UTM – Hanoï IUT de Toulon

Financial Mathematics
Applications
François Lacroux

Summary

Application #1: simple interest........................................................................................................................................2

Application #2: compound interest.................................................................................................................................2
Application #3: multiple flows.........................................................................................................................................3
Application #4: loans.......................................................................................................................................................4
Application #5: ROI..........................................................................................................................................................5

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Application #1: simple interest

1.1 What will be the future value of 1000$ with an annual rate (simple interest) of 10% in 5 years?

1.2 What will be the interests of 2000$ with an annual rate (simple interest) of 10% in 10 years?

1.3 What is the quarterly rate of a 12% annual rate?

1.4 How long does it take to have 15,000$ from an initial deposit of 10,000$ (annual rate: 5%)

1.5 How long does it take to double your initial deposit with a 5% rate?

1.6 What must be the rate if I want to double my investment in 8 years?

1.7 What must be the rate if I want to have 10,000$ in 5 years with an initial investment of 8,000$?

1.8 How much do I have to invest if I want to get 12,000$ in 3 years with an interest rate of 6.5%?

1.9 My current balance is 5,000$. How much more do I have to invest to get 10,000 in 5 years with a 8% interest
rate?

1.10 I want a future balance of 4,000$. My current balance is 1,000$. How much will I be able to with draw if I invest
2,000$ for 3 years with an interest rate of 7.5%?

1.11 I make a deposit of 6000$. What must be my interest rate if I want to withdraw 7,000$ in 3 years?

1.12 Do you prefer to get 1,000$ now or 1,200$ in 3 years ?

1.13 With an interest rate of 8%, how long do I have to keep my money saved to get if I want my balance to grow by
20%?

1.14 Is it more interesting to make a deposit of 10,000 for 5 years or 8000$ for 8 years?

1.15 When do the following investments become equivalent: deposit of 10,000$, interest rate: 5%; deposit
of 12,000$, interest rate: 3%

1.1. Cn=C0*(1+n*r) 0,25*0,2=0,05 = 5% Dựa vào tỉ lệ lạm phát

1000*(1+10%*5)=1500 (influation), chia làm 3 case
1.8.
1.2. 2000*(1+10%*10)=4000 12000/(1+3*6,5%)=10041,841 1.13. 1000*120%=1200
4000-2000=2000 1200/1000=1,2. 1,2-1=0,2
1.9. 0,2*12,5=2,5 years
1.3. 12%*0,25=0,03 10000/(1+5*8%)=7142,8571
7142,8571-5000=2142,8571 1.14. cho hai phương trình bằng
1.4. 15000/10000=1,5 nhau, tìm r => r= 0,1428
1,5-1=0,5 10000/1,4=7142,8571 Nếu rate nhỏ hơn 14,28%
0,5*20=10 years =>chọn option 1
1.10. 3000*(1+3*7,5%)=3675,0 Nếu rate bằng 14,28% => chọn
1.5. 2000/1000=2 Not enough option nào cũng được
2-1=1 Nếu rate lớn hơn => chọn
1*20=20 years 1.11. ((7000/6000)- option 2
1)*1/3=0,0556
1.6. 2-1=1 5,56% 1.15 14,29 years
1*0,125=0,125=12,5% Cho 2 ptrinh bằng nhau
1.12. 1200/1000=1,2 Nhỏ hơn chọn 2
1.7. 10000/8000=1,25 0,2*3=0,6 Bằng chọn cnao cũng được
1,25-1=0,25 Lớn hơn chọn
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 Application #2: compound interest

2.1 What will be the future value of 1000$ with an annual rate (compound interest) of 10% in 5 years?

2.2 What will be the interests of 2000$ with an annual rate (compound interest) of 10% in 10 years?

2.3 What is the quarterly rate of a 12% annual rate?

2.4 How long does it take to have 15,000$ from an initial deposit of 10,000$ (annual rate: 5%)

2.5 How long does it take to double your initial deposit with a 5% rate?

2.6 What must be the rate if I want to double my investment in 8 years?

2.7 What must be the rate if I want to have 10,000$ in 5 years with an initial investment of 8,000$?

2.8 How much do I have to invest if I want to get 12,000$ in 3 years with an interest rate of 6.5%?

2.9 My current balance is 5,000$. How much more do I have to invest to get 10,000 in 5 years with a 8% interest
rate?

2.10 I want a future balance of 4,000$. My current balance is 1,000$. How much will I be able to with draw if I invest
2,000$ for 3 years with an interest rate of 7.5%?

