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

2
votes
1answer
45 views

Calculating percentage reduction from results only.

I've been looking over some loan repayment statements, and I'm trying to work out: What the precentage interest is per month. How long it will be until the final amount reaches 0. Whether there is ...
0
votes
1answer
95 views

Calculate the time after which Money doubles

I while solving a problem in banking just thought to form a formula for the time period after which money deposited in bank at a compounded interest rate @$\alpha $ % p.a. . Amount for compounded ...
1
vote
1answer
2k views

Increasing and decreasing annuity

Going in circles..... Find an expression for the present value of an annuity-immediate where payments start at 1, increase by 1 each period up to a payment of $n$, and then decrease by 1 each period ...
1
vote
1answer
238 views

Continuous annuity calculation

This is a problem from Marcel Finan's Exam FM/2 course. It is not homework but I am studying for the FM exam and trying to get through this. You are given $\frac{d}{dt}\bar{s}_t$ = $(1.02)^{2t}$. ...
0
votes
1answer
190 views

Random Stock Stop-Loss/Stop

Assuming a Stock's price changes in a random manner. If you buy this Stock, you are required to set a stop-return and stop-loss price. I am looking for the equation that shows the probability for ...
0
votes
1answer
63 views

Bond worth given yield to maturity

On 18 February 2010, the bonds were issued with a face value of $\$1,000$. The bonds mature in 15 April 2015 and have an annual coupon rate of $6\%$. (a) Assuming today is 15 April 2013, how much is ...
1
vote
1answer
229 views

A loan is being repaid by 12 annual payments of 3000…determine the principal and interest portions of the tenth payment

A loan is being repaid by 12 annual payments of 3000 followed by 8 annual payments of 5000. If i=0.10, determine the principal and interest portions of the tenth payment and the 15th payment. I am ...
2
votes
2answers
155 views

Are there constraint problem calculators?

So I just remembered Lincoln Logs exist, so I found ten giant sets of them on ebay for Buy It Now, and I'm trying to decide what combination of purchases gives me the most logs for the least money if ...
1
vote
2answers
266 views

Calculating the same exchange rate to make an investor indifferent

If we consider an American investor in 2009 with 160 million Dollars to place in a bank deposit in either America or the UK. The (1 yr) interest rate on bank deposits is 6 percent in the UK and 1 ...
1
vote
1answer
261 views

Find the present value of a ten-year annuity

Find the present value of a ten-year annuity which pays $400$ at the beginning of each quarter for the first $5$ years, increasing to $\$600$ per quarter thereafter. The annual effective rate of ...
2
votes
4answers
14k views

Most efficient method for converting flat rate interest to APR.

A while ago, a rather sneaky car salesman tried to sell me a car financing deal, advertising an 'incredibly low' annual interest rate of 1.5%. What he later revealed that this was the 'flat rate' ...
1
vote
1answer
215 views

Find the accumulated value of an investment fund

Find the accumulated value at the end of six years of an investment fund in which \$100 is deposited at the beginning of each quarter for the first three years and \$50 is deposited at the beginning ...
0
votes
1answer
50 views

Find the relative shares of B,C and D in the estate, if it is assumed that the estate will earn a 7% annual eff

Person A leaves an estate of $100,000. Interest on the estate is paid at the end of the year to beneficiary B for the first 10 years, to beneficiary C for the next 10 years, and to charity D ...
2
votes
1answer
159 views

Is the following a martingale?

Let $X_{n}$ be a martingale with respect to a filtration $\mathbb{P}_{n}$. Define: $Y_{n}$ := $X_{n}^{3}$ Is $Y_{n}$ a martingale? Supermartingale?
2
votes
0answers
89 views

Doob Decomposition of American Option

I am trying to figure out the Doob decomposition of an American put option in a discrete time binomial model. I know how to price the American put, but I'm having trouble expressing it as the sum of ...
0
votes
3answers
156 views

A fund of $30,000 is used to award scholarships…If i=0.09, find the number of scholarships which can be awarded

A fund of $30,000 is used to award scholarships of amount 3000, one per year, at the end of each year for as long as possible. If i=0.09, find the number of scholarships which can be awarded and the ...
0
votes
2answers
62 views

If $ i=0.09 $, find $ n $ and the amount of final payment.

