“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.