Time Value of Money - CFA® Level 1

Master present value, future value, compounding and the EAR, annuities, perpetuities and loan payments, step by step.

New

Created byIvan Granzotto

Last updated 8/2026

English

What you'll learn

Calculate the future value and present value of single cash flows, and interpret an interest rate as a required return, discount rate or opportunity cost.
Adjust the TVM formulas for any compounding frequency and compute the effective annual rate (EAR) to compare rates quoted on different bases.
Calculate the future and present value of annuities and annuities due, using annuity factors to value a whole stream of payments in one step.
Value perpetuities and deferred cash flows, and price irregular streams using the cash flow additivity principle.
Solve any TVM problem for the missing variable: the interest or growth rate (CAGR), the number of periods, or the payment size.
Break a loan into an amortization schedule and see how each level payment splits between interest and principal.

Course content

1 section • 5 lectures • 47m total length

Future & Present Value of Single Cash Flows11:34
We start with the building block the whole course rests on: moving a single cash flow forward and backward through time.
By the end of this lesson you will be able to:
• Explain why money has time value: investment opportunity, inflation and risk
• Interpret an interest rate as a required return, a discount rate, or an opportunity cost
• Calculate the future value of a lump sum with compound interest
• Discount a future amount back to its present value
Compounding Frequency & the Effective Annual Rate11:05
Interest is rarely credited just once a year. Here you'll see what changes when it compounds monthly, quarterly or continuously, and how to compare rates fairly.
By the end of this lesson you will be able to:
• Work with the stated annual rate, the periodic rate and the number of compounding periods
• Adjust the FV and PV formulas for any compounding frequency
• Apply continuous compounding
• Calculate the effective annual rate (EAR) and use it to compare rates quoted on different bases
Annuities - Future & Present Value8:18
Mortgages, pensions and bond coupons are all the same payment repeated. This lesson gives you a shortcut to value an entire stream at once.
By the end of this lesson you will be able to:
• Tell an ordinary annuity apart from an annuity due
• Calculate the future value of an annuity using the FV annuity factor
• Calculate the present value of an annuity using the PV annuity factor
• Adjust for annuities due by multiplying by (1 + r)
Perpetuities, Deferred Cash Flows & Cash Flow Additivity8:23
Now the harder streams: payments that never end, payments that don't start for years, and payments that are all different.
By the end of this lesson you will be able to:
• Value a perpetuity as A divided by r
• Value deferred cash flows by valuing them one period early, then discounting back
• Find the present value of a series of unequal cash flows
• Use the cash flow additivity principle to break any stream into simple pieces
Solving TVM Problems: Rates, Periods & Payments8:02
The formulas run in reverse too. Here you learn to solve for whatever is missing.
By the end of this lesson you will be able to:
• Solve for the interest rate or compound annual growth rate (CAGR)
• Solve for the number of periods, and sanity-check it with the Rule of 72
• Calculate a loan payment, or the savings needed to hit a target
• Read a loan as an amortization of interest and principal

Requirements

No prior finance knowledge is required. every concept is built from the ground up.
Basic high-school algebra (exponents and logarithms) is helpful, but every step is explained.
A financial or scientific calculator (or a spreadsheet) to follow along with the worked examples.

Description

This course contains the use of artificial intelligence.

The Time Value of Money is the single most important idea in finance, and the foundation of the entire CFA® Level 1 curriculum.

Almost everything you will ever value (a bond, a stock, a loan, a project, a pension) comes down to one question: what is a future cash flow worth today? This course teaches you to answer that question with confidence.

We start from first principles: why a dollar today is worth more than a dollar tomorrow, and how a single interest rate can be read three different ways: as a required return, a discount rate, or an opportunity cost. From there we build, step by step, to everything the exam expects you to know.

What we cover
• Future value and present value of a single cash flow, and simple versus compound interest
• Compounding frequency (monthly, quarterly, daily and continuous) and the Effective Annual Rate (EAR) that lets you compare any two rates fairly
• Annuities and annuities due: valuing an entire stream of level payments in one step
• Perpetuities, deferred cash flows, and the cash flow additivity principle for irregular streams
• Solving problems in reverse: finding the interest rate (CAGR), the number of periods, or the size of a loan or savings payment
• Reading a loan as an amortization of interest and principal

How it is taught
Every concept is introduced visually, built up with intuition, then locked in with a fully worked example: the numbers are shown line by line, never skipped. No prior finance knowledge is assumed.

You will also download the complete slide deck and a Formulas Cheat Sheet, so you can revise without re-watching a single video.

By the end, the Time Value of Money will stop being a set of formulas to memorise and start being a way of thinking, one you will use in every topic that follows.

Who this course is for:

CFA® Level 1 candidates who want a clear, exam-focused treatment of the Time Value of Money reading.
Finance, economics and business students who need to master present value, future value and annuities.
Analysts and professionals who want to refresh the discounting fundamentals behind bonds, loans and valuation.
Anyone preparing for a finance interview, or starting out in investment management.