from 181 to 7.38 - 6.61 - .0 - 8.20 - - - - 6.89 - - - 7.

23
360 days 0

Loans longer
8.23 10.00 7.24 12.00 - - - 7.90 - - - 7.31 - - - 8.08
than 360 days

Medium 10 .9 10.
13.05 17.71 10.16 11.78 9.39 5.41 12.87 21.00 - 8.64 - - - 11.10
Companies 5 86

10 .5 10.
Discounts 12.49 21.37 9.86 9.41 9.36 6.43 9.84 - - 8.50 - - - 10.43
3 86

Loans 13
9.3
up to 30 13.10 12.59 9.72 15.00 .2 8.61 6.75 14.21 20.33 - - - - - 10.73
2
days 7
Loans 11
10.
from 31 to 90 13.52 12.20 10.98 10.79 .9 7.56 5.11 10.46 22.68 - - - - - 10.16
61
days 4
Loans 11
11.
from 91 to 180 13.44 13.18 11.61 10.68 .9 10.15 7.78 9.48 - - - - - - 12.19
87
days 4
Loans 10
13.
from 181 to 13.51 - 8.88 12.83 .1 8.19 8.25 12.14 22.95 - 8.66 - - - 11.58
33
360 days 1
Loans to 11
more than 360 12.62 14.07 11.31 18.56 .4 15.94 - 19.61 20.54 12. - - - - - 14.00
3 00
days

Small 14 .2 10.
23.29 27.97 16.86 25.08 25.05 8.25 19.30 25.87 - - - - - 23.32
companies 3 30

14 .4 10.
Discounts 26.41 26.09 13.83 12.96 13.94 - 11.38 - - - - - - 15.94
4 23

Loans up to 30 10.
24.84 14.00 13.28 38.00 - 20.20 - 11.82 23.95 - - - - - 23.33
days 46

Loans 10
10.
from 31 to 90 22.56 26.80 19.72 27.27 .1 19.95 - 20.37 31.33 - - - - - 21.56
48
days 9
Loans 18
15.
from 91 to 180 22.73 34.00 23.64 25.72 .7 21.03 8.25 24.50 29.17 - - - - - 23.34
50
days 6
Loans 16
from 181 to 23.20 29.67 8.35 26.01 .2 24.62 - 20.42 28.09 - - - - - - 25.55
360 days 8
Loans to 17
 Course Planning
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Financial mathematics
Author:
Fourth edition
Publisher: McGraw Hill

Financial mathematics
Author: Alfredo Díaz Mata / Victor M. Aguilera Gomez
Fourth edition
Publisher: McGraw Hill

Financial Mathematics Problem

Author: Abraham Hernández Hernández / Abraham
Hernández
Villalobos / Alejandro Hernández Suarez
Publisher: Thomson
 MATH
FINANCIAL
Financial Mathematics or Engineering
Economic aim
fundamental is the study and analysis of all
those operations and approaches in
which involve the magnitudes of:
Capital, Interest, Time and Rate.
 MATH
FINANCIAL
We can associate Financial Mathematics
with two symbols, that is, the one with numbers
(#)
and that of the suns (S/.), well, when we talk
of Mathematics we automatically do
relationship with numbers; and when we talk
In Finance we relate it to the sun sign;
hence the association.
RATIONALE
FINANCIAL
 THE FINANCES
It is the discipline that is responsible for the study of theory and
its application in time and space, on obtaining resources, their
allocation, distribution and minimization of risk in organizations
in order to achieve the objectives that satisfy their requirements.
.
Bernard Shaw said that "we have no more right to consume
happiness without producing it, than to consume wealth without
producing it", which is why it is important to make it clear that
the purpose of this discipline is to serve as support, provide
information and coordination, and be a facilitator of activities
carried out by other areas of the organization, production (of
goods and/or services), marketing (of goods and/or services).
 / \ (% I rki / k "/ A (
_ -v II lkIAlv
Philosophically we think that money is not important on its own, but as
a means or instrument that helps us satisfy some of the needs that
human beings have, such as physiological, security, status, etc.

