 1 Question 12 Discussion

Actual exam question for CFA Institute's CFA-Level-I exam
Question #: 12
Topic #: 1
[All CFA-Level-I Questions]

If you have $5,000 in an account today and withdraw $2,000 in 3 years, how much can you withdraw from the account in 5 years, if the account earns interest at 8% per year, compounded annually?

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Suggested Answer: C
by Arlette at Jan 23, 2025, 05:22 PM

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Dortha
6 months ago
Is it really that much after just 5 years?
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Antione
6 months ago
Totally agree with C, seems right!
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Lorean
6 months ago
Wait, how can you withdraw that much after 5 years?
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Kyoko
7 months ago
I think it's option C, $4,407.98.
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Loreta
7 months ago
The account grows at 8% compounded annually.
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Viva
7 months ago
I think we just need to calculate the total amount after 5 years and then subtract the $2,000. But I’m not entirely confident about the compounding part.
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Izetta
7 months ago
I feel like I might be mixing up the compounding interest formula. Should we apply it before or after the withdrawal?
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Leanora
7 months ago
I remember a similar question where we had to find the amount left after a withdrawal. I think we should first find the amount after 3 years before the withdrawal.
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Charlette
7 months ago
I think we need to calculate the future value of the account after 5 years, but I'm not sure how to factor in the withdrawal.
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Mammie
7 months ago
This is a good opportunity to practice compound interest calculations. I'll sketch out the timeline and the formulas to make sure I have the right approach.
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Adolph
7 months ago
Wait, I'm a bit confused. Do we need to account for the withdrawal in 3 years? How does that affect the final balance? I better double-check my work.
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Blair
7 months ago
Easy peasy! With 8% annual interest, the balance will grow quite a bit in 5 years. I'm confident I can calculate the final withdrawal amount.
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Laquanda
7 months ago
Hmm, this looks tricky. I'll need to remember the compound interest formula and plug in the values carefully. Gotta make sure I don't miss anything.
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Johanna
8 months ago
Okay, let's think this through step-by-step. We have the initial amount, the withdrawal, the interest rate, and the time period. I think I can work this out.
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Louisa
1 year ago
I'm totally acing this exam. This question is a piece of cake. I'm gonna be rolling in the dough after I graduate!
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Inocencia
10 months ago
It's definitely a great feeling to watch your savings grow.
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Verlene
10 months ago
I love seeing my money grow like that.
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Kati
10 months ago
That's correct! The interest really adds up over time.
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Antione
11 months ago
You can withdraw $3,456 in 5 years.
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Cheryl
1 year ago
Hmm, I wonder if the interest is compounded monthly or daily instead of annually. That could make a difference. I'll have to read the question carefully.
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Horace
11 months ago
Just make sure to calculate the future value using the compound interest formula.
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Ilene
11 months ago
The interest is compounded annually, so it doesn't matter if it's monthly or daily.
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Margery
11 months ago
You can withdraw $3,456 from the account in 5 years.
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Haydee
1 year ago
Wait, wait, wait. What if I decide to withdraw the $2,000 in 4 years instead of 3? Will that change the final answer? I better double-check the details.
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Roxanne
11 months ago
Make sure to double-check the details to be sure.
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Kyoko
12 months ago
No, withdrawing the $2,000 in 4 years instead of 3 will not change the final answer.
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Hillary
12 months ago
You can withdraw $3,464.96 in 5 years.
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King
1 year ago
This seems like a straightforward interest calculation problem. I just need to figure out the balance after 5 years and then subtract the $2,000 withdrawal. Easy peasy!
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Mollie
1 year ago
That's correct. Just calculate the future value of the account after 5 years and subtract the $2,000 withdrawal.
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Delmy
1 year ago
You can withdraw $3,648.64 in 5 years.
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Martina
1 year ago
Exactly, we can use the formula A = P(1 + r)^n to calculate the future value of the account.
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Monroe
1 year ago
Okay, let's see. If I have $5,000 and withdraw $2,000 in 3 years, and the account earns 8% interest annually, that means I'll have more than $5,000 left in 5 years. I'll just need to calculate the exact amount.
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Lillian
1 year ago
Yes, it's important to consider when planning withdrawals.
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Domitila
1 year ago
So, the interest really adds up over time.
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Christiane
1 year ago
That's good to know, thanks!
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Mariann
1 year ago
You can withdraw $5,440 in 5 years.
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Pearlene
1 year ago
Yes, we can use the formula for compound interest to find out how much we can withdraw in 5 years.
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Martina
1 year ago
I think we need to calculate the future value of the account.
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