Lecture 7 Notes: Annuities (Part 1)
1.1
Introduction
An annuity is a sequence of cash payments made at xed time intervals for a xed
period of time. Originally, annuities were payments made every year. They have
now been extended to have any time interval
Lecture 4 Notes: TVM (Part 2)
1.3.2
Time Weighted Rate of Return
The time weighted rate of return is also known as the geometric return of the
investment. It signies how well the fund was managed. Suppose we are given
the balances of the fund, Btj , at ev
Lecture 6 Notes: Interest Rate Theory Part 2
(Inverted Yield Curve). An inverted yield curve, Y (t), is usually de_ned as Y
(t) < 0 for most of t > 0. This implies that the yield curve is negatively
sloped and decreasing as time increases.
Y (t)
Inverted
Lecture 2 Notes: Interest Rates (Part 2)
1.4
1.4.1
Supplementary Material
Force of Interest (Calculus Required)
The force of interest _t may not necessarily be a constant, but can be dened
as a function of time instead.
De_nition 10 (Force of Interest). T
Lecture 2 Notes: TVM (Part 1)
1.1
Introduction
Suppose your friend Alice owed you $10000 today. Would you rather receive the
money today or at a later date? Most rational people would prefer to receive the
money now rather than later. However, you would p
Lecture 5 Notes: Interest Rate Theory (Part 1)
1.1
Introduction
In previous lessons, interest rates were presented to you as constant rates over
several years. However, as we all know, this does not happen very often in the
real world. In fact, there are
Lecture 9 Notes: Loans (Part 1)
Note: for clari_cation, I always denote the eective interest rate for the period with
r, and any annual rates with i. For example, an annual interest rate com-pounded
quarterly would be i(4) , but the interest rate for the
Lecture 10 Notes: Loans (Part 2)
1.4
Loan Balance Tables
Now that we know how to _gure out both the periodic payments for our loan
and also the outstanding loan balance at any time during our loan, we should
be able to build a loan balance table to see ho
Lecture 8 Notes: Annuities (Part 2)
1.4
Perpetuities
A perpetuity is a special type of annuity. Previously, the annuities that we
have encountered were for a xed period of time n. But what if n ?
For this special case, the annuity is called a perpetuity.
Lecture 1 Notes: Interest Rates (Part 1)
1.1
Introduction
Where are interest rates commonly found and what do they mean? They can be
found on credit card statements, car leases, and mortgages. They all have one
feature in common: they are a form of debt o