MSM2303 - Mathematics of Money

HNGU M.SC. MATHEMATICS SEMESTER - 3 

MSM2303 – MATHEMATICS OF MONEY

Unit 1: 

• The Simple Interest Theorem,
• Consequences of the theorem,
• Financial Digression,
• Ambiguities when interest period is measured in days,
• Number of days calculations,
• The Compound Interest Theorem,
• Consequences of the theorem,
• The annual effective rate,
• Time diagram and cash flows,
• Interest rate of return (IRR),
• Financial Digression,
• The IRR uniqueness theorem and its consequences,
• The rule of 72,Inflation,
• The purchasing power theorem,
• Consumer price index(CPI),
• Personal taxes,
• The tax theorem.

Unit 2: 

• An ordinary annuity,
• The future value of an ordinary annuity theorem(OAT),
• Consequences of OAT,
• The interest value of an OAT and its applications,
• An annuity due,
• The future value of an annuity due theorem(ADT),
• The present value of an ADT,
• Perpetuities,
• Loans and risks, examples of loans(bond, zero coupon bond, credit card load)

Unit 3: 

• Amortization tables,
• The amortization theorem,
• Periodic payments,
• The periodic payment theorem(PPT),
• Consequences of PPT,
• Linear interpolations,
• Credit cards payments,
• The credit card theorem and its applications, credit card numbers.

Unit 4: 

• Bonds,
• Noncallable bonds,
• The bond theorem,
• The price-yield theorem,
• Accrued interest,
• Duration,
• Modified duration,
• Convexity, portfolio,
• Buying and selling stocks,
• The dollar cost averaging theorem,
• The long sale maintenance level theorem,
• The short sale maintenance level theorem and its examples.

Download Reference books:

Note:Course covered by the book: An Introduction to the Mathematics of Money:Savings and Investing - David,Mendel and Wright,Springer,2000.

1. Investments, Bodie,Kane and Marcus, McGraw Hill, 2005, 6th ed.

2. Black-Scholes and Beyond:Option Pricing Models, McGraw Hill, 1997.

3. The Banker’s Secret, Eisenson, Villard Books, New York, 1990.

4. The Handbook of Fixed Income Securities, Fabozzi and Mann, McGraw Hill, NY2005, 7th .

5. Options, Futures and Other Derivatives - Hull, Prentice Hall, New Jersey,2006,6th ed.

6. Interest Rate Modelling, Jemes and Webber, John Wiley and sons, NY,2000.

7. Investment Science, Luenberger, Oxford Uni. Press,NY,1997.

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