When should I use the TVM keys instead of the cash-flow worksheet on CFA Level I?

Question

AcadiFi · Accepted Answer

Use a TVM structure when the cash flows are level, evenly spaced, and tied to one periodic rate. Use an uneven cash-flow structure when each period can have a different amount or when the problem is explicitly asking for project NPV or IRR.

A quick setup map helps:

```mermaid
flowchart TD
  A["Read the timeline"] --> B{"Cash flows equal each period?"}
  B -->|Yes| C["TVM setup"]
  B -->|No| D["Uneven cash-flow setup"]
  C --> E["Solve PV, FV, PMT, N, or rate"]
  D --> F["Solve NPV or IRR"]
  E --> G["Interpret with period-matched rate"]
  F --> G
```

Example: if a lease pays USD 8,000 every year for six years, the TVM annuity setup is appropriate. If a project costs USD 90,000 today and then produces USD 21,000, USD 34,000, USD 28,000, and USD 41,000, it belongs in an uneven cash-flow setup because the inflows change each year.

When should I use the TVM keys instead of the cash-flow worksheet on CFA Level I?

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