2.11 I make a deposit of 6000$. What must be my interest rate if I want to withdraw 7,000$ in 3 years?

2.12 Do you prefer to get 1,000$ now or 1,200$ in 3 years ?

2.13 With an interest rate of 8%, how long do I have to keep my money saved to get if I want my balance to grow by
20%?

2.14 Is it more interesting to make a deposit of 10,000 for 5 years or 8000$ for 8 years?

2.15 When do the following investments become equivalent: deposit of 10,000$, interest rate: 5%; deposit
of 12,000$, interest rate: 3%

2.1.
Cn = C0 *(1+r)^n
1000*(1+10%)^5=1610,51

2.2.
Cn = ... => interest = Cn-C0
2000*(1+10%)^10=5187,4849
5187,4849-2000=3187,4849

2.3. đề bài không có tính theo cgi thì chọn simple 12%*0,25=0,03
Còn nếu tính theo equivalent => (1+12%)^(1/4) -1 = 0,0287
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2.4. n = ln(Cn/C0) /ln(1+r) = 8,31 => 0,31*360=111,6 => 8 years and 111 days

2.5. thay số deposit thành 1000 và 2000

=> tính n = 14, 2 => 0,2*360=72 => 14 years and 72 days

2.6. thay số deposit thành 1000 và 2000

=> tính r = 0,09 = 9%

2.7. r = căn bậc n của Cn -C0 rồi -1 = 0,046 => 4,6%

2.8. C0 = Cn/(1+r)^n => 12000/((1+6,5%)^3)=9934,1891

2.9. tính C0 cần có rồi trừ C0 thật

10000/((1+8%)^5)=6805,832
6805,832 - 5000=1805,832

2.10. Nếu invest 2000 => 3000

Tính Cn => 3000*((1+7,5%)^3)=3726,8906
Chưa đủ để withdraw

2.11. r = (Cn/C0)^(1/n) -1 = 5,2%

2.12. Tính interest rate => sau đó chia làm 3 case

R = 1200/1000=1,2 1,2 ^(1/3) - 1 = 0,0627
Rate bigger than 6,27% => we get more than 1200 => choose option 1
Rate equal => I can choose both
Rate smaller than 6,27% => we get less than 1200 => choose option 2

2.13. Thay số, C0 = 1000, Cn = 1200

=> tìm n = 2,37 => 0,37*360=133,2 => 2 years and 133 days

2.14. giải phương trình tính future value cho interest rate là ẩn => tìm rate rồi chia case
=> r = 0,77 = 7,7%.

2.15. giải phương trình tính future value cho duration là ẩn => tìm duration rồi chia case
=> n = 9,48 => 0,48*360=172,8 => 9 years and 172 days.

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 Application #3: multiple flows

3.1 What will be my balance if I make a yearly deposit of 1,000$ during 15 years with an interest rate of 7.5%?

3.2 What must be my deposit today if I want to get a 2,000$ income every year during 8 years with an interest rate
of 9%?

3.3 What must be my discount rate if I want to pay 2,000$ instead of 2,200$ in 9 months instead of 18?

3.4 What must be my deposit today if I want to get a 5,000$ income every quarter during 10 years with an interest
rate of 6%?

3.5 How much will I get every year during 10 years if I make an initial deposit of 30,000$ with an annual interest rate
of 6.5%?

3.6 How much do I have to deposit every month during 30 years if I want to have 60,000$ at the end with an annual
interest rate of 5.5%?

3.7 My current balance is 5,000$. How much more do I have to invest every month to get 15,000 in 5 years with a 8%
interest rate?

