Proposed Course Outline - Theory Of Interest

PROPOSED COURSE OUTLINE Instructor: Arlan Rodrigo e-mail: [email protected] Course Number: Course Title: Course Credit: Course Requirements: Passing Grade: Consultation Hours: Main References:

Math 45 Theory of Interest 3 3 Long Exams = 2/3 of Final Grade 1 Final Exam = 1/3 of Final Grade Attendance, Participation, Quizzes, Homework (Bonus points for Exams) 60% By appointment (send me an e-mail) The Theory of Interest 2nd edition (by Stephen Kellison) ACTEX Study Manual Course 2 Society of Actuaries

Course Objectives: At the end of the course, the student is expected to know the basic concepts relating to the Theory of Interest and apply them to solve real-world problems in finance, accounting, and business. In particular, the student is expected to know the following: • • • • • • • •

Simple Interest and Compound Interest Measures of interest and discount Accumulation and Amount Functions, Present value and Future value Annuities and Perpetuities Discounted cash flow analysis, uniqueness of yield rate, reinvestment rates, Time-weighted rates of interest Amortization and Sinking Fund Methods Bonds and Stocks, determining the Prices of Premium and Discount Bonds Bond Yield Rates and other types of Bonds

Exams: There will be 3 written Long Exams with a cumulative weight of 2/3 of the Final Grade. Aside from this, a Final Exam will be given at the end of the semester and this will make up 1/3 of the Final Grade. The passing grade at the end of the semester is 60%. Standard college rules will be used in determining the Final Grade to be marked in the grading sheet. Exemption from the Final Exam: If the student has obtained an average of 80% or higher for the 3 Long Exams, he/she can opt not to take the Final Exam. If he/she does so, then the Final Grade will be the average for the 3 Long Exams. Attendance, Participation, Quizzes, Homework: Extra Bonus points or percentage points will be given to students who have a good attendance. Points Earned from quizzes and homework also have their corresponding merit in the Examinations. Please refer to the table at the end for more information.

Class Policy: 1. If a student is late for more than 15 minutes for a particular class period, then he will be marked absent for that period. 2. There will be no make-up for missed quizzes and unsubmitted homework or homework submitted past the deadline. 3. If a student misses a Long Exam for a valid reason (requires documentation), then he/she must take the Final Exam and the grade for the missed Long Exam will be the grade of the Final Exam. If a student misses a second Long Exam, then it is automatically ZERO regardless of the reason. A student who misses an exam for an invalid reason will have a grade of ZERO for that exam. 4. Cheating, in any form, including copying homework will not be tolerated. COURSE OUTLINE Meeting No.

Topic

Reference/s

1

Self-Introduction by the teacher and the students, discussion of class policies, Overview of the subject

Wikipedia / other external sources

2

The Accumulation Function and the Amount Function, The Effective Rate of Interest, Simple Interest and Compound Interest Present Value, The Effective Rate of Discount, Nominal Rate of Interest and Discount convertible mthly Forces of Interest and Discount, Varying Interest Obtaining Numerical Results, Determining Time Periods, The Basic Problem, Equations of Value Unknown Time, Unknown Rate of Interest, Practical Examples Annuity-Immediate, Annuity-Due, Annuity Values on Any Date Perpetuities Unknown Rate of Interest, Varying Rate of Interest EXERCISES

Kellison ( Ch. 1.2 – 1.5 )

Reading assignment YES

Kellison ( Ch. 1.6 – 1.8 )

YES

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Kellison ( Ch. 1.9 – 1.10 ) Kellison ( Ch. 2.2 – 2.5 )

Quiz

Homework

YES YES

Kellison ( Ch. 2.6 – 2.8 )

YES

Kellison ( Ch. 3.2 – 3.4 )

YES

Kellison ( Ch. 3.5 ) Kellison ( Ch. 3.8 – 3.9 )

YES

YES YES

YES

EXAM 1 Annuities payable at a different frequency than interest is convertible, Analysis of Annuities payable LESS frequently than interest is convertible Analysis of Annuities payable MORE frequently than interest is convertible Continuous Annuities, Basic Varying Annuities More General Varying Annuities Continuous Varying Annuities Discounted Cash Flow Analysis, Uniqueness of the Yield Rate Reinvestment Rates, Interest Measurement of a Fund Time-Weighted Rates of Interest EXERCISES

EXAM 2

Kellison ( Ch.4.2 – 4.3 ) Kellison ( Ch.4.4 ) Kellison ( Ch.4.5 – 4.6 ) Kellison ( Ch.4.7 ) Kellison ( Ch.4.8 ) Kellison ( Ch.5.2 – 5.3 ) Kellison ( Ch.5.4 – 5.5 ) Kellison ( Ch.5.6 )

YES YES YES YES YES YES YES YES YES

YES

Meeting No. 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Topic

Reference/s

Finding the Outstanding Loan, Amortization Schedules Amortization Schedules, Sinking Funds Differing Payment Periods and Interest Conversion Periods Varying Series of Payments Types of Securities, Price of a Bond Premium and Discount Pricing of a Bond Valuation Between Coupon Payment Dates Determination of Yield Rates Callable Bonds, Serial Bonds EXERCISES

Quiz

Homework

Kellison ( Ch.6.2 – 6.3 ) Kellison ( Ch.6.3 – 6.4 ) Kellison ( Ch.6.5 )

YES YES

Kellison ( Ch.6.6 ) Kellison ( Ch.7.2 – 7.3 ) Kellison ( Ch.7.4 ) Kellison ( Ch.7.5 ) Kellison ( Ch.7.6 ) Kellison ( Ch.7.7 – 7.8 )

YES YES YES YES YES YES YES

EXAM 3 Review For Final Exam ( Sample Exam to be given ) Review for Final Exam

FINAL EXAM BONUS POINTS !!! CRITERIA

Attendance

Per 5 classes attended : + 1% in Long Exam Complete Attendance : + 1% in Final Exam

Quizzes

Per 10 points earned : + 1% in Long Exam 90% and up for total : + 3% in Final Exam

Homework

Per 15 points earned : + 1% in Long Exam 95% and up for total : + 1% in Final Exam