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2008/9 Module Catalogue
 Module Code: MAT2008 Module Title: THEORY OF FINANCE
Module Provider: Mathematics Short Name: MS220 Previous Short Name: MS220
Level: HE2 Module Co-ordinator: ZELIK S Dr (Maths)
Number of credits: 15 Number of ECTS credits: 7.5
Module Availability
Assessment Pattern

Unit(s) of Assessment
Weighting Towards Module Mark( %)
25 %
Exam (2 hours unseen)

Module Overview
This module introduces students to the theory of finance, including mortgage payments, assessment of simple cash flow models and simple financial derivatives. 


Module Aims

This module introduces the application of mathematics to finance. Compound interest, discounting, cash flows, loans and fixed interest securities are discussed, and a range of mathematical techniques for their analysis is introduced.

Learning Outcomes
By the end of this module, students should: 
    * Understand compound interest and discounting
    * Know how to value and accumulate cash flows
    * Know the derivation of formulae for standardised cash flows
    * Be able to derive and solve equations of value
    * Understand how a loan may be repaid by regular instalments of capital interest
    * Understand measurement of investment performance
    * Be able to value fixed interest securities (such as bonds) and determine their yield

    * Show an understanding of simple stochastic interest rate models

Module Content
The contents of this module will include: 
  • interest rates, inflation, discounted cash flows, assessment of
  • investment projects, analysis of loan schedules, fixed interest securities (bonds),
  • investment portfolios and immunisation, stochastic interest rate models.
Methods of Teaching/Learning
Teaching is by lectures, tutorials and example classes. Learning takes place through lectures, exercises (example sheets), preparation for tests and background reading. 
There will be 3 contact hours for 10 weeks consisting of lectures, tutorials and example classes .
Selected Texts/Journals
- J.J. McCutcheon and W.F. Scott, An Introduction to the Mathematics of Finance 

- D. G. Luenberger, Investment Science

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