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Overview for Actsc 231: Mathematics of Finance
Important Note: This overview note aims at assisting students in studying their
exams, but does NOT reﬂect or imply any materials in the exam. Students
are responsible for understanding ALL materials in the class notes, the tutorial,
the MapleTA materials and the quizzes. Students are also encouraged to check
UWACE regularly for announcements.
Chapter 1: The growth of money
 understanding the time value of money
 accumulation function
a
(
t
) with general force of interest
δ
t
(special cases include simple
interest and compound interest)
 eﬀective rate of interest over a period [
t
1
,t
2
]
 (for compound interest) conversion among eﬀective rates of interest/discount, nominal rates
of interest/discount and force of interest
 present value of cashﬂows using discount function
v
(
t
) = 1
/a
(
t
)
 calendar usage (exact method, 20/360 rule, bankers’ rule)
 understanding inﬂation and the purchasing power of money
Chapter 2: Equations of value and fund performance
 equations of value: PV of income = PV of outgo (called yield equation when interest rate
is unknown)
 understanding the conditions guaranteeing a unique yield rate (which is greater than 1)
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 Fall '09
 Chisholm

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