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ACSC12-201: Financial Mathematics January 2018 [Standard]

General information

This subject provides a foundation in the mathematics that underpins financial calculations. The theory of financial mathematics is supplemented with applications of that theory to real world problems. These practical applications include valuing a series of cashflows (annuities), valuing bonds with tax implications, calculating loan repayment schedules, valuing forward contracts, modelling investment returns, selecting investment projects and estimating the sensitivity of a series of cashflows to interest rate changes.

Changes due to Commonwealth Games: The University has marginally altered the timetable for the January semester of 2018 (181) to ensure that students have the opportunity to engage with the Commonwealth Games to be held in April 2018. The modified timetable has been designed to not impact on overall subject or program learning outcomes. Some subjects may be delivered in a slightly modified mode to accommodate the change. Specific arrangements will be included on the iLearn site for each subject. All changes to the class schedule have the full approval of University and Academic Unit administration and will not adversely affect student learning or assessment.

Details

Academic unit:Bond Business School
Subject code:ACSC12-201
Subject title:Financial Mathematics
Subject level:Undergraduate
Semester/Year:January 2018
Credit points:10

Delivery & attendance

Timetable: https://bond.edu.au/timetable
Delivery mode:

Standard

Workload items:
  • Seminar: x12 (Total hours: 24) - Seminar 1
  • Seminar: x12 (Total hours: 24) - Seminar 2
  • Personal Study Hours: x12 (Total hours: 72) - Recommended study time & reviewing materials

Resources

Prescribed resources: None
[email protected] & Email:[email protected] is the online learning environment at Bond University and is used to provide access to subject materials, lecture recordings and detailed subject information regarding the subject curriculum, assessment and timing. Both iLearn and the Student Email facility are used to provide important subject notifications. Additionally, official correspondence from the University will be forwarded to students’ Bond email account and must be monitored by the student.

To access these services, log on to the Student Portal from the Bond University website as www.bond.edu.au

Enrolment requirements

Requisites: ?

Nil

Restrictions: ?

Nil

Assurance of learning

Assurance of Learning means that universities take responsibility for creating, monitoring and updating curriculum, teaching and assessment so that students graduate with the knowledge, skills and attributes they need for employability and/or further study.

At Bond University, we carefully develop subject and program outcomes to ensure that student learning in each subject contributes to the whole student experience. Students are encouraged to carefully read and consider subject and program outcomes as combined elements.

Program Learning Outcomes (PLOs)

Program Learning Outcomes provide a broad and measurable set of standards that incorporate a range of knowledge and skills that will be achieved on completion of the program. If you are undertaking this subject as part of a degree program, you should refer to the relevant degree program outcomes and graduate attributes as they relate to this subject.

Find your program

Subject Learning Outcomes (SLOs)

On successful completion of this subject the learner will be able to:
  1. Describe the time value of money concept and apply it in different situations; understand the difference between real and money interest rates.
  2. Define and analyse basic compound interest problems.
  3. Calculate present and future values for a wide variety of cash flow streams, using effective and nominal interest rates.
  4. Calculate a schedule of loan repayments and identify capital and interest components.
  5. Use discounted cash flow techniques to perform project appraisal and capital budgeting.
  6. Understand the investment and risk characteristics of a variety of investment assets
  7. Demonstrate an understanding of the term structure of interest rates
  8. Calculate the delivery price and the arbitrage-free value of a forward contract. Understand and apply probability rules and concepts relating to discrete and continuous random variables
  9. Demonstrate an understanding of simple stochastic models for investment returns

Assessment

Assessment details

TypeTask%Timing*Outcomes assessed
Essay Assignment 1 5% Week 2 1, 2, 3.
Essay Assignment 2 15% Week 4 4, 5.
Paper-based Examination (Closed) Mid-semester Examination (Week 6) 40% Mid-Semester Examination Period 1, 2, 3, 4, 5.
Paper-based Examination (Closed) Final Examination 40% Final Examination Period 1, 2, 3, 4, 5, 6, 7, 8, 9.
  • * Assessment timing is indicative of the week that the assessment is due or begins (where conducted over multiple weeks), and is based on the standard University academic calendar
  • C = Students must reach a level of competency to successfully complete this assessment.

