Ms Margaret Atkinson. 617-160 Scientific Programming and Statistics, 617-101 Mathematics 1A. First semester Three 1-hour lectures and a one-hour tutorial. On completion of the subject, students will be able to:

• calculate the present value and the accumulated value of a stream of equal or unequal payments using specified rates of interest;
• show how interest rates or discount rates may be expressed in terms of different time periods;
• analyse compound interest problems and solve an equation of value for the implied rate of interest;
• show how discounted cash flow techniques can be used in project appraisal, with an allowance for taxation;
• show an understanding of simple stochastic interest rate models; and
• evaluate the liabilities under a capital redemption contract or annuity certain, in terms of emerging costs and in terms of present values, for the purposes of product pricing and for the purposes of reserving.

Valuation of annuities certain; loans repayable by instalments of principal and interest; valuation of financial securities using Makeham's formula; the effect of income and capital gains taxes; discounted cash flow; the determination of yield; methods used to assess alternative investments; reinvestment rate models. A 3-hour final examination (85%)and two 1-hour examinations during the semester (15 per cent). McCutcheon J J and Scott W An Introduction to the Mathematics of Finance Heinemann