Course co-ordinator(s): Prof Andrew Cairns (Edinburgh), Dr Matthias Fahrenwaldt (Edinburgh), Dr Karamjeet Singh (Malaysia).
Aims:
This course aims to provide students with an introduction to the basic concepts and models of financial mathematics.
Summary:
- Simple interest
- Compound interest and discount
- Time units and effective rates of interest
- Accumulations and present values of discrete-time cashflows
- Varying rates of interest
- Annuities
- Yields
- Measuring rates of return
- Loan schedules
- Fixed-interest securities
- Discounted Cash Flows
Detailed Information
Pre-requisites: none.
Location: Edinburgh, Malaysia.
Semester: 1.
Learning Outcomes: Subject Mastery
At the end of studying this course, students should be able to:
- Describe the basic concepts of simple and compound interest.
- Calculate the present value or accumulation of any set of discrete-time cashflows, at constant or varying rates of interest
- Derive and use simple formulae for values of level and increasing annuities-certain
- Explain the concept of the yield on a series of cashflows, and its limitations
- Calculate time-weighted, money-weighted and internal linked rates of return
- Analyse loan schedules, including simple alterations
- Describe basic fixed-interest securities, and calculate prices and yields allowing for tax
- Understand, the discounted cash flow model and know what internal rates of return (IRR), net present values (NPV) and break-even durations are
Reading list:
- Garrett, S.J. (2013). An Introduction to the Mathematics of Finance (second edition). Butterworth-Heinemann.
- Zima, P. & Brown, R.L. (1996). Schaum’s Outline: Mathematics of Finance (Second Edition), McGraw Hill.
Assessment Methods:
There will be a two-hour end-of-course examination, contributing 90% of the total mark. During the second half of the semester there will be an Excel-based assignment counting for 10% of the total mark.
SCQF Level: 8.
Credits: 15.
Other Information
Help: If you have any problems or questions regarding the course, you are encouraged to contact the lecturer
VISION: further information and course materials are available on VISION