If someone promised to give you $105 one year from now, how much would that be worth today? This simple question is about Present Value (PV) — one of the most fundamental concepts in finance. It appears frequently on bond pricing questions and is essential for many areas of the CFA Level I exam. In this article, I’ll explain how PV calculations apply to bond pricing. What is Present Value? Present Value (PV) answers a simple question: How much would someone pay you today in exchange for a payment — or stream of payments — you’re promised to receive in the future? ...
The CFA Program is notorious for its comprehensive curriculum—and let’s be honest—they excel at crafting questions and answer choices designed to trip you up. If you believe Quantitative Finance for CFA Level I is just about memorizing formulas, you’re setting yourself up for disappointment. Success requires deeply understanding why and when to use each formula. Even when you think you’ve mastered a topic, you’ll inevitably encounter questions that make you pause, reread, and then read once more. ...