Faculty of Business and Economics
Department of Finance and Banking
Course Title: Mathematical Finance
Course No.: 1303201
Classes: NT 9:30- 11
Credit Hours: Three Hours
Semester: 1st Semester 2014
Methods of Instruction: Lecturing/ Discussion
Lecturer: T. Shanti Office: Faculty of Law - 1st Floor Room (3210)
E-mail: talshanti@yahoo.com Mob 0524567140
Office Hours:
N 11:00 - 2:00
Why this course?
üThis course will provide a set of quantitative techniques that may apply to solve day- to- day problems that arise in the world of business and finance.
The mathematical skill that the student acquire will serve him in ,almost, every other course in Finance ,particularly, Portfolio Management and Risk Management courses. y condition.
Text Book:
The contents of this courses will be extracted from different resources.
1)Peter Zema, Robert L. Brown, Financial Mathmatics,2nd edition
2)Jenny Gosling , Math for Business & Finance, Pascal Press
Grade Distribution
Med Term Exam 30%
Second Exam 20%
Quizzes 10%
Final 40%
Outline:
I.Week1:Chapter 1 Simple interest and some Application
§Future Value at simple interest
§Present Value at simple interest
§The time between dates
§Flat interest
§Early repayment at flat interest
§Calculating rebates and early payout figures
II.Week2-3:Chapter 2 Compound interest- concept and calculation
§Compound interest
§Future Value at compound interest
§Present Value at compound interest
§Finding: The interest rate, the length of the term
§Nominal and effective rate of compound interest
§Equivalence between nominal and effective rate
§Compound interest versus flat interest
III.Week4: Chapter 3 Practical applications of both compound interest and simple interest
§The value of money
§Equations of value
§Promissory notes
§Business decision- net present value
§Business decision- internal rate of return
First Hour Exam
IV.Week5: Chapter 4 Annuities- concept and basic calculations
§Simple annuities-general explanation
§The future value/amount ,S, of an annuity
§Periodic payment, R, given the present value of an annuity
§Approximating the interest rate of an annuity
§ Approximating the term of an annuity
V.Week6: Chapter 5 Some special annuity situation
§Deferred annuities
§Perpetuities
§General Annuities
§More irregular annuity situation
VI.Week7: Chapter 6 Amortization and sinking Fund
§Amortization of Debt
§Outstanding Principal
§Mortgages
§Refinancing a loan
§Sinking Funds
§Comparison of Amortizing and sinking-Fund Methods
2nd Hour Exam
VII.Week8: Chapter 7 Bonds
§Purchase price to yield a given investment rate at interest payment dates
§Purchase price for a given yield between interest payment date
§Finding the yield rate for a given price
§Premium and discount
VIII.Week8: Chapter 8 Contingent Payment
§Introduction
§Probabilities
§Mathematical Expectation
§Contingent payment with Time Value
§
IX.!!!Chapter 9 Life Annuities and Life Insurance
§Introduction
§Mortality Table
§Pure Endowment
§Life Annuities
§Life Insurance
§Annual-Premium Policies
Final Exam
- Teacher: Talal Al-shanti