Mathematics of Finance (2 cr)

Objectives (course unit)

This straightforward exercise based course provides the students with information and hands-on skills of selected fundamental parts of business mathematics.

The time value of money theory forms the foundation of the course. The predetermined main objectives for the students are to learn to apply the theory, solve problems and communicate the problems, their solutions as well as the achieved new understanding effectively.

After completing the course, the students will be able to:
• Identify opportunities for mathematical problem solving involved with the time value of money concept and theory.
• Find out the present and future values of invested money in different cases of compounding.
• Compare interest rates, returns on investments and cash flows utilizing the effective rate, present value and net present value concepts.
• Find out the present and future value as well as the periodic payment of an ordinary annuity.
• Prepare simple loan amortization schedules and calculate amortizations in MS Excel.
• Communicate mathematical problems, their solutions and interpretations briefly and informatively.

Content (course unit)

• What are the simple interest, growth percentage and sum of sequence all about?
• How are various compound interest and effective rate calculations solved?
• How are the present value and net present value (NPV) determined?
• What different types of annuities are there, and how are the periodic payment and the present and future values of an ordinary annuity determined?
• How can loan amortization schedules be prepared and loans become amortized?

Assessment criteria, satisfactory (1-2) (course unit)

The student is able to determine and use the concepts and methods of mathematics of finance. The student can solve basic level compound interest and present value problems. The student can take responsibility for any of his individual duties in routine mathematics of finance activities and is able to make some contribution in a group.

Assessment criteria, good (3-4) (course unit)

The student has the competence of explaining the concepts and methods of mathematics of finance and applying them in cases of reasonable difficulty. The student works actively and cooperates responsibly and constructively both individually and in a group. The student can solve compound interest, present value and annuity exercises and problems as well as interpret the answers for the benefit of business projects and activities. His/her courses of action are well justified.

Assessment criteria, excellent (5) (course unit)

The student can analyse mathematics of business exercises and work on related business cases
individually. The student is able to choose approaches and construct equations and formulas applying the assigned mathematics of finance theory skillfully. The student can produce analyses and correct solutions to compound interest, present value and annuity problems as well as interpret the answers profoundly for the benefit of business projects and activities. The student’s courses of action are very well justified, and he/she makes noticeable contribution to group work, cooperating responsibly, constructively and flexibly in a committed manner.

Location and time

31 Oct 11.15 C2-09
07 Nov 11.15 B4-20 - different classroom!
14 Nov 11.15 C2-09
21 Nov 11.15 C2-09

No class on Week 48 (students have time for the exam preparation).

05 Dec 11.15 G00-10 - mock exam (it serves as practice for the future exam)
12 Dec 11.15 C2-02 - exam

Exam schedules

The course includes a small open-book exam.
Potential retakes of the course will be performed by presenting and/or discussing the student's course exercise portfolios together with the instructor of the course. Portfolio discussions will be there no earlier than one month, at least, after the end of the course.

Assessment methods and criteria

The overall course performance is evaluated and graded using:
- a 20% weight on performing exercises acceptably during the course
- a 20% weight on student's other overall activity, incl. sharing solutions and other mathematics of finance information with fellow students, as well as contribution to the common learning sessions and discussions in the classroom, and on Tabula
- a 60% weight on the exam.

Assessment scale

0-5

Teaching methods

Instructor's brief introductions of the themes, theories, methods and formulas. Mathematical problem solving both under supervision in the class and individually and/or as pairwork between the classes. Model answers and discussion based on them finish each main theme of the course.

Learning materials

Access to and hints about necessary theory, exercises and other learning material are there in the course Tabula.

Student workload

Student's workload is max. 52-54h, in Oct - Dec 2019.

Content scheduling

(See the Contents and Objectives of the Course categories.)

Further information

Mr Adrian Kovacs
adrian.kovacs@tuni.fi

Assessment criteria - fail (0) (Not in use, Look at the Assessment criteria above)

Student has not solved all the required exercises. Or the student has many incorrect answers and/or is not able to show his/her understanding of the required course contents.
Or, student has not passed the exam.

Assessment criteria - satisfactory (1-2) (Not in use, Look at the Assessment criteria above)

Student has many incorrect answers as end results of his/her calculations. His/her solutions, anyway, mostly prove that he/she has, anyway, mostly understood the theories, methods and practices of the course contents.
The student has passed the exam.

Assessment criteria - good (3-4) (Not in use, Look at the Assessment criteria above)

Student has mostly correct answers as end results of his/her calculations. His/her solutions prove that he/she has also understood the theories, methods and practices of the course contents. Student's proven skills of also communicating and sharing his/her knowledge of the course contents during the course help in achieving the very good grade of 4, instead of the good 3.
The student has passed the exam with, at least, a strong satisfactory performance.

Assessment criteria - excellent (5) (Not in use, Look at the Assessment criteria above)

Student has in practice only correct answers as end results of his/her calculations. His/her solutions prove that he/she has also understood the theories, methods and practices of the course contents very well. Student's highly desired habit of also communicating and sharing his/her knowledge of the course contents together with the other course participants is an additional big plus in his/her also otherwise excellent performance.
The student has passed the exam with, at least, a very good grade of 4.