A fund of $ \$500 $ is to be accumulated by $ n $ annual payments of $ \$100 $, plus a final payment as small as possible made one year after the last regular payment. If $ i = 0.09 $, find $ n $ and ...
1
vote
2answers
265 views

at a nominal rate of interest of 8% converted semiannually…Find the initial amount of the loan.

A loan is to be repaid with level instalments payable at the end of each half-year for $3$ and $\frac{1}{2}$ years, at a nominal rate of interest of 8% converted semiannually. After the $4^{\rm th}$ ...
1
vote
1answer
593 views

Determine the effective annual interest rate on the loan

A borrower owes \$5000 today and has promised to pay \$1900 at the end of the next three years to repay the loan. Determine the effective annual interest rate on the loan. What is the outstanding ...
0
votes
2answers
358 views

Determine the monthly payments if the nominal rate is 12% converted monthly

a) A $\$50,000$ mortgage is to be repaid by monthly payments for $20$ years. Determine the monthly payments if the nominal rate is $12\%$ converted monthly b) an extra payment of $\$1,000$ is made at ...
0
votes
2answers
236 views

Why does the internal rate of return have no analytic expression?

I know that the IRR can be computed using iterative methods, but why is this necessary? What makes it impossible to give an expression for IRR? How would you prove it to be impossible?
1
vote
2answers
338 views

Profit and Loss calculation: Fake currency

A store buys an item for $\$50$. They price it then, at $\$80$ ($\$30$ profit margin). A customer buys the item from them with a fake $\$100$ note. The store returns $\$20$ to the customer. My ...
2
votes
1answer
4k views

How to convert interest rate to discount factor

I'm studying on Kellison's Theory of Interest and I'm stuck on the exercise 20/a of the 1st chapter. If the $i=0.1$ then $d = 0.0901$ $d_5=\frac{A_5-A_4}{A_5}$ when I insert $d$ into this ...
0
votes
1answer
158 views

Trouble arranging for interest in annuity to present value formula

The formula is: $$A = P\frac{i(i+1)^{n}}{(i + 1)^{n}- 1}$$ and I need to rearrange for $i$ because I don't know the interest. I can solve this if it were Any help would be greatly appreciated.
1
vote
2answers
70 views

Value of Investment in the Past

An amount of $1000$ is to be accumulated at a compound rate of discount of $9$% per year. (a) Find the present value $3$ years before (b) Find the value of i corresponding to d. For a) i have done ...
0
votes
2answers
549 views

Determine the simple interest rate under which a sum of money will double in 5 years.

Determine the simple interest rate under which a sum of money will double in 5 years. IS my following solution correct below? $A = p(1+r)^{t}$ $A/p = 2 =(1+r)^{5}$ $ln2 = 5ln(1+r)$ $ln2/5 = ...
2
votes
2answers
72 views

Cost for hedges under a Wiener process

I'm trying to estimate the hedging costs relating to a financial derivative which moves like a Wiener process, and I'm struggling to find the correct setup to solve the problem. Suppose I have a ...
0
votes
1answer
78 views

European Calls: arbitrage

I have following question, it should be pretty easy, but this subject is still pretty new for me. Given a market where calls of any strike price can be bought and sold. Assume that the interest rate ...
2
votes
1answer
6k views

How the formula for EMI is derived

I was looking for a formula to calculate EMI (Equated Monthly Installments). I have some fixed known parameters like, Principal Amount, Rate of Interest and No. Of Installments. By googling, I came ...
0
votes
2answers
131 views

Calculating deposit based on interest and required withdrawal in future

I am really stuck with example 2-5 and 2-6. I don't really understand example 2-6 and example 2-5 I just can't figure out...I was able to do example 2-4 which was easy... For example 2-4 I did F=P(1+ ...
1
vote
1answer
96 views

Isolate a variable in this financial formula

I'm trying to build a programming function that returns the value of CET so I need to isolate it. How can I isolate CET so I get something that can I linearly solve using a programming language? ...
2
votes
2answers
74 views

Compounding with varying principal?