Financial Activity

Public sector Private sector

Determination of public needs Estimation of income and investments
Public expenditure as a cause of public Financing
income Maximization of the value of invested
public income
Maximization of the comprehensive capital
Distribution of dividends
well-being of the population
 STORIES OF FINANCE
We can differentiate three periods of finances:
The descriptive view of business finance until the Second
World War
From the mid-1940s to the foundation of modern
business finance theory
Business finance expansion and deepening of finance to
the present day.
 DESCRIPTIVE VISION OF THE
FINANCE
The origin of money as a unit of account or value dates back to one
of the quotes from the Bible, cave paintings and hieroglyphs.
BC
Existence of elements that favored commercial exchanges and the
collection of taxes, such as the code of Hammurabi, also appear a
type of “options” described by Aristotle.
Years 1500 – 1900
In the 15th century, international banks were born with the power of
the large Florentine banks (Italy).
In 1590, companies were born with the capital distributed among
several investors who were called investors in England with the
registration of East India Compani.
 DESCRIPTIVE VISION OF THE
FINANCE
In 1650 “futures” were born (protection against fluctuating market
prices).
In 1792 the New York Stock Exchange was born.
At the beginning of the 18th century, the concern of finance was how
to obtain funds in the most economical way possible, neglecting
short-term financing.
In the 19th century, economic theory advanced considerably as an
academic discipline, with the so-called classical model emerging from
the hand of Adam Smith. Until the beginning of the 19th century,
financial managers dedicated themselves to keeping accounting
books or controlling bookkeeping, their main task being to seek
financing when was necessary.
 DESCRIPTIVE VISION OF THE
FINANCE
Years 1900-1930
Technological innovations and new industries caused the need for more funds.
In 1929 the economy was immersed in an international crisis, the New York stock
market crashed and North American and British groups clashed (excess loans), as a
result of which companies went bankrupt and others were liquidated.
It appears to be of interest due to the company's financial concern and state
interventionism.
After the Second World War in the mid-1950s, planning and control gained
importance by reorganizing the organic structure of companies.
Profitability objectives prevail; growth and international diversification. The theory of
risk is deeply analyzed.
 DESCRIPTIVE VISION OF THE
FINANCE
In the 1950s after the Second World War, financial management
was seen as part of total management. Importance is given to the
capital budget; New methods and techniques appear to select
investment projects, based fundamentally on the present value of
fund flows.
In the 1960s, two types of risk, Diversifiable and Systematic,
occurred in the market.
From the 1970s to the present day, interest in the study of finance
grew, with new lines of research emerging such as:
The theory of option pricing.
The theory of valuation by arbitrage.
Agency theory.
 DESCRIPTIVE VISION OF THE
FINANCE
During the 1980s, great attention was given to market
imperfections and their effect on value. The ideas of total quality
and financial engineering were born, and new forms of operations
with securities and new types of contracts were implemented.
Advances in the theory of options, futures and swaps, etc.

In the 90s, SMEs and the globalization of finance appeared,

leading to the increasing integration of global financial markets.
 DAf FINANCIAL ANOINTING

H The current financial function pays special attention to the cost of

capital corresponding to the investment project.
H Level of debt that best suits the company.

H Liquidity and treasury management

H Long and medium term financial planning
H Financial control.
H Analytical techniques for making internal decisions in the field of
investment and financing of the company.
 AS FINANCIAL DECISIONS
Financial Theory - Financial Policy - Financial Objective.
Business decisions involve an increase or decrease in the use of
company resources and respond to the three questions posed:
H What should be the size of the company and its growth rate.
H What kind of assets should the company have.
H What should be the composition of your liabilities.
The company must be faced with three categories of financial
decisions:
H Volume and destination of your investments.
H Volume of dividends to be distributed.
H Volume and origin of the resources to be used.
 MANAGEMENT ABILITIES
FINANCIAL
The functions of financial administration in an organization acquire
great importance because it is the one who administers (planning,
management and control), the resource that acts as a unit of
account, measure of value, coordinator and facilitator of the
activities of the other areas ( production, marketing, management).
 SUPPLIERS

CUSTOME COMMUNITY
RS

UNIONS COMPANY COMPETITORS

BANKS GOVERNM
ENT

SHAREHOLDE
RS
MANAGEMENT ACTIVITIES
FINANCIAL
a
b
C
D
e
f

SHOPP
t Sector ING
ob organization
Supplier
detection of internal
c Supervision
d logistics
Stock control

AUDIT
a Internal
b Maintain relations with external
 k FINANCIAL MANAGEMENT
ACTIVITIES
ECONOMIC-FINANCIAL PLANNING
Coordination of strategic planning of the organization
Budget coordination
Investment evaluation
Analysis of micro and macroeconomic information
Market monitoring and anticipation
Preparation of the command or control board
 ANCERO
Traditional objective of companies: Profit maximization.
Objective set by financial management: Maximization of the
market value of the company from the point of view of its owners
(shareholders in the case of a SA).
This objective can be criticized since not all companies are listed
on the stock market, however it is a scheme that allows
demonstrating the effectiveness because it can have a simple,
unique operational demonstration with quantifiable objectives.
This may occur because decision-making in a company is made
not by the owners but by the managers, who tend to satisfy the
interests of the shareholders by maximizing the price of the
shares.
 AND MEANS ACHIEVING PERFORMANCES
GG MEDIUM AND LONG TERM
LISTINGS
In the medium term, you can choose to
maximize profits with low-quality products, a consequence of the
use of low-quality inputs, which will result in losing customers in
the long term and reducing productivity.

