Questions having to do with financial mathematics. Please note that for questions in quantitative finance, quant.stackexchange.com is perhaps a better site.

learn more… | top users | synonyms

3
votes
2answers
89 views

Accrued interest

I know how to calculate accrued interest over time on an initial amount. However, my assignment has me artificially adding additional sums intermittently. I'm curious if there is a formula to do that. ...
-1
votes
1answer
149 views

Paying less interest rate in credit card

I think I've found a way to pay off my credit cards faster, and therefore paying less interest rate. There's a Google Spreadsheet with my work at http://goo.gl/NqliZM My question What payment ...
0
votes
2answers
101 views

Help with Effective Rate of Discount- Theory of interest

I am just beggining Financial Mathematics. One of my assignment questions are as follows: (Q) Find the amount of interest earned from the principal of $1000 during the fourth period If the ...
-2
votes
1answer
241 views

Financial Math - Nominal and Effective Rates [closed]

I am currently studying for the actuarial exam FM with the mathematical interest theory textbook from MAA. I have been doing a bunch of problems and the one below is giving me a lot of trouble to ...
1
vote
1answer
25 views

Question About Notation of CRR

I am reading a book on financial theory and it has been a while since I took a notation heavy math course so could someone help me out here... Now with this equation how does the sum work? Do I do ...
1
vote
1answer
83 views

How does one calculate product pricing to cover processing fees from $\$5$ to $\$5,000$ while maintaining a profit?

Credit card processor charges, for each transaction, $2.9\% + \$0.30$. I need to find an amount that covers that cost, from $\$5$ to $\$5,000$, on a per item basis, all while maintaining a small ...
1
vote
1answer
198 views

Master degree require Matlab? [closed]

I'm devon. I'm in second year math integrated computer concentrate in statistic. I love math and I'm very interested in finance. So I'm planning to get the master degree in Financial Mathematic. What ...
2
votes
1answer
375 views

Compound interest -like calculation, but with increasing rate

Let's say an organization has 100 employees in the beginning of 2013 and grows to 110 employees by the beginning of 2014. This implies a growth rate of 10% for 2013. Now, let's say a hiring manager ...
1
vote
0answers
345 views

Calculate sell(sales) price from margin and cost price

Slight finance question, trying to program the calculation of sell price when we have %margin and cost price. ((CostPrice / ((1 - %Margin) / 100)) * 100) / 100 ...
1
vote
2answers
96 views

Why can moving averages of the prices indicate the trend of a stock?

In technical analysis of stock trading, we can use the moving averages of the historical prices of a stock to indicate whether it is currently in the uptrend or downtrend. Let me exemplify the idea ...
1
vote
2answers
179 views

interest rate not constant with constant installments

Do you know a formulae which would calculate a constant installment withe non constant interest rate. For example let's say that Mr A take a loan of 1000 and pays a monthly interest rate of 6% the ...
2
votes
2answers
96 views

How to split the rent if two roommates live there from the beginning and a third one joins in the middle of the month?

I've been thinking over it and I can't figure it out. Consider the rent of the house is $X$. Now there are two roommates from the beginning and a third one joins in the middle of the month. Now ...
0
votes
1answer
79 views

Interest Calculation

A university student receives his statement for his tuition and notices that he doesn't have enough money to pay it all off at once. The student inquires about interest rates at his university and is ...
1
vote
1answer
31 views

Mortgage calculating time for residual debt

I have a mortgage for C capital, with constant monthly payments, constant interest rate i (and constant duration in year D). I would like to know after how much time I reimburse $r$ dollars. For ...
1
vote
4answers
8k views

No-Arbitrage Principle

I hope you do not mind me asking a financial question in this section. I am having trouble understanding the concept of the no-arbitrage principle for a particular example in my notes: Suppose a ...
3
votes
0answers
95 views

How to get interest in the mathematics of tax

In a similar vein to my previous thread, I will also be teaching about the mathematics behind taxation - to a lot of people, this is very mundane - but that is not true of everyone. The practicality ...
0
votes
1answer
84 views

Portfolio which replicates given payoff

Consider the following payoff function: $$p(S_T) = \begin{cases} 0 & \text{if } S_{T} \leq 70 \\ S_{T}-70 & \text{if } S_{T} \in (70; 100] \\ -S_{T}+120 & \text{if } S_{T} \in (100; 120] ...
0
votes
2answers
81 views

