Interest Rates and Time Value

This is the introduction section for PRM Exam I.

It presents the fundamental concept that money has a time value that results from investment opportunities. It covers basic measures of interest rates, the value of time and compounding methods. These foundational concepts have relevance for the valuation of all financial assets.

Learning Outcome Statements:

• Differentiate between continuous and discrete compounding
• Differentiate between the nominal interest rate and effective yield