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  • 1. MODULE BOOKLET Module Title Mathematics of Finance 1 Module Code MA1006N Session 2005-2006 Semester SPRING approved May 2004 ADC commencing Sept 2004
  • 2. Module Booklet Contents a) Welcome to Mathematics of Finance 1 Session 2005/2006 Semester Spring Details of the Staff teaching team b) Name of Module Leader Dr P S Calay Office Location EG115 Email Telephone 020 7133 7037 Office Hours Name(s) of other staff H Robert Office Location EG103 Email Telephone 020-7133-7005 Office hours
  • 3. MODULE SPECIFICATION 1. Module title Mathematics of Finance 1 2. Module code MA1006N 3. Module level C 4. Module Leader Dr P S Calay 5. Home academic department CCTM 6. Teaching location North 7. Teaching semester Spring 8. Teaching mode day 9. Module Type STAN 10. Credit rating for module 15 11. Prerequisites and corequisites A-Level Mathematics or equivalent (MA1001N or MA1003CN) 12. Module summary MA1006N Mathematics of Finance 1 The module introduces students to basic mathematical techniques that are applied in making decisions in areas of finance. Problems that will be addressed during the course will include some of personal finance, such as credit card interest, mortgages, pensions and life insurance. Semester: Spring Prerequisites: A-Level Mathematics or equivalent ( MA1001N or MA1003CN) Assessment: Written Report with oral presentation 25% + Exam 75% 13. Module aims Mathematics of Finance 1 (MA1006N) The principal graduate attributes developed in the module are A2 and A3. The module aims to · Introduce students to the terminology used in common areas of finance, · Develop the mathematical techniques that will enable students to investigate and solve
  • 4. problems in the area of finance. [A2, A3]. · Enable students to examine the role of interest in the more general context of consumer spending and earnings, and to make informed, personal financial decisions.[A2, A3] · Promote the ability to write clear mathematical arguments using sound reasoning in making financial decisions by working with a team and completing a written project report and presentation. [A2, A3]. · Apply statistical concepts in a financial context. 14. Learning outcomes On completing this module, students should be able to 1. Demonstrate an understanding of the mathematical aspects of interest as applied to financial instruments. (A2) 2. Calculate various rates of interest (AER, EAR, APR) and understand the differences between the various rates. (A3) 3. Calculate present and future values and apply to annuities, sinking funds and financial bonds 4. Calculate sample statistics for financial data and present such data appropriately 5. Use expected values in a financial context and understand their use in the decision making process. 6. Use a range of software (such as EXCEL, MAPLE, MINITAB) and produce appropriate output to support their investigations 7. demonstrate sound reasoning in making financial decisions by working as part of a team to investigate a problem, produce a written project report and presentation. 15. Syllabus Mathematics of Money: financial instruments and institutions, Simple Interest, Compound Interest, Effective Rates, appreciation and depreciation, Present Value, Future Value, Annuities (Mortgages), Sinking Fund and Amortization Statistics and Probability: Samples and populations in financial applications, Data sources and data display for financial data Sample statistics and population parameters including mean, variance, covariance, correlation. The addition and multiplication rules. Independence, Expected values 16. Assessment strategy The opportunity for students to monitor their progress and the feedback will be provided by the use of graded tutorial sheets. There will be an unseen examination at the end of the module (LO1-LO6).[A2, A3] The group coursework component will draw together all the acquired skills by means of a case study (LO1- LO7). Students will produce a written report and present their analyses and conclusions regarding a real problem (as far possible). [A2, A3]. Reassessment strategy to be 100% via examination 17. Summary description of assessment items Assessment Description of item % Qual Qual Tariff Week type Weighting Mark Set due CWK Written Report with oral 25 - -       10 Presentation EXU 2 hour exam 75 - -       13 -             - -       - -             - -       - -             - -       - 18. Learning and teaching Teaching and learning will be mostly by lecture (22 hours) and small group tutorials (11 hours) and Practical Session (11 hours) The lectures will introduce students to the ways in which problems in this area of mathematics are approached and will provide a focal point for the module. The group tutorial will provide the students with opportunity of gaining 'hands-on' experience of solving problems. For the Tutorials students will be provided with Tutorial sheets and Self Assessment Exercises via WebCT (48 hours) that will enable them to explore, both on their own and within self-help peer groups, the various concepts and techniques introduced in the lectures. The exercises are designed to re-inforce the lecture
  • 5. material and to give the students confidence and control over their own learning. Practical Session will give students 'hands-on' experience of using a computer package to analyse data. Students will be provided with detailed instructions introducing the main features of the mathematical package as applied to the analysis of a range of problems of varying complexity, application and context. Follow up questions to help students reflect on the analysis will be provided. The Case Study Report (40 hours) will be mostly student led and will involve investigating a real problem (as far as possible) from start to finish. This will provide an opportunity for students to make decisions as to the most appropriate technique to use. Students will present their analysis in a group report and presentation. Students will require time for revision for the final assessment examination. This will comprise class revision (4 hours) and revision outside class to include the production of worked solutions to previous exam papers (14 hours). 19. Bibliography 1) Guthrie, G and Lemon, L (2003) Mathematics of Interest and Finance, Prentice Hall. 2) Zima, P and Brown, R (1998) Schaum’s Mathematics of Finance, McGraw-Hill 3) Kaminsky, K (2003) Financial Literacy: Introduction to the Mathematics of Interest, Annuities. UPA 4) Adams, A, Booth, P, Bowie, D and Freeth, D (2003) Investment Mathematics, John Wiley 5) Jackson, M and Mike Staunton (2001) Advanced Modelling in Finance using Excel and VBA, John Wiley 6) Zima, P and Brown, R (1997) Schaum’s Outlines of Mathematics of Finance, McGraw-Hill 20. Approved to run from September 2004 21. Module multivalency Core for BSc(Hons) Financial Mathematics Designate for BSc(Hons) Mathematics Designate for BSc(Hons) Statistics 22. Module designation undergraduate only none of these types 23. Subject Standards Board Mathematics 24. Subject Standards External Examiner(s) N/A
  • 6. MA1006 Mathematics of Finance – 1 Scheme of work Teaching Week Topic 1 Introduction to the Course 1.3 Interest Rates (i) Simple and Compound Interest Rate (ii) Effective Rates (iii) Present and Future Values 4-6 Annuities (i) Simple Annuities (ii) General Annuities (iii) Sinking Funds and Amortisation 6 Course-Work Handed out (25% of module) 7 Statistics and Probability (i) Samples and Populations Financial Application (ii) Data sources and display of financial data (iii) Sample statistics (iv) Introduction to Probability (v) Expected Values 8-9 Application of Expected Values (i) Contingent Payments with Time Value (ii) Mortality Tables (iii) Life Annuities and Insurance 10 Course-Work Hand-in after the Group-Work Presentation 11 Bonds (i) Introduction to Bonds (ii) Purchase Price (iii) Premium and Discount 12 Revision 13-15 Unseen Examination (75% of module)