Required Rate of Return | Quantitative Methods – 17 | CFA Level 1 | FRM P1

In this lecture, the logic behind Required Rate of Return, Discount Rate, and Opportunity Cost is explained, showing why they represent the same idea from different perspectives. The session clarifies how risk determines the return you demand, why the required return becomes the discount rate, and how opportunity cost applies beyond monetary decisions. It also explains real vs nominal returns using inflation and purchasing power, with a gold-based example to address a common exam trap.

Class notes written on the board are available in the App under the ‘Quantitative Methods’ - ‘Time Value of Money’ chapter. Please note that the lectures are to be done as per the order of the playlist and not the textbook.
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00:00 – Introduction: Three Confusing Terms
01:10 – FD vs Equity Example
03:05 – Expected Return vs Guaranteed Return
05:10 – What Is Required Rate of Return (Investor View)
07:40 – Required Return as Discount Rate
10:15 – Lending to a Friend Example
13:10 – Demand & Supply of Capital
16:40 – Risk Levels & Equilibrium Rates
19:20 – What Is Opportunity Cost (Non-Money Example)
22:10 – Opportunity Cost in Daily Life
25:00 – Interest Rates & Spending Behavior
28:00 – Inflation Introduction
30:30 – Real vs Nominal Return Explained
34:30 – Inflation Formula
37:30 – Gold Example

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Faculty- Aswini Bajaj, a qualified CA, CS, CFA, FRM, CAIA, CIPM, CFP, RV, CCRA, CIIB, CIRA, and AIM. He is also a guest lecturer (across 180+ colleges and 35+ IITs and IIMs), corporate trainer, and CEO of Leveraged Growth (Research and Consulting).

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