Long-term performance will depend on the planning carried out

at the beginning of a project, and it is the responsibility of the
company's managers to adopt a systemic attitude and a
methodology of continuous improvement.
 ADMINISTRATION BJECTIVES
COMPANY FINANCIAL
•Provide the necessary tools to propose solutions to general or
specific business finance problems.
• Make known the analysis, use and development of different
financial tools and strategies.
•Develop the ability to identify, analyze and provide solutions to
different financial problems.
Guide the design of strategies.
Generate skills that allow you to foresee trends and negative
scenarios.
Correct analysis of financial information.
Provide tools to senior management to lead business
development and decision-making processes.
 NANCIERO
The main objective of financial management is the
maximization of the value of the company's shares.

The flow begins when securities are issued to obtain money (line 1 in the figure). The money is
used to purchase real assets used in the company's operations (line 2). (You can imagine the
company's operations as a set of real assets.) Later, if the company is doing well, the real assets
generate cash flows greater than the repayment of the initial investment (line 3). Finally, the
money is reinvested (line 4) or returned to the investors who acquired the initial issue of
securities (line 4b). Of course the choice between lines 4a and 4b is not completely free. For
example, if a bank lends money to stage 1, it must recover its money from the company in stage
1, it must recover its money plus interest in stage 4b.
 BASIC ASSIGNMENTS FOR THE
FINANCIAL DIRECTOR
What should the company invest in?
How to get the funds for these investments?
INVESTMENT DECISIONS FINANCING DECISIONS
How much to invest and in what assets to How to get the necessary funds?
invest?
Project analysis (estimation of costs, risks and
ID of sources of
future options.
financing (own funds, shares and debt)
Treasury (calculation and placement of funds) Calculation of financing costs.

Acquisition of other companies (calculation of Estimation of contribution of financing

costs and risks) methods to the company's risk.

Assessment of others advantages

Independent project expenses (fixed capital and and
administrative) disadvantages (impact on company control,
market signals, etc.)
 QUESTIONING
What does financial planning for an individual consist of?
 COMPANY MEASURES
• Maximization of profits.
• Maximization of net worth.
• Maximize the net present value of the
company – Value of a company.
• Maximization of value creation.
Social responsability.
 SOCIAL RESPONSIBILITY OF COMPANIES
corporate social responsibility refers to aspects related to
employees and environmental aspects; the same as with local
communities, business partners, suppliers, buyers, human rights
and global ecological problems. Its practice requires the political
will of the different nations as well as the dialogue and
negotiation of the different shareholders.
 JjJerés
Interest is the payment for the use of other people's money, it is
denoted by I.
Another way to conceptualize interest or yield is “the change in the
value of money over time.”

The money that capital produces by lending or investing it for

others to use without being their property. For example, if you get
a bank loan, you will be using money that is not yours, but the
bank's. Capital is also invested in a bank, so the bank will pay you
interest for using your money.

The price of money, like any other good, is the payment for the
acquisition of goods and services in credit operations, etc.
Numerically speaking, interest is the difference between two
amounts: the principal and the amount.
 jj]'c]'Gj)

If, as time passes, an amount of money P increases to another S,

then the interest is I = SP, where P is the capital and S the capital
amount.
Depending on the case and circumstances, capital is also called
principal, present value or current value. Likewise, some
synonyms for the capital amount are future value, accumulated
value or simply amount.
 The number of days or other units of time that pass
between the initial and final dates in a financial transaction
called term or time.

CAPITAL

Initial date Terminal Date

Term
From this point of view, the amount is always greater
than the
capital and is located in a future time with respect to
capital.
The ratio between interest I and capital P per unit of time is
called the interest rate, therefore:

i = I/P

Thanks to the economic stability that is currently

live in the country, interest rates are relatively
lows, much lower than in previous times. No
However, despite the above, these rates are
variable
and are determined by adding percentage points to
the
following reference rates:
- The leading rate of performance.
H The average percentage cost of acquisition.
S The equilibrium interbank interest rates.

These vary with different periods and their new value is

published on the BCRP website.
If the interest rate is multiplied by 100, the interest rate is
obtained as a percentage. In this way, the interest rate is the
value of a monetary unit over time. If it is in proportion it will be
the value of 100 monetary units over time.
When the interest rate is expressed as a percentage, it is called
the interest rate, and the corresponding value expressed in
decimals, the one used in operations, is called the interest rate,
but in practice it is the first one that is used. called interest rate.

http://www.sbs.gob.pe/app/stats/TasaDiaria7A.asp?FECHACONSULTA=02/08/2011
 Adriana invests $4000 and at the end of 1 year receives $4500
for your investment. The present value of capital is P = $4000, the amount is S
= $4500 and the interest is the difference of S and P:
I = 4500 – 4000
I = 500

