The Time Value of Money (2023 CFA Level I Exam – Quantitative Methods – Module 1)

Master one of the most important CFA Level I Quantitative Methods topics: The Time Value of Money (TVM). In this lesson, Prof. Forjan breaks down the foundations of compounding, discounting, annuities, perpetuities, and the use of financial calculators for PV, FV, and interest rate problems. Learn how to interpret interest rates, calculate effective annual rates (EAR), and handle different compounding frequencies with confidence.
Key Learning Outcomes:
- Interpret interest rates as required returns, discount rates, or opportunity costs
- Explain how interest rates combine real risk-free rate and risk premiums
- Calculate the effective annual rate (EAR) from nominal rates
- Compute FV and PV of single sums, annuities, and perpetuities
- Apply the timeline method to visualize and solve cash flow problems
Level I CFA Program Video Lessons offered by AnalystPrep
For All of the Videos (57 Readings), plus Level I Study Notes, Practice Questions, and Mock Exams: https://analystprep.com/shop/cfa-level-1-learn-practice-package/
Reading 1 – The Time Value of Money
0:00 Introduction
2:01 LOS : interpret interest rates as required rates of return, discount rates, or opportunity costs;
23:33 LOS : explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk;
33:52 LOS : calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding;
36:40 LOS : calculate the solution for time value of money problems with different frequencies of compounding;
44:48 LOS : 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;
51:13 LOS : demonstrate the use of a time line in modeling and solving time value of money problems.
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