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

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2
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2answers
45 views

Working out the difference in earnings

I'm mathematically impaired/ignorant and trying to figure out the difference in earnings between my partner and I to work out a fair split of the bills. So; I earn £2060 per month and partner earns ...
2
votes
2answers
62 views

Actuarial Science FM Question

$$a(t)=Zt^2+Bt+1$$ If \$100 at $t=0$ grows to \$152 at $t=4$ and \$200 at $t=0$ grows to \$240 at $t=2$, what are $Z$ and $B$? Please show work. Also, what would \$1600 invested at $t=6$ grow to at ...
0
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1answer
118 views

Geometric Brownian motion problem

Here's the question: Let $S(t)$, $t \geq 0$ be a Geometric Brownian motion process with drift parameter $\mu = 0.1$ and volatility parameter $\sigma = 0.2$. Find $P(S(3) < S(1) > S(0)).$ Is ...
0
votes
1answer
89 views

When does variance fail to meet its purpose in mathematical statistics? [closed]

It have shown in a lot of both math and statistics book, however, When the books define the variance, it doesn't give much attention to math based theoretical background, i wonder if some formula that ...
1
vote
1answer
311 views

Normal Distribution Quantiles and Value at Risk

I'm preparing an exam, Quantitative Methods for Financial Markets. My book is not really clear for what concerns the calculation of normal distribution quantiles that have to be used in VaR's formula. ...
1
vote
0answers
37 views

How to find sigma-algebra over omega3 generated by the log-return ln(S2/S1) and ln(S3/S2)?

I calculated {S2/S1} = {u, u*u/d, d, d*d/u}, and then get ln(S2/S1)= {ln(u),ln(u*u/d), ln(d),ln( d*d/u)}. I am not sure my way of doing this question is right, because i m confuse about how to get ...
1
vote
1answer
67 views

Computing monthly loan payments when interest is 0%

I'm writing a Javascript program to display a mortgage amortization from a user input form that asks for typical things such as loan amount, interest rate, etc... A lot of sites, such as this one, ...
1
vote
2answers
70 views

annuities - equations of value

Chuck needs to purchase an item in $10$ years. The item costs $ \$200$ today, but its price inflates at $4 \%$ per year. To finance the purchase, Chuck deposits $ \$20$ into an account at the ...
2
votes
2answers
476 views

Perpetuity Immediate Present Value Question

A perpetuity-immediate pays $X per year. Brian receives the first n payments, Colleen receives the next n payments, and Jeff receives the remaining payments. Brian's share of the present value of ...
2
votes
1answer
144 views

Variance Covariance Matrix, positive definiteness

Suppose we have a variance covariance matrix $\Sigma$. Under what conditions on the variance covariance matrix, $\Sigma$ is positive definite, that is $\forall w \neq 0, w^T \Sigma w>0$. In fact, ...
0
votes
1answer
37 views

financial calculus put option

Consider a 1-year European put (right to sell) with a strike price of 52 on a stock whose current price is 50. We suppose that there is only time step at which the stock moves either up by 20% or down ...
0
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1answer
74 views

financial calculus call option

A stock price is currently 50. It is known that at the end of 2 months it will be either 53 or 48. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a ...
0
votes
1answer
40 views

Lump Sum + Series of Payments Future Value = X Amount

say I have $X saved already and I will from now on save a constant amount each year (Amount Y). I also want to have amount Z saved in the future. The question is how long do I need to save? I want to ...
1
vote
1answer
103 views

simple interest rate to product of interest rates

Which simple interest rate over six years is closest to being equivalent to the following: an effective rate of discount of 3% for the first year, an effective rate of discount of 6% for the second ...
0
votes
1answer
158 views

Present Value Cash Flow Questions - Discounting

At an annual effective interest rate of i, i > 0 all the following are equal: i. the present value of 10,000 at the end of 6 years ii. the sum of the present values of 6000 at the end ...
3
votes
2answers
1k views

Financial Linear Programming Problem

I'm very new at linear programming and I'm trying to figure out a way to approach this problem below: ...
1
vote
1answer
183 views

Determining Total Assets, Total Liabilities From a Financial Statement with Missing Values

I at a loss trying to figure out the total assets and liabilities from what is given. K-Os Corporation Beginning of year Total ...
2
votes
2answers
56 views

quartely payment

A Loan of R65 000 with an interest rate of 16% per annum compounded quartely is to be amortised by equal quartely payments over 3 years Question : how do I calculate the size of the quartely payment? ...
1
vote
1answer
113 views

Outstanding part-way balance for loan compounded quarterly

A loan of $R65000$ with an interest of $16\%$ per annum, compounded quarterly, is to be amortized by equal quarterly payments over $3$ years. Question: What is the outstanding amount on the loan at ...
1
vote
2answers
154 views

Solving i for annuities equation without financial calculator

I would like to know if there was a way to approximate i here without a financial calculator, in the following equation: $\displaystyle -50000 + \frac{12992}{1+i} + \frac{12992}{(1+i)^2} + ⋯ + ...
2
votes
1answer
250 views

formula to calculate the monthly repayments of this contract

I know that the interest rate is constant through the whole period and the interest method is declining balance. By declining balance mean that the interest at period t is calculated on the balance of ...
3
votes
2answers
75 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
132 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
87 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
181 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
24 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
72 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
181 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
307 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
299 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
86 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
150 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 ...
0
votes
0answers
48 views

Determine the contract terms

I'm trying to guess the contract term of the following repayment schedule. My kingdom for some help. You will find the excel file here http://wikisend.com/download/144458/guessContractTerm.xlsx ...
2
votes
2answers
92 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
76 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
30 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
6k 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
91 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
80 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
66 views

Mathematical Finance Question

I am having trouble answering this question confidently. A walk through would be amazing.
1
vote
1answer
163 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
163 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
148 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 ...
0
votes
0answers
36 views

Split a debt into growing parts

Suppose that at the present day I owe a friend a certain amound of money, say $ P_1 $ . This debt will linearly grow at a fixed (and known) rate, so that there will be a time in the future at which my ...
1
vote
1answer
931 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
153 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
55 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
906 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
1k 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 ...