The question pertains to determining average rate of return per year over $n$ years when the final amount and principal invested each year is known and it is assumed that the principal is invested at ...
0
votes
1answer
697 views

Early withdrawal fee for compound interest CD investment

Suppose you buy a CD for $1000 that earns 2.5% APR and is compounded quarterly. The CD matures in 5 years. Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 ...
1
vote
1answer
1k views

Subtract simple interest from compound interest

Here's a question on compound interest and simple interest. The difference in compound interest and simple interest for 2 years on a sum of money is \$160. If the simple interest for 2 years be ...
3
votes
2answers
480 views

Independent math learning

I'm an undergraduate math and econ major and I'm planning on graduating relatively soon and I am very limited to the number of math classes I have left (very sad about this fact). So far I have ...
0
votes
1answer
109 views

Find the total percentage loss over a specified time frame.

If you had an investment and you consistently lost 5% of it per year for 6 years, how do you find the total percentage loss, without knowing the original investment?
1
vote
1answer
570 views

Finding a fix amount payment to payoff multiple credit cards in 24 months

Mr.Debt has 3 credit cards. First card have \$5,000 balance with the rate of 10% compounded monthly. Second card have \$2,000 balance with the rate of 14% compounded monthly. Third card have \$4,000 ...
2
votes
1answer
191 views

Calculate interests

Simply wants to calculate interests of an initial amount $N$, with a monthly payback $m$, and a year interest rate of $R$ I guess the interests are not cumulated each month, but just at the end of ...
2
votes
1answer
148 views

Black scholes model type

I want to study the following market: $$S_1(t)=S_1(t)(\mu_1dt + \sigma_1dW_1(t))$$ $$S_2(t)=S_2(t)(\mu_2dt+\sigma_2dW_2(t))$$ for $t\in [0,T]$, constants $\mu_i,\sigma_i$, initial values ...
1
vote
1answer
265 views

Compound interest quarterly

I know the financial formula for calculating compound interest: Compound Interest Multiple = [1+(Annual Interest in decimals/365)]^(number of days). I have a initial and final date. I calculate the ...
2
votes
2answers
693 views

Daily rate loan APR

This example comes from used car software that is approved in Texas, a state which calculates interest using a true daily earnings method (definition below): The terms are: Amount financed: 5,000 ...
0
votes
1answer
29 views

Capping part of a sum

I have a financial constraint which states that: spend on x cannot exceed 15% of total spend, where ...
2
votes
0answers
427 views

Analogue of Leibniz Rule for Stochastic Integrals

Suppose $$f(t,u)=f(0,u)+\int_0^t{\mu (w,u)dw}+\int_0^t{\sigma(w,u)dB_w}$$, where $B_w$ is a standard Brownian motion. I would like to calculus the drift and diffusion of $Y_t=-\int_t^s{f(t,u)du}$ ...
1
vote
1answer
264 views

Net Present Worth Calculation (Economic Equivalence)

I'm currently doing some work involving net present worth analyses, and I'm really struggling with calculations that involve interest and inflation, such as the question below. I feel that if anyone ...
7
votes
2answers
343 views

Significant digits

We use currency conversion rates for financial calculations. Our currency conversion table stores conversion rates to and from each currency (about 150 world currencies) for each day, going back 20 ...
1
vote
1answer
100 views

PayDay loan APR

I'm not convinced I'm getting the correct figure when I calculate an APR rate. I have an amount I want to loan £100 I want to pay this back in 14 days. Interest for this loan is 15% The fee for this ...
0
votes
1answer
70 views

annuities and interest

The loan of 30.000 euros is depriciated after 10 years, with equal annuities and interest of 11% of annual capitalization. how can the annuity be determined? -this one seems to be the toughest of them ...
1
vote
2answers
39 views

Percentage of capitalization

After how many years the deposited sum of K-euros will triple itself if the interest percentage of capitalization is 12%, the capitalization is annual.
1
vote
2answers
119 views

How to solve for $i$ and $n$ in compound interest formula?

Given that $$F = A{ (1+i)^n - 1 \over i}$$ How can you solve for $i$ or $n$?
2
votes
1answer
668 views

Converting an Annuity due to Annuity immediate

I'm working on the following problem at the moment while preparing for an exam. Find the present value of payments of 200 every six months starting immediately and continuing through four years from ...