Mathematical Finance Question

I am having trouble answering this question confidently. A walk through would be amazing.
1
vote
1answer
198 views

Calculate the yield rate on transaction

Problem:- 'A' is able to borrow $1000 from 'B' for one year at 8% effective and at the same time lend it to 'C' for one year at 10% effective. what is 'A's yield rate on this transaction? My ...
4
votes
2answers
178 views

Speculating on the stock exchange

Imagine you model each stock as a random walk (fractal) and also that you can buy and sell at any price. Suppose also that it 'walks' with the pace of 1. If you buy, for example, 1000 shares of ...
1
vote
1answer
182 views

Hedging a long position-one period

Consider a one period binomial stock model with $S_0=4$, $S_1(H)=8$ and $S_1(T)=2$. The interest rate is $25$%. Let's say I buy a call option for $1.20$ with strike price $K=5$ which expires at time ...
1
vote
1answer
1k views

Black-Scholes PDE to heat equation, nonconstant coefficients

Can someone provide me with details or a reference on how to transform the Black-Scholes PDE with nonconstant coefficients (i.e. $r=r\left(S,t\right)$, $\sigma=\sigma\left(S,t\right)$) to the heat ...
0
votes
3answers
169 views

$1500=P \times { (1 + 0.02) }^{ 24 }$, what is the value of $P$?

Hey guys could you please tell me what is the faster why to solve this equation. It's a compound interest equation and I'm stuck at the ${ (1 + 0.02) }^{ 24 }$ I really don't know how to proceed in ...
1
vote
1answer
58 views

I'm looking a compound interest formula.

Admittedly, I just finished physics and calculas but some of my more basic math skills escape me. I'm looking for a formula that will give me a total compounded value after x number of weeks. So for ...
1
vote
1answer
1k views

Easy proof of Black-Scholes option pricing formula

I use this Book to read the option princing in Black-Scholes model in pages 93-99, The poof of the formula given by $$c(s,t)= N(d_1(s,t)- Ke^{-rT}N(d_2(s,t)))$$ where $$d_{1,2}=\frac{\ln(s/K)+(r\pm ...
1
vote
2answers
1k views

Calculating interest rate of car financing

I want a new car which costs $\$26.000$. But there's an offer to finance the car: Immediate prepayment: $25\%$ of the original price The amount left is financed with a loan: Duration: $5$ years, ...
0
votes
1answer
2k views

Difference between Bi-annual and semi-annual in Financial Maths

I was wandering what the difference was between compounding interest when they use bi-annual and semi-annual and hence how to change your value of i I think semi-annual means twice in 1 year so your ...
0
votes
1answer
74 views

Early-exercise point of American Put

Could you please help me? In book Rüdiger Seydel "Tools for Computational Finance" in Chapter 4.5 "American Options as Free Boundary Problem" it is provided the following explanation for case ...
1
vote
1answer
93 views

Deferred Annuity not working

A simple financial math problem: Mack obtains $500\ 000$ repayable over $20$ years. If interest is compounded monthly at $9.25\%$ per annum, determine the monthly repayments if the repayment ...
1
vote
0answers
335 views

Notation in Financial Math

I am very close to showing part b of this question and think that the reason my solution doesn't match up is because I don't understand a piece of notation.The notation I don't understand is ...
5
votes
1answer
174 views

Arbitrage opportunity

Given odds $o_i$ for $i=1,2,\ldots,n$ and the possibility to bet the amount $b_i\in \mathbb{R}$ on each event such that if event $i$ occurs you receive $b_io_i$ and if it doesn't you recieve $-b_i$. I ...
-1
votes
2answers
72 views

How to find the amount to added every month or year to get the required amount after certain years?

I want to do a Java application for which after giving the current savings, and the rate of interest and and required amount after specified no of years, it has to show how much a person has to earn ...
0
votes
1answer
103 views

Why are call options necessary?

My question is actually less ambitious and more specific then the title may have lead you to believe. Suppose the interest rate is $25\%$ you have a stock at time zero price of $S_0=50$ and at time 1 ...
1
vote
1answer
301 views

if you invest $ 500 at 6 % compounded annually,

Please help me with this problem. It needs to be done in the same format as below if you invest $500$ dollars at $6$ percent compounded annually, how many years to the nearest tenth would it take your ...
0
votes
1answer
41 views

Suppose you invest \$10 at 10.2% per annum compounded annually. How many years would it take for your investment to grow to \$15 000?