3.8 I want a future balance of 4,000$. My current balance is 1,000$. How much will I be able to withdraw if I invest
200$ every month for 3 years with an interest rate of 7.5%?

3.9 I make an initial deposit of 6000$, and 300$ per quarter for 3 years. What must be my interest rate if I want to
withdraw 20,000$ in 3 years?

3.10 Do you prefer to make a deposit of 1,000$ for 2 years or a deposit of 1,200 for 18 months ?

3.11 How long does it take to get 30,000$ with an interest rate of 6% and a monthly deposit of 250$ (annuity due)

3.12 With an interest rate of 8%, and a monthly deposit of 1% of my initial capital, how long do I have to keep my
money saved to get if I want my balance to grow by 20%?

3.13 How long does it take to get 30,000$ if you deposit 200$ /month with an interest rate of 7%?

3.14 When is it more interesting to pay an annuity of 1,000$: with an interest rate of 5.5% and ten years or with an
interest rate of 8% and 8 years?
3.15 When is it longer to get 20,000$? With an annuity of 2,000$ and an interest rate of 5% or with an annuity of
1,900$ and an interest rate of 6% (annuity due for the 2nd, ordinary annuity for the 1st)

3.1.

= 1000*( (((1+7,5%)^15)-1)/7,5%)=26118,3647
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A là số tiền bỏ thêm vào sau khi đáo hạn 1 kì, Tìm Cn khi bài hỏi tổng số tiền nhận được sau 15 năm gửi tiền
nếu mỗi năm đều gửi thêm 1000

Number payments per year: 1

N: 15
I/PV: 7.5
PV: 0
PMT: -1000
FV ? => 26118.36
Beg/End: End

3.2.

2000*((1-((1+9%)^(-8))/9%) =. 1069,63
Tìm C0 khi bài hỏi tìm số tiền ban đầu để có thể nhận được 2000 mỗi năm trong 8 năm

Number payments per year: 1

N: 8
I/PV: 9
PV: ? => -11069,64
PMT: +2000
FV: 0

3.3.
Phương trình discount rate cho 1 năm (ko nói full year, nói 18 months chỉ đơn giản là hạn nộp tiền nhưng vẫn
phải tính theo full year): 2000 = 2200 *(1-d*9/12) => d = 12,12%

3.4.
Number payments per year: 4
N: 4*10=40
I/PV: 6 => real interest rate: tính theo propotional = 6/4=1,5
PV: ?
PMT: +5000
FV: 0

3.5
Number payments per year: 1
N: 10
I/PV: 6,5
PV: -30000
PMT: ? => 4173,14
FV:0
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3.6.
Number payments per year: 12
N: 12*30=360
I/PV: 5,5
PV: 0
PMT: ? -65,67
FV +60000

3.7
Number payments per year: 12
N: 5*12=60
I/PV: 8
PV: -5000
PMT: ? -102.76
FV: +15000

3.8. compare 2 flows, flows must be at the same moment

Number payments per year: 12
N: 3*12=36
I/PV: 7,5
PV: -1000
PMT: -200
FV: ? 9297.72
Lấy FV-4000 => 9297,72-4000=5297,72

3.9.
Number payments per year: 4
N 3*4=12
I/PV: ? => 5.68
PV -6000
PMT -300
FV +20000 (hoặc đổi thành 11000 giống đề mới)

3.10. thiếu dữ kiện interest rate

Quy đổi năm thành tháng => 2 years= 24 months, sau đó cần đưa cả hai khoản tiền về

I1 = I2
1000*((1+r)^24 -1)/r) = 1200*((1+r)^18-1)/r) => không tính được rate
=> cần dùng table, hoặc excel
Nếu I/Y = 0 => CN1 = 24000; CN2 = 21600 số 1 hấp dẫn hơn
Sử dụng table đưa hai công thức CN1 và CN2 và so sánh => khoảng cách giữa hai giá trị càng ngày càng cao
khi interest tăng

=> Chọn đáp án 1000 for 3 years.