The interest rate is i = 500/4000 = 0.125. The interest rate is, therefore
Therefore, 0.125 (100) = 12.5% per year and the term of 01 year.
 Jjjjerés Slnple

In previous slides it was said that the interest rate per unit
of time is i = I/P. If I is cleared by multiplying the two members
From the equation for P, the interests are obtained:
I = Pi
But if the term is not unity but any other value, say n
periods, then the interest will be:
I = Pni
That is, they are proportional to the capital, the term and the
rate of
interest, which is formalized in the following theorem:
The interest produced by a capital P with an interest rate
simple annual i for n years, are given by:

I = Pin
What is the annual simple interest rate if a loan of $14,000 is paid
off with $14,644 within a period of 06 months?
Interest is the difference between the amount and the capital
borrowed.
I = 14.644-14000 (I = S – P)
I = $644
The term is n = ½, which is equivalent to one semester. The
annual rate i, is
Solve the following equation that resulted from substituting the
values
above in I = Pin
644 = 14,000(i)(1/2)
 From where, 644(2)/14000 = i
I = 0.092 or 9.2% simple annual.
 ADYERJEJ)CJA
The unit of time for the interest rate may not be annual, but monthly, daily, quarterly,
or any other unit of time. However, in any case it is important to match it with the
time units of the term; For example, if the interest rate is weekly then the term must
be expressed and handled in weeks.
If nothing else is said regarding the interest rate, this will be considered simple
annual. For example, when saying a rate of 11.5% it will be understood as 11.5%
simple annual rate.
Also remember that for the operations the given rate must be divided by 100,
moving the decimal point two places to the left and most importantly, that we must
in any case clarify the way in which the interest rates of any operation are being
treated. financial or commercial, since failure to do so could cause certain problems
between the parties involved in such operations. We will see that a rate of 13%
gives different results if it is simple, composed of months or composed of
semesters, for example, although in any case it is an annualized rate.
Previously it was mentioned that interests are the difference
between
the amount and capital:
I=S–P
If we add the P to the left side, we solve for S
S=P+I and I = Pin
So,
S = P + Pin
Factoring:
S = P(1+in)
The accumulated value S of a capital P that accrues interest with
the annual simple interest rate i, at the end of n annual periods is:
S = P(1+in)
It is very important to insist that if the interest rate is not annual,
then it is necessary that both the rate and the term be in the same
units of time.
How much does Mr. Morales accumulate in his bank account in
2 years?
If you invest $28,000 earning interest of 7.3% simple annually.
Solution.
The values to substitute in the previous equation are:
P= $28,000, the capital
N = 2 the term in years.
I = 0.073, the annual simple interest rate
M = the unknown, then,
 M = 28,000[ 1+0.073(2)]
M = $32,088

Remember that from this formula, or any other, you can

determine one of the variables that appear in it. For
clear any one, it is advisable to do so until after
having replaced the values that are known, that is, the data.
 Exampl CUpjCa) Uñ)E 5)Y9rsjá5) COf
e:
How long does it take for an investment to double with an interest
rate?
of 13% simple annual?
Solution:If P is the initial capital, then the amount S at the end of
the
term will be twice P, that is S = 2p, so when replacing
this in the equation of the theorem, it will look like this:
2P = P(1+0.13n) since S = P(1+in)
To solve the unknown n, the equation is divided by P and cancels,
Subtract the 1 and finally divide the two members by 0.13
2 = 1+0.13n
N= 1/0.13 on = 7.69.2307692
 Conver CO) 939S V say
Tosexpress this period in years with months and days, the decimal part is multiplied
15
by 12, which are the months that make up the year: 0.692307692(12) =
8.307692304
This means that 0.692307692 years is equivalent to 8.307692304 months. Now, the
fractional part of this number is multiplied by 30, the days contained in a month.
0.307692304(30) = 9.23076912
Result that is rounded to 9, so the term is: 7 years, 8 months and 9 days
Note that the time frame can be expressed in hours by multiplying the fraction by
24, so this could continue onwards.
The size of the capital invested, P, is not important in the result, since it was
eliminated from the first step in the previous development, which means that any
capital will double in this period at a simple rate of 13% per year.
 Example:
What is the price of a television that is paid with a 30% advance and a
three-month document with face value of $3,600? Suppose that the rate of
interest is equal to the TIIE plus 4 percentage points and that on the day of
purchase the
TIIE was 9.8%.
Solution.
First we find the present value of the $3600, substituting the rate I =
0.098+0.04 = 0.138 in the simple interest formula and the other values:
S for $3600, the future value of the credit, and n for 3/12 or 0.25 years, which is the
term. The equation looks like this:
3600 = P[1+0.138(0.25)] S = P(1+in)
C= $3479.94
The present value of the document is $3479.94, since the
advance
was 30%, this result corresponds to 70% of the price of the
television and therefore:
(0.70) Price = 3479.94
Where from:
Price = 4971.35
At what simple interest rate was a credit transaction carried out?
that settled with a payment after 10 months with $42,350,
Assuming the credit was for $37,644.44?
Solution.
The values to substitute in the simple interest formula are:
S = 42,350, the future heat of credit
P = 37,644.44, the present value, that is, the value of the credit.
n = 10 months, the term on = 10/12 years
i = the annual simple interest rate is the unknown.
 3153) ce Jjerés 5ljple
So:
42,350 = 37,644.44 [1+(10/12)i] S = P(1+in)
42350/37644.44 = 1+(10/12)I
1.125-1 = (10/12)I
I = 0.15 or 15% simple annual.
 Cgjj'c I heard

