“The Time Value of Money” is a reading in the Level I curriculum for the CFA Program. It covers the following learning outcomes.
a. interpret interest rates as required rates of return, discount rates,
or opportunity costs;
b. explain an interest rate as the sum of a real risk-free rate and
premiums that compensate investors for bearing distinct types of
c. calculate and interpret the effective annual rate, given the stated
annual interest rate and the frequency of compounding;
d. solve time value of money problems for different frequencies of
e. calculate and interpret the future value (FV) and present value
(PV) of a single sum of money, an ordinary annuity, an annuity
due, a perpetuity (PV only), and a series of unequal cash flows;
f. demonstrate the use of a time line in modeling and solving time
value of money problems.