Final Syllabus

 Logarithm and Exponents

 Introduction to math of finance
 Demand supply and equilibrium
 Solving values of x and y from linear equations
 CHAPTER 6
INTRODUCTUCTION TO THE MATHEMATICS OF FINANCE
BASICS OF FINANCE MATH
 If5000$ is deposited in a bank account now,
what will be the amount in the account 10 years
from now? Future value= Present value + Interest
(9%)
 How much must be deposited in a bank account
now if the amount in the account after 5 years
will be 10,000? Present value ?
 DPS system- Deposit pension scheme
 Loan payoff system
 Fixed deposit system
etc.
Simple interest and the future value
Per Cent
Principal= Present value , P? Interest, I ?
Interest rate i, Duration , n ? Future, F
Concept of Future value and present value:

Future Value = F
Present Value = P

I = Pin= 500 x 0.1 x 2 = 100

Simple versus compound (compounded)
interest
If Interest rate is 10%
Simple interest is like 10% interest
means in each 100taka you will get 10
taka.
Present value= 500 taka
Interest= 10%
After 2 year,
Future value= 500 + 100 = 600
 If Interest rate is 10%
 Compounded interest means 10%
will be compounded each time. Or
years.
Present value= 500 taka
Interest= 10%
After 1 year, F= P + I= 500 + 50 =550
2nd year, Present Value= 550
Interest= 550 * 10% = 55
F = 550 + 55 = 605
Simple Interest
Per + cent= per 100

 PRESENT VALUE – P  n calculation

 FUTURE VALUE- F
 INTERST RATE- i%  Months= n/12
 Interest - I  Week= n/ 52
 Quarter= n/4
 Day = n/365
Example- Simple Interest 6 + 0.25= 6.25
Calculating Interest rate (i%) for simple interest
Solve

Calculate the interest rate if 2500

Taka is invested in a project for 200
days (bankers rule) and interest gained
from the project is 250 Taka. Ans- 5%
I=Pin
250= 2500 x i x 200/360
Compute the future value of Tk.5000 at
9 percent compounded monthly for 10
years.
 Discuss simple and compound interest.
 What is difference between simple and compound interest?

 Compute the interest on Tk.5480 at 9% for 9 months.

 Ans- 369.9
 Find the interest rate if Tk.5250 earns Tk.55 interest in 6
months. (Answer: 2.1%) 55= 5250 x ix 0.5
 Find the exact and ordinary interest on $ 2190 for 75 days at
12 percent interest.
 (Answer: $54.00, $54.75)
 Find the future value if Tk.20000 is invested at 6 percent for 3
months. (Answer:Tk.20300) F= P (1 + in)= 20000 (1+.06 x 0.25)