1) Which of the following reward options best suits an employee's

interests?
a. Receive now $7,700.
b. Receive $4,400 now and another $4,000 in two months.
c. Receive three payments of $2,800 each in 30, 60 and 90 days.

2) Exportadora Quiriarte SA carried out an important purchase

and sale operation for $350,000 and was paid in three equal
bonuses. The first on the day of purchase and the other two after
30 and 60 days. How much is each if they have charges of 13.2%
annual simple interest.
 kPlelgalj/)aS C9 JJeJJpO
To raise and resolve situations in which a relatively large number
of amounts and dates are involved – for example, when a set of
obligations that debtors and creditors previously contracted is
replaced by another that is equivalent, but with other times and
amounts – they are used graphs that are known as time diagrams.
These consist of a simple straight line in which the values,
amounts, capitals, dates and deadlines of the problem to be
solved are noted.
Sometimes, when the periods are equal, in the case of annuities,
for example, instead of a straight line, rectangles are used to
represent the periods. In any case, it is necessary to point out that
a time or temporal diagram serves to illustrate quantities over time.
 Inver
s 99 93,30/©©
How much must be invested at 5.1% simple annual rate on February 15, to have
$7,000 on May 9, $15,500 on June 20, and $10,000 on December 23?

SOLUTION

P3

P2
P1
7000 15500 10000

February 15 May 9 June 20 December 23

84 days 41 days 183 days

Formula: S = P(1+in)
 DJa1gral//Jals ce jjeJpO
On March 11, Adriana deposited $10,000 in an account that earns interest at
12.48% simple annually. On December 15 he had deposited another $15,000, but
on January 28 he withdrew $9,500. How much will he be able to withdraw on May
9? How much do I earn in interest?

SOLUTION

Formula: S = P(1+in)
 CapJal, JjJOJJO 8 jjJereses
On November 15, a merchant purchased merchandise that he settled with 35% in
cash, a payment for $32,050, which corresponds to 40% on March 3, and another
for the rest on April 22. Considering charges of 16.8% annually. Determine:
a) The value of the merchandise on the day of purchase.

b) The amount paid on April 22.

c) Interest or charges for not paying in cash.

SOLUTION

Formula: S(1+in) -
1
P
INTEREST AND INTEREST RATES
 Types of interest rates:

Active interest rate : It is the price that an individual pays for

credit or for the use of money (it is not the price of money itself).

Passive interest rate : it is the rate paid by financial intermediaries

to resource providers for the money raised.
 RATES
Nominal Rate:
It is the rate agreed upon in the operation. An annual rate that is
compounded in periods shorter than the year.
Ex: Annual Nominal Rate that is capitalized quarterly

Proportional Rate (in the case of nominal rates):

Once an annual rate has been set, the quotient between the
annual rate times the number of periods (semesters, quarters,
quarters, etc.) is called the proportional rate (semi-annual,
quarterly, quarterly, etc.)
Ex. i/2 ; i/3 ; i/4
 RATES
Equivalent Rates: those that correspond to different periods of time
and applied to equal capital, produce equal
amounts after the same time.
Annual Effective Rate: is obtained by reinvesting periodically for a
year, capital plus interest, obtained by using the
proportional rate.

Continuous Rate: is the rate obtained by continuously capitalizing

interest.
• e = 2.71828
• S = P x e nxi
 RATES
Discrete compound interest rate:

It is the interest rate that is applied when the capitalization period is a discrete
variable, that is, when the period is measured in fixed time
intervals such as year, semester, quarter, quarter, two months,
month, day or other.

Besides…

Discrete compound interest: It is applied when the interest accrued, not

withdrawn or paid, in turn begins to accrue interest every
certain previously specified period of time.
NOW, LET'S SEE THE RATES WE
WILL WORK WITH
CONSTANTLY…

…Nominal and effective rates…

 Capitalization Period

The interest can be converted into annual, semiannual capital

quarterly, and monthly as well as daily, this period is
called capitalization period. To the number of times that the
interest capitalized during a year is called the frequency of
conversion.
For example, what is the compounding period of a bank deposit that pays 5% interest
compounded quarterly?