Assessment criteria

High Distinction 85-100 Outstanding or exemplary performance in the following areas: interpretative ability; intellectual initiative in response to questions; mastery of the skills required by the subject, general levels of knowledge and analytic ability or clear thinking.
Distinction 75-84 Usually awarded to students whose performance goes well beyond the minimum requirements set for tasks required in assessment, and who perform well in most of the above areas.
Credit 65-74 Usually awarded to students whose performance is considered to go beyond the minimum requirements for work set for assessment. Assessable work is typically characterised by a strong performance in some of the capacities listed above.
Pass 50-64 Usually awarded to students whose performance meets the requirements set for work provided for assessment.
Fail 0-49 Usually awarded to students whose performance is not considered to meet the minimum requirements set for particular tasks. The fail grade may be a result of insufficient preparation, of inattention to assignment guidelines or lack of academic ability. A frequent cause of failure is lack of attention to subject or assignment guidelines.

Quality assurance

For the purposes of quality assurance, Bond University conducts an evaluation process to measure and document student assessment as evidence of the extent to which program and subject learning outcomes are achieved. Some examples of student work will be retained for potential research and quality auditing purposes only. Any student work used will be treated confidentially and no student grades will be affected.

Study information

Submission procedures

Students must check the [email protected] subject site for detailed assessment information and submission procedures.

Policy on late submission and extensions

A late penalty will be applied to all overdue assessment tasks unless an extension is granted by the subject coordinator. The standard penalty will be 10% of marks awarded to that assessment per day late with no assessment to be accepted seven days after the due date. Where a student is granted an extension, the penalty of 10% per day late starts from the new due date.

Policy on plagiarism

University’s Academic Integrity Policy defines plagiarism as the act of misrepresenting as one’s own original work: another’s ideas, interpretations, words, or creative works; and/or one’s own previous ideas, interpretations, words, or creative work without acknowledging that it was used previously (i.e., self-plagiarism). The University considers the act of plagiarising to be a breach of the Student Conduct Code and, therefore, subject to the Discipline Regulations which provide for a range of penalties including the reduction of marks or grades, fines and suspension from the University.

Bond University utilises Originality Reporting software to inform academic integrity.

Feedback on assessment

Feedback on assessment will be provided to students within two weeks of the assessment submission due date, as per the Assessment Policy.

Disability support

If you have a disability, illness, injury or health condition that impacts your capacity to complete studies, exams or assessment tasks, it is important you let us know your special requirements, early in the semester. Students will need to make an application for support and submit it with recent, comprehensive documentation at an appointment with a Disability Officer. Students with a disability are encouraged to contact the Disability Office at the earliest possible time, to meet staff and learn about the services available to meet your specific needs. Please note that late notification or failure to disclose your disability can be to your disadvantage as the University cannot guarantee support under such circumstances.

Additional subject information

Formulae and Tables for Actuarial Examinations - available from the bookshop or http://www.actuaries.org.uk/research-and-resources/eshop

Subject curriculum

Different cash flow scenarios, the time value of money, simple and compound interest, accumulation and the principle of consistency, present values.

The relationship between nominal and effectives rates on interest and discount. Calculation of present values and accumulated values. The force of interest. Real rates.

Valuation of periodic payments. Immediate annuities, Annuities due, deferred annuities, annuities payable more frequently than annually, continuously payable annuities, perpetuities.

Increasing and decreasing annuities, continuously payable variable annuities, annuities with inflation.

Constructing and solving equations of value for price, payment, time or interest rate.

Loan repayments, loan schedule, calculating outstanding balance, loan with payments made m times per year.

Covers weeks 1-5

Accumulated profit, net present value, internal rate of return. Discounted payback period. Measuring investment performance, money-weighted rate of return, time-weighted rate of return.

Investment and risk characteristics of different types of asset Types of fixed interest securities. Calculating Bond prices and yields, with and without income tax and capital gains tax. Effect of term to redemption on yield. Bonds with optional redemption dates, bonds with payments linked to inflation

Par yield and yield to maturity, spot rates, forward rates. Duration, convexity and immunization.

Introduction to arbitrage, calculating the price of a forward contract.

Approved on: Nov 17, 2017. Edition: 1.2