I'am solving a simlar equation to this and just trying to figure out how they did it? the only part I don't understand is how they got the number.... 1.102 15000 = 10(1.102)n ¬1 mark 1500 = 1.102n
2
votes
1answer
80 views

first order differential question

Mr. John want to buy a house and he must borrow $150,000 from the bank. He wants a 30-year mortgage and he has 2 choice. Choice #1, he can borrow money at 7% per year with no point ( each point is ...
2
votes
2answers
152 views

Probability related finance question: Need a more formal solution

You are offered a contract on a piece of land which is worth $1,000,000$ USD $70\%$ of the time, $500,000$ USD $20\%$ percent of the time, and $150,000$ USD $10\%$ of the time. We're trying to max ...
1
vote
1answer
48 views

Can anyone show me how this was derived?

So here is all the slide says and I'm and trying to see the steps for derivation. Can someone please show me how this is derived? Essentially I'm trying to go from 1 to 2. Pi is the profit function. ...
4
votes
1answer
119 views

Calculating interest rate for a payment plan

I really should know this from high school so I'm a bit ashamed to ask... :) I've been offered several cars for lease and want to compare the offered interest rates. E.g. I have: ...
2
votes
5answers
335 views

Game Theory Question about Financial Markets

This is a recent quote from one of the outstanding bond portfolio managers: "First of all, for every buyer there is a seller. Therefore, in order for someone to sell their bonds and buy stocks means ...
0
votes
1answer
79 views

Find the transaction cost-adjusted expected return of the stock

Let $W^b_i$ denote the weight of stock i in the existing portfolio and $W^a_i$ denote the weight of stock i in the new portfolio to be created. Let $c_i$ denote the transaction cost of stock $i$. If ...
2
votes
0answers
39 views

Stochastic control, numerical, need expectations given coupled SDEs

I'm looking at a trio of processes which arises in a stochastic control situation. I have a process $(V_t)$ which I may control, and $(V_t)$ influences a diffusive stock price process $(S_t)$. The ...
1
vote
3answers
108 views

If you invest $\$1500$ at $7\%$ compounded annually, how many years would it take for your investment to grow

If you invest $\$1500$ at $7\%$ compounded annually, how many years would it take for your investment to grow to $3750$? Is this right? $$\text{term } = \frac{\log( \text{overall gain factor})}{ ...
0
votes
1answer
113 views

confusing part to basic accounting question

Directions: Given the information find the weekly and monthly taxable wages (4.3 weeks per month). This is for federal income taxes. Weekly Taxable Wages: $\$21.40$ per hour, $40$ hours a week, $47$ ...
0
votes
1answer
66 views

How to Maximise Efficiency With hp12c gold calculator: Equation of Value Loan Schedule

I would like to calculate the net present value of a loan schedule or an equation of value. e.g. "For an investor receives R1 000 after 2 years, R2 000 after 5 years and R4000 after 7 years, how much ...
0
votes
1answer
119 views

Binomial expansion for solving american put option identity [duplicate]

For american put option I have to prove that: 1) As $D$ tends to $\infty$, $a_n$ tends to $-r/D$ so that $S^*$ tends to $0$. 2) As $D$ tends to $-\infty$, $a_n$ tends to $2D/ \sigma^2$ so that ...
1
vote
1answer
144 views

american put option

For a perpetual american put option $v(s)$, satisfies the following problem: $$\frac12\sigma^2S^2\frac{\mathrm d^2V}{\mathrm dS^2}+(r-D)S\frac{\mathrm dV}{\mathrm dS} - rV = 0\quad\text{for ...
2
votes
1answer
59 views

Financial Bonds 500 $1,000 bonds with stated rate of 5% issued at par. 10 year term and pay interest semi-annually.

Every time I try and calculate this problem something comes up wrong. Either from working it out by hand or using my BA II plus, I cannot get the answer shown below. Am I wrong or is this book answer ...
1
vote
2answers
24 views

In this situation, how to decrease the payout amount based on the “weighed” constituent parts?

Couldn't think of a better way to explain it in the title, my bad. This is a problem I'm running into in a programming project. Here's the situation: Say a partner is due to be paid $1000 for ...
0
votes
1answer
38 views

How to find breakeven amount when the buy and sell amount has a fee?

With currency exchange they charge 3% when I buy a currency. When I sell they charge 3% on the amount I sell. My question: At which amount do I need to sell to make up for the 3% fees? I currently ...