One year = 12 months/3 months = 4

4 is the quarterly compounding period

 Nominal Interest Rate,
Effective (or real) and Equivalent
When a financial operation is carried out, an annual interest rate is agreed
upon that governs the duration of the operation; this is called the nominal
interest rate.
However, if interest is compounded semiannually, quarterly, or monthly,
the effective amount paid or earned is greater than if it is compounded
annually. When this happens, an effective interest rate can be
determined.

Two annual interest rates with different compounding periods will be

equivalent if after one year they produce the same compound interest,
that is, if two annual interest rates with different compounding periods are
said to be equivalent , if the return obtained by compounding It is the
same at the end of the year.
 Examples of nominal rates:

…conversions…worksheet exercises.

Conversion of nominal rates to effective…

Conversion between effective and alternative rates

conversion…
 TIPS:

Percentage points:
1 percentage point = 1% change in the price.

Example: Example: The interest rate was reduced by 5 percentage points:

Interest rate minus 5%

Basic points:
100 basis points = 1 percentage point (1%)

Example: The interest rate was reduced by 50 basis points:

Interest rate minus 0.5%
 COMPOUND TERES

Concept:
It is the interest that is generated on interest.
The interest generated in the first capitalization period is
converted into capital to generate more interest for the second
capitalization period and so on.
 COMPOUND INTEREST
If, for example, in a fixed-term investment, the capital and the interest
that were generated are not withdrawn, then these can be added to the
capital, so that from the second period onwards they will produce
their own interests, and if this continues, the capital in The
investment, at the beginning of any period, will be greater than what it
had at the beginning of the previous period.
This is the essential characteristic of compound interest, which makes
it different from simple interest, in which case only the original capital
generates interest, that is, at the beginning of any period the capital is
constant, it is the same.

Although it is true that compound interest has always existed, it was

revealed with the so-called anatocism, when bank debtors cannot
settle their debts, since even if they are up to date with their
payments, the capital they owed, in Instead of shrinking, it grew more
and more, so other ways were sought to liquidate them. Compound
interest is nothing more than an important application of geometric
progressions.
 INTRODUCTION EXAMPLE

Suppose our population increases by 3% each year. How much will it grow
in 3 years?
 WARNING

When the variation of the values is uniform and is

expressed as a percentage, two growth rates, or
reduction, are distinguished: the one that corresponds to
the given percentage, 3% of the annual increase in the
population for example, and the one that results from
divide any term, that is, any value by the one that
precedes it, 1.03 in the same example. This, 1.03, is the
one applied in the formulas of geometric progressions,
denoting it as r, the common ratio, and will be given in
general by r = 1+v, where v is the
percentage of the increase in the succession of values.
COMPOUND INTERESTS

GENERAL FORMULA

S=P(1+i)
 THEOREM
The accumulated amount S of a capital P at the end of n
periods is

S = P(1+i) n

Where:
n is the time period
S the amount that accumulates
P the initial capital.
i is the effective interest rate.
Let's clear up other unknowns...

P=…
F
i=…

n = … … and now, the interest will be…

 COMPOUND INTEREST

Comparison between simple interest and compound interest

$ 100,000
to 10% Annual
th 5 years
Period Simple interest Compound interest Difference
dwarves Amount Interest Int. Amount Interest Int. in interest
Accumulate Accumulate 0
0
1,000
3,100
6,410
11,05
1
 COMPOUND INTEREST
Comparison between simple interest and compound interest
Period Int. Sim. Int. Com.
dwarves Amount Amount
0
1 110,000 110,000
2 120,000 121,000
3 130,000 133,100
4 140,000 146,410
5 150,000 161,051
Let's look at a graphic example: MAT. END\Comparison I simple i compound.xls
 Suppose we deposit $1000
in a bank account that pays the
12% annual interest compounded by
month. What will be the amount at the end of
year and a half?
Saying that interest is compounded by months means that each month the interest generated
is capitalized, that is, added to the capital.
 Capital investment for amount
preset

What capital should be invested now at 12.69% annually

compounded every two months to have $40,000 in 10
months?
 Amount that accumulates when
investing a
capital
Obtain the amount that accumulates in three years, if a
capital of $65,000 is invested at 10% compounded by
semesters.
 Capital investment term

What day should mathematician Gutierrez invest $10,000 to

have $10,512.00 on May 11? Assume the investment earns
interest of 13% compounded weekly.
Present value of a credit and interest
25% of the price of a living room furniture is paid with a document
with a face value of $4,000 and maturity in 30 days. 30% is settled
through a payment within 60 days, another 30% with a document
within 90 days of the purchase and the remaining 15% is left as an
advance payment. Get:
a) The price of the furniture.
b) The advance payment and the other two payments.
c) The total interest charge.
Suppose the furniture store charges 22.20% annually compounded
by months on its credit sales.
 j of interest to double a capital

