“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
risk;
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
compounding;
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.