Rates and Returns
2025 Curriculum
CFA® Program Level I
Quantitative Methods
Refresher reading access
Introduction
Interest rates are a critical concept in finance. In some cases, we assume a particular interest rate and in others, the interest rate remains the unknown quantity to determine. Although the pre-reads have covered the mechanics of time value of money problems, here we first illustrate the underlying economic concepts by explaining the meaning and interpretation of interest rates and then calculate, interpret, and compare different return measures.
Learning Outcomes
The candidate should be able to:
- interpret interest rates as required rates of return, discount rates, or opportunity costs and explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk
- calculate and interpret different approaches to return measurement over time and describe their appropriate uses
- compare the money-weighted and time-weighted rates of return and evaluate the performance of portfolios based on these measures
- calculate and interpret annualized return measures and continuously compounded returns, and describe their appropriate uses
- calculate and interpret major return measures and describe their appropriate uses
1.5 PL Credit
If you are a CFA Institute member don’t forget to record Professional Learning (PL) credit from reading this article.