At what annual interest rate, compounded every two

months, does capital double for three years?
PARTIAL PAYMENTS
For the treatment of obligations that allow partial payments or credits within the period or term of the
obligation, instead of a single payment on the due date, there are different criteria; We will refer to
the two most important and most frequently applied. In any case, when studying compound interest,
you will see more general methods for this type of problems.
Commercial rule This rule indicates that, for notes that earn interest, the amounts of the obligation
and the different credits must be calculated independently on the maturity date. The amount to be
settled on that date is the difference between the amount of the obligation and the sum of the
amounts of the different payments.
Let S be the amount of the debt on the due date and SI, S2, ..., Sn be the amounts of the different
payments on the same date and let X be the amount to be settled. According to the business rule,
the equivalence equation is:
X=S - (SI +S2 + ...+Sn)

Example: On an obligation of $10,000 with a one-year term with interest of 12%, the debtor makes
the following payments: $5,000 after three months and $4,000 after 8 months. Calculate, applying
the business rule, the balance payable on the due date.
 COMPOUND
INTEREST
Business rule

0 1 2 3 4 5 6 7 8 9 10 11 12
cast
focal
Rule of unpaid balances: This rule for promissory notes that
earn interest indicates: each time a payment is made, the
amount of the debt must be calculated up to the date of
payment and the value of the payment must be subtracted
from that amount; This is how the unpaid balance is
obtained on that date. Partial payments must be greater
than the interest on the debt, until the payment date.

Example: Applying the unpaid balance rule, calculate the

balance payable on the due date for the obligation in the
previous example.
COMPOUND INTEREST
Unpaid balance rule:
 IAGRAMS OF TIME, CAL DATE AND
VALUE EQUATIONS.

In simple interest, we study time diagrams that constitute

useful tools for posing and solving financial problems, since
they facilitate the symbolic movements of capital over time.
These movements allow all the amounts of money involved in
a problem to be brought to a common date, which is known as
the focal date or reference date.
With all the values on that focal date and separating those
that correspond to debts from those that correspond to
payments, that is, grouping on the one hand those of debit
and on the other those of credit, an equality is established
that is known as equation of equivalent values or simply as a
value equation. This equation is then solved by solving the
unknown or the unknowns that appear, thus achieving the
solution to the problem.
This solution varies a little according to the location of the
focal date when it comes to simple interest; but when interest
is compound, the solution is the same for any location of the
focal date.
It should be noted that the amounts of money may be before or
after the reference date. If the amount of money A is before
that date, the interest is added to find its equivalent future
value on the focal date; but if it is later, then the interests will
be subtracted, obtaining its equivalent present value on the
same focal date.
The following figure illustrates the two
possibilities, where S A is the amount of A and
P B is the present value of P

P B

S.A.

FOCUS DATE

In both cases, the transfer is made with the

formula of compound interest or simple
interest if the problem stipulates this.
 SETTLEMENT OF CREDITS WITH PAYMENTS
DEFERRED
Today marks 5 months since a food merchant
obtained a loan of $30,000 by signing a 7-
month document. Three months ago he was
granted another one and signed a document
with a face value of $ 54000, value that
includes
the interest of the 6-month term. Today he
pays $60,000 towards his debts and agrees
with his creditor to settle the rest four months
from now. For what amount is this payment, if
there are charges or interest of 11.76%
nominal monthly.
INTEREST ON CREDIT WITH FERTILIZATIONS
DEFERRED

Find the interest charged on the

Previous example.
CREDIT PURCHASES, EQUIVALENT PAYMENTS
AND INTERESTS

With daily nominal interest of 16.56%, on April

21, a merchandise credit for $63,000 is granted,
to be paid on October 1. On June 30, another is
granted for $46,000 that expires on December 15
and another on July 25 for $76,000, including
interest, maturing on September 3. In an
agreement it is agreed to settle the commitments
with 2 payments, one on August 10 and another
on November 10, in such a way that the second
doubles the first. Determine: What amount is
each of the two payments? How much do you pay
in interest?
AND IF THE INTEREST RATES ARE
VARIABLES ???????
 EXAMPLE

