CM1 Time Value of Money Explained | Present Value, Future Value & Discounting

In this CM1 actuarial mathematics lesson, we break down Chapter 1: The Time Value of Money in a clear, practical, and exam-focused way. The time value of money is one of the most important foundations in actuarial science, finance, insurance, pensions, investment modelling, and risk management. Before you can master annuities, assurances, reserves, bonds, profit testing, or pricing, you must understand how money moves across time. In this video, you will learn: • What the time value of money means • Why money today is worth more than money in the future • How accumulation works • How discounting works • Present value vs future value • Simple interest vs compound interest • How to use timelines in CM1 questions • Common mistakes students make in early CM1 calculations Key ideas covered: Future Value: FV = PV(1 + i)^n Present Value: PV = FV(1 + i)^(-n) Simple Interest: A = P(1 + in) Compound Interest: A = P(1 + i)^n A key CM1 exam tip: always draw a timeline before calculating. Most mistakes in time value of money questions come from using the right formula at the wrong time point. This video is ideal for actuarial students preparing for IFoA CM1, university actuarial science exams, or anyone learning actuarial mathematics from the beginning. This is Video 1 in our CM1 Fundamentals Series. Next videos: Chapter 2 – Interest Rates Chapter 3 – Real and Money Interest Rates Subscribe to The Infinite Actuary for more actuarial science, CM1 revision, financial mathematics, risk modelling, and exam preparation content. #CM1 #ActuarialScience #TimeValueOfMoney #PresentValue #FutureValue #Discounting #ActuarialExams #IFoA #ActuarialStudents #FinancialMathematics #TheInfiniteActuary