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.
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Details
Academic unit: Bond Business School Subject code: ACSC71-201 Subject title: Financial Mathematics Subject level: Postgraduate Semester/Year: January 2018 Credit points: 10.000 -
Delivery & attendance
Timetable: https://bond.edu.au/timetable Delivery mode: Standard Workload items: - Personal Study Hours: x12 (Total hours: 72) - Recommended study time & reviewing materials
- Seminar: x12 (Total hours: 24) - Seminar 1
- Seminar: x12 (Total hours: 24) - Seminar 2
Attendance and learning activities: -
Resources
Prescribed resources: No Prescribed resources.
After enrolment, students can check the Books and Tools area in iLearn for the full Resource List.iLearn@Bond & Email: iLearn@Bond 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
| Academic unit: | Bond Business School |
|---|---|
| Subject code: | ACSC71-201 |
| Subject title: | Financial Mathematics |
| Subject level: | Postgraduate |
| Semester/Year: | January 2018 |
| Credit points: | 10.000 |
| Timetable: | https://bond.edu.au/timetable |
|---|---|
| Delivery mode: | Standard |
| Workload items: |
|
| Attendance and learning activities: |
| Prescribed resources: | No Prescribed resources. After enrolment, students can check the Books and Tools area in iLearn for the full Resource List. |
|---|---|
| iLearn@Bond & Email: | iLearn@Bond 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 |
|---|---|
| Assumed knowledge: |
Assumed knowledge is the minimum level of knowledge of a subject area that students are assumed to have acquired through previous study. It is the responsibility of students to ensure they meet the assumed knowledge expectations of the subject. Students who do not possess this prior knowledge are strongly recommended against enrolling and do so at their own risk. No concessions will be made for students’ lack of prior knowledge. No Prior Knowledge Required |
| 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.
Subject Learning Outcomes (SLOs)
On successful completion of this subject the learner will be able to:
- Describe the time value of money concept and apply it in different situations; understand the difference between real and money interest rates.
- Define and analyse basic compound interest problems.
- Calculate present and future values for a wide variety of cash flow streams, using effective and nominal interest rates.
- Calculate a schedule of loan repayments and identify capital and interest components
- Use discounted cash flow techniques to perform project appraisal and capital budgeting.
- Understand the investment and risk characteristics of a variety of investment assets
- Demonstrate an understanding of the term structure of interest rates.
- 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.
- Demonstrate an understanding of simple stochastic models for investment returns
Generative Artificial Intelligence in Assessment
The University acknowledges that Generative Artificial Intelligence (Gen-AI) tools are an important facet of contemporary life. Their use in assessment is considered in line with students’ development of the skills and knowledge which demonstrate learning outcomes and underpin study and career success. Instructions on the use of Gen-AI are given for each assessment task; it is your responsibility to adhere to these instructions.
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Assessment details
Type Task % Timing* Outcomes assessed Paper-based Examination (Closed) Final Examination 40% Final Examination Period 1,2,3,4,5,6,7,8,9 Paper-based Examination (Closed) Mid-semester Examination (Week 6) 40% Mid-Semester Examination Period 1,2,3,4,5 Essay Assignment 1 5% Week 2 1,2,3 Essay Assignment 2 15% Week 4 4,5 - * 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.
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Assessment criteria
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.
| Type | Task | % | Timing* | Outcomes assessed |
|---|---|---|---|---|
| Paper-based Examination (Closed) | Final Examination | 40% | Final Examination Period | 1,2,3,4,5,6,7,8,9 |
| Paper-based Examination (Closed) | Mid-semester Examination (Week 6) | 40% | Mid-Semester Examination Period | 1,2,3,4,5 |
| Essay | Assignment 1 | 5% | Week 2 | 1,2,3 |
| Essay | Assignment 2 | 15% | Week 4 | 4,5 |
- * 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 iLearn@Bond 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.
Academic Integrity
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.
Accessibility and Inclusion 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
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Cash Flow Models and Introduction to Interest rates
Different cash flow scenarios, the time value of money, simple and compound interest, accumulation and the principle of consistency, present values.
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Nominal and effective rates
The relationship between nominal and effectives rates on interest and discount. Calculation of present values and accumulated values. The force of interest. Real rates.
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Annuities
Valuation of periodic payments. Immediate annuities, Annuities due, deferred annuities, annuities payable more frequently than annually, continuously payable annuities, perpetuities.
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Annuities continued
Increasing and decreasing annuities, continuously payable variable annuities, annuities with inflation.
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Equations of Value
Constructing and solving equations of value for price, payment, time or interest rate.
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Loans
Loan repayments, loan schedule, calculating outstanding balance, loan with payments made m times per year.
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Midterm Exam Week 6
Covers weeks 1-5.
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Project Appraisal and Capital budgeting
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.
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Fixed Interest Securities
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.
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The Yield Curve and the Term Structure of Interest rate
yield and yield to maturity, spot rates, forward rates. Duration, convexity and immunization.
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Arbitrage and Forward Contracts,
Introduction to arbitrage, calculating the price of a forward contract.
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Revision
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