Assuming that a person makes the following

deposits and withdrawals in an account that
rewards 9.36% nominal daily in the first three
months and 10.32% compounded per month,
then obtain the amount in your account on
December 20 after its withdrawal , considering
that when he made his first withdrawal he had
$47,925.
PROBLEMS OF
APPLICATION
 CASH FLOW IN CONSTRUCTION OF
LIVING PLACE
For the construction of a housing core, a
contractor requires $5,000,000 distributed as
follows: 40% at the beginning of the works, 30%
after three months, 20% after 6 months and the
remaining 10% upon delivery. the homes, 8
months after starting the works. For this purpose,
the owner deposits $2,000,000, one month
before starting construction. Three months after
the first deposit, he makes another, equivalent to
the rest of the budget, in a bank that pays
13.92% annual interest compounded by months.
What amount is this payment?
 STRUCTURING OF A CREDIT
AUTOMOTIVE
A truck is purchased with a cash price of
$193,500 with an advance payment and three
bimonthly payments equal to the advance
payment, with an annual interest of 16.2%
compounded bimonthly. Shortly before making
the first bimonthly payment, it is agreed to
restructure the debt with two payments 3 and 6
months after the purchase, in such a way that
the second payment is 25% greater than the
first. How much is each payment?
How much do you pay in interest?
 CONSTITUTION OF A TRUST WITH
VARIABLE RATE
How much should be deposited now, how much in
2 years and how much more than 3 years later,
to establish a trust and have 4.5 million soles,
after 12 years from now, considering that the
second deposit is 25% greater than the first and
that the last exceeds by S/. 450,000 to the
previous one?
Suppose that interest accrues at 9.3% nominal
monthly in the first four years, 10.4% annually
compounded semi-annually in the following 3
years, and 11.8% effective in the last five.
How much do they amount to? the
interests that HE
 EQUIVALENT DEADLINES
What day should a single payment be made for
$60,000 that replaces two amounts, the first for
$25,000 with a term of 5 months and the second
for 35,000 with a term of 8 months, assuming
interest of 10% effective?
 EXAMPLE
What day should $50,500 be paid to replace 3
payments: the first for $9,000 on July 10, the
second for $28,500 on August 25, and the other
for $ 13000 of October 3,
considering interest of 12.87% nominal monthly?
 Depreciation
It is the loss of value of a fixed asset, depreciation is the decrease in
the property value of a fixed asset, produced by the passage of
time, wear and tear, disuse, technical insufficiency, obsolescence
or other operational, technological factors. , tax, etc.
Depreciation can be calculated based on its use value, its book value,
the number of units produced or based on some index established
by the competent authority or by technical economic engineering
studies on asset replacements.
Depreciation constitutes the progressive loss of value of a machine,
equipment or property for each year it ages. Some authors point out
depreciation as a lease that the company pays itself for the use and
deterioration of
their
facilities and equipment.
According to the National Superintendency of Tax Administration – SUNAT.
Loss or decrease in value of a fixed asset due to use, the action of time or
obsolescence. The purpose of depreciation is to separate and accumulate
 Purpose of Depreciation

Depreciation is carried out in order to charge to expenses the cost of

the asset, and that this value will be reimbursable in the near future,
either for the acquisition of another asset, or the improvement of it,
depending on the management decisions of the company. .

Likewise, it has the following purposes:

• Ensure that each financial year is taxed by the total expenses that
correspond to it and have contributed to its product.
• Assess the annual wear and tear of the elements that make up your
Fixed Assets.
• Constitute a reserve to replace the initial value of the elements that
make up the Fixed Assets.
 Importance
Carrying out depreciation is so important for the company since
through them the company deducts expenses, as long as these are
accepted by Law.

Through depreciation, a complete unit can be replaced, or otherwise

reconditioned.

To cover the depreciation of fixed assets, it is necessary to form a

reserve fund (F) through depreciation charges made periodically in
accordance with the previously chosen method.

The reserve or accumulated depreciation fund will cover the

replacement cost of the asset at the end of its useful life.

With the exception of land, most fixed assets have a limited useful life,
that is, they will serve the company for a certain number of future
periods eAn# hI ne
 Depreciation Methods

• Straight line
• Double declining balance
• Sum of digit years
• Units produced
 Est Usef Perc
ate
Working and breeding cattle 4 ul entag
2
Land transport vehicles; ovens ye 5
in general ar %
Machinery and equipment for s 2
mining and oil activities (except 5 0
furniture) ye %
Data processing equipment
Other Fixed Assets
 Method Selection

To decide on the best method of depreciation, tax considerations must

be separated from financial accounting considerations. For tax
purposes, the best method is one that minimizes the effects of
taxes on the company. Generally, one of the permitted accelerated
depreciation methods is chosen.
With respect to financial accounting, each of its concepts that have
been described above has its supporters. The vast majority of
businesses use the straight line method, due to its simplicity, but
the number of companies that are applying the other methods is
increasing. It should be emphasized that different methods may be
used for different types of assets in a single trade. For example, the
straight line for buildings, one of the accelerated for certain types of
machinery and equipment, and the production units for other asset
classes. An essential imperative is that there be a method. The old
practice of charging depreciation to the extent that results hold is
insubstantial.
STUDY CASE

Statement
A truck is purchased at the price of S/. 7,000, its
estimated useful life is 5 years, its scrap value of
S/. 1000.
It is requested to prepare depreciation tables by
known methods.