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MATH 384  Mathematical Theory of Interest  Units: 3.00  
Interest accumulation factors, annuities, amortization, sinking funds, bonds, yield rates, capital budgeting, contingent payments. Students will work mostly on their own; there will be a total of six survey lectures and six tests throughout the term, plus opportunity for individual help.
Learning Hours: 102 (12 Lecture, 84 Private Study)  
Requirements: Prerequisite Level 3 or above and (MATH 120 or MATH 121 or MATH 124 or MATH 126).  
Offering Faculty: Faculty of Arts and Science  

Course Learning Outcomes:

  1. Define and recognize the definitions of annuity-immediate, annuity due, perpetuity, m-thly payable, continuous annuity, level payment annuity, arithmetic increasing/decreasing annuity, geometric increasing/decreasing annuity, term of annuity. Given sufficient information of immediate or due, present value, future value, current value, interest rate, payment amount, and term of annuity, student is able to calculate any remaining item.
  2. Understand different type of interest rates: effective rate, nominal rate, discount rate, simple rate and simple discount, real and inflation rates, yield rate, and be able to set up the equation of values and perform calculations relating to present value, current value, and accumulated value.
  3. Understand key concepts of bonds: term of bond, bond price, book value, redemption value, face value, yield rate, coupon, coupon rate, term of bond, callable bond, amortization of bond. Given sufficient information of bond, be able to calculate the remaining item(s).
  4. Understand key concepts of cash flows: cash-in, cash-out, net cash flow, yield rates, net present value, and internal rate of return, measure of duration and convexity, cashflow matching and immunization. Be able to perform related calculations.
  5. Understand key concepts of loans: amortization, term of loan, outstanding balance, principal repayment, interest amount/payment, payment period, refinancing. Given sufficient information of loans, be able to calculate any remaining item(s).