CFA I R6 Time Value of Money (TVM)

Dear fellow CFA candidates/readers,

Thank you for visiting visiting WhitneyDiary CFA I Notes series, I have been using the notes below for my revision and have passed the CFA Level I on June 2018 Exam. Hereby, I share my notes with you and hope that they are helpful:

  1. nominal risk-free rate = real risk-free rate + expected inflation rate
  2. required interest rate on security = nominal risk-free rate + default risk premium + liquidity premium + maturity risk premium
  3. EAR = (1+periodic rate)^m – 1
    EAR = Annual rate of return actually being earned after adjustments have been made for different compounding periods.
  4. FV = PV (1+I/Y)^N
  5. PV = FV × [1/(1+I/Y)^N]
  6. Annuity
    FV = {[(1+r)^N – 1]/r} × PV
    PV = FV × (1+r)^-N
  7. Perpetuity
    PV = PMT/(I/Y)
    IRR = PMT/Cost
  8. Compound growth rate = (FV/PV)^(1/N) – 1
  9. APY = FV/PV -1
  10. APR = by months
  11. With positive interest rate, PV of ordinary annuity (END PMT) < PV of annuity due (BGN PMT)

Thanks again for reading the notes, please like and share this post if you think my notes are helpful! Do leave your comments and let me know about your thoughts!

Good luck to your exam!


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