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Section outline
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The aim of this unit is to introduce the fundamental concepts of financial mathematics, and how those concepts are applied in calculating present and accumulated values for various streams of cash flows.
It is designed to cover:
1. The key concept of the interest rates;
2. Understand the mathematics underlying the theory of interest rate, especially simple and compound interest rates.
Learning Outcomes:At the end of this unit, participants will be able to:
1. Understand the basics of financial mathematics pertaining to interest rates.;
2. Given any two of interest rate, present value, or future value, calculate the third based on simple or compound interest.;
3. Write the equation of value given a set of cash flows and an interest rate.
You will be engaged in different activities such as forum discussion, practical activities, and assignments as designed in different corresponding activities.-
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E-tivity 1.1 Chat
The aim of this e-tivity 1.1 is to provide essential knowledge of interest rates and calculate the cash flows involved.
From the teams of 3 students each proposed by your lecturers, do the following:
Read the following resources:
• “Lecture notes on financial mathematics”
Task:
1. Join his/her respective group discussion about 90 minutes
2. Make a brief presentable note to post in the discussion by:
(i) Key terms/verbs used in financial mathematics pertaining to the simple interest rate;
(ii)Describe the basic terms characterizing the interest rate.
3. Post your work in the discussion forums by Wednesday at 23h30.
4. Read what other students posted on your team and comment on at least three work of your team.
5. Send the final work to your e-moderator for assessment and send feedback by Friday at 23h00 in the week this unit is taught. -
Assignment(e-tivity 1.2)
This e-tivity 1.2 is designed as an assignment to be submitted helps well prepare you to understand the basics of the interest rate.
Read the following resources:
• “Deterministic Cash-Flows” available at http://www.columbia.edu/~mh2078/FoundationsFE/DeterministicCashFlows.pdf
• Lecture notes/slides
Task:
Find how long should be left $1000 to accumulate at 6% effective in order it will amount to twice the accumulated value of another $1000 deposited at the same time at 4% effective.
Send the file of your summary to e-moderator electronic mail(nhategekimana@ur.ac.rw) before the start of a new unit, exactly by Tuesday at 23h00 in the week this unit is taught. -
E-tivity 1.3 Forum
This e-tivity 1.3 helps well prepare you to understand the equations governing the cash flows for a given financial transaction.
Read the following resources:
• “Stephen G. Kellison (2009). The Theory of Interest, 3rd Edition. McGraw-Hill."
• Lecture notes
Task:
1. Read chapter 11, pages 1-39, and then
2. Let’s take an ideal investment of amount S that would accumulate cashflows at the nth period. Determine the sequence of the interest rate up to the last period.
3. What is the relationship between the present value and the future value of cash flows?
4. Post the file of your summary in the discussion board of this unit and wait for feedback from the e-Moderator. -
E-tivity10 Forum
Show your performance.
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Students mustMark as done
Match the following types of insurance products with their descriptions
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