Mathematics of Investment
MACT 3311
Chapter 2: Valuation of Annuities
Instructor: Roba Bairakdar, ASA
Semester: Fall 2015
1
Annuity
Video:
http:/www.investopedia.com/terms/a/annuity.a
sp
Annuities are series of regular periodic
payments
Types of annuit

Mathematics of Investment MACT 3311
Chapter 3: Loan Repayment
Formula Sheet
Loan Amount
= 1 + 2 2 + +
Outstanding Balance at time t
= 1 , where 0 = and = 0
= 1 [ ]
= (1 + )1
Interest Due at time t
= 1 x
Principal Repaid in the tth
payment
=
Pros

Mathematics of Investment
MACT 3311
Chapter 3: Loan Repayment
Instructor: Roba Bairakdar, ASA
Semester: Fall 2015
1
Amortization Method of Loan
Repayment
The amortization method is the
distribution of payment of a loan into
multiple cash flow instalment

Mathematics of Investment MACT 3311
Chapter 1: Interest Rate Measurement
Formula Sheet
a(t) is the accumulated value at time t of an investment of 1 made at time 0
A(t) is the accumulated amount at time t of an investment made at time 0
Equation of Value:

Mathematics of Investment
MACT 3311
Chapter 1: Interest Rate Measurement
Instructor: Roba Bairakdar, ASA
Semester: Fall 2015
1
Interest
Interest refers to the consideration or rent paid by a
borrower of money to a lender for the use of the
money over a

Mathematics of Investment MACT 3311
Chapter 6: The Term Structure of Interest Rates
Formula Sheet
Spot Rates
The yield to maturity on a zero coupon bond is called the spot rate of interest for the
time to maturity.
is the spot rate for a t-year maturity z