Family Name
ID. No.
Given Name
U of Windsor DEPARTMENT OF MATHEMATICS AND STATISTICS
Theory of Interest 62-392 Test 1
M. Hlynka
Wednesday, February 11, 2015. Time allowed: 75 minutes.
Directions: You must show your work! You will be graded on completeness

Family Name
ID. No.
Given Name
U of Windsor DEPARTMENT OF MATHEMATICS AND STATISTICS
Theory of Interest 62-392 Test 1
M. Hlynka
Tuesday, February 11, 2014. Time allowed: 75 minutes.
Directions: You must show your work! You will be graded on completeness a

CHAPTER 7: CASH FLOW DURATION AND IMMUNIZATION
page 361 (6th ed.)
The market value (or price) of a bond generally changes over time, as does the
yield rate.
7.1 BOND DURATION AND CASH FLOW DURATION:
The sensitivity (or volatility) of a bonds price (relati

CHAPTER 9: ADDITIONAL TOPICS (p. 439 (6th)
We cover sections 9.1, 9.2, 9.3.1 and 8.1.1,8.1.2 (6th ed)
9.1 (p.439) STOCK VALUATION:
The DIVIDEND DISCOUNT MODEL FOR VALUING STOCKS says that the
value of a stock is the present value of all future dividends.

CHAPTER 6: THE TERM STRUCTURE OF INTEREST RATES
p. 315 (6th. ed.)
Denition: Term structure is the relationship between the time to maturity
and the yield to maturity of zero coupon bonds.
6.1 SPOT RATES OF INTEREST
DEFINITION:
The spot rate of interest is

CHAPTER 5: MEASURING RATE OF RETURN OF AN INVESTMENT
(p.277, 6h edition Broverman)
An investor may have an account where investments earn interest. At various
times, amounts are added to the account and at other times, amounts are received as interest/div

Chapter 4 Class Notes for Brovermans
Mathematics for Investment and Credit, 6th ed.
CHAPTER 4: BOND VALUATION (p. 237)
When a corporation or government wants to borrow money, it issues a bond (or
debenture) which can be purchased by the general public (or

Class Notes for Brovermans Mathematics for
Investment and Credit, 6th ed.
CHAPTER 2: VALUATION OF ANNUITIES (p. 77, 6th)
DEFINITION: An annuity is a series of payments over time. An annuity-certain
is a series of payments that will denitely be made (regar

Chapter 3 Class Notes for Brovermans
Mathematics for Investment and Credit, 6th ed.
CHAPTER 3: LOAN REPAYMENT AND AMORTIZATION
Section 3.1.
The amortization method is a loan repayment scheme and decomposition of
the payments into interest and principal pa

Class Notes for Brovermans Mathematics for
Investment and Credit, 6th ed.
CHAPTER 1
Notes prepared by M. Hlynka, Department of Mathematics & Statistics,
University of Windsor, Windsor, Ontario, Canada N9B 3P4
hlynka@uwindsor.ca
The 6th, 5th, 4th and 3rd e