3.11.
Number payments per year: 12
N: ? => 93,86=> 7 years 10 months and ... days
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I/PV: 6
PV 0
PMT -250
FV +30000
Beg/End: Beg

3.12. đổi PV= số nào cũng được, không đổi đáp án

Number payments per year: 12
N ? 11,58 months
I/PV: 8
PV -1000
PMT 1%*1000=-10
FV= 1000*120%=1200

3.13.
Number payments per year: 12
N ? 108, 8 months = 9,01 year
I/PV: 7
PV 0
PMT -200
FV 30000

3.14. thiếu dữ kiện FV

Cần tính FV (CN)

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Application #4: loans

4.1 Calculate the 4 first rows of a constant amortization loan with C=50,000$, I = 8%, duration: 10 years (monthly
payments)

4.2 Calculate the 4 first rows of an interest only loan with C=50,000$, I = 8%, duration: 10 years (monthly payments)

4.3 Calculate the 4 first rows of a constant annuity loan with C=50,000$, I = 8%, duration: 10 years (monthly
payments)

4.4 Recalculate the annuities of an ARM (C=50,000$, I = 8%, duration: 10 years; monthly payments) if the rate is
increasing by 10% in year 4 and 10% more in year 8?

4.5 Calculate the 4 first rows of a constant annuity loan with C=40,000$, I = 8%, duration: 10 years (monthly
payments), insurance fee (yearly): 300$, application fee: 500$

4.6 What is the total cost of the loan in 4.15?

4.8 What will be my future annuity if a renegotiate a loan of 50,000$ (10 years, I= 7.5%, exit fee = 500$, constant
annuity) after 5 years with a rate of 5%?

4.9 With the same data than 4.8, how long do I still have to pay, if I want to keep the same annuity ?

4.10 What will be my annuity if I make a loan of 50,000$ (10 years, I= 7.5%, exit fee = 500$, constant annuity) if I
want to start paying only after 3 months?

4.11 Compare the costs of the loan of question 4.10 if you want to start paying at the beginning and 3 months later?

4.12 With the loan of question 4.3, what is the extra cost of a loan with an insurance fee (yearly): 500$, application
fee: 500$, and an exit fee of 1% of the remaining capital if I want to exit after 5 years?

4.13 What is the total cost of a loan of 100,000$, I=7%, duration : 12 years, insurance fee : 1% of the capital at the
beginning of the year (divided in 12 payments/year)?

(Chapter 5 required)

4.14 What is the EAPR of loan in 4.15?

4.15 What is the EAPR of a loan of 100,000$, I=7%, duration : 12 years, insurance fee : 1% of the capital at the
beginning of the year (divided in 12 payments?

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Application #5: ROI
Discounting rate : 4%
CF0 CF1 CF2 CF3 CF4 CF5 CF6 CF7 CF8
I0 $ -100 000,00 $ 10 000,00 $ 20 000,00 $ -5 000,00 $ 20 000,00 $ 20 000,00 $ 20 000,00 $ 20 000,00 $ 20 000,00
I1 $ -50 000,00 $ 15 000,00 $ 15 000,00 $ 18 000,00 $ 17 000,00
I2 $ -40 000,00 $ -20 000,00 $ -10 000,00 $ 20 000,00 $ 20 000,00 $ 20 000,00 $ 20 000,00 $ 20 000,00 $ 20 000,00
I3 $ -35 000,00 $ 5 000,00 $ 5 000,00 $ 5 000,00 $ 4 000,00 $ 6 000,00 $ 7 000,00 $ 5 000,00 $ 5 000,00

5.1 What is the NPV of I0?

5.2 What is the IRR of I3?
5.3 Do you prefer I2 or I3?
5.4 (without calculation) do you prefer I0 or I2?
5.5 What should be CF5 of I1 if I want a NPV higher than 16,000$?
5.6 What is the NPV of I3 (I = 6%)?
5.7 What is you favorite investment?
5.8 What is the most interesting PI of all the projects?
5.9 Do you prefer I1 or I2?
5.10 With a rate of 5%, which investment has the best payback period?
5.11 If you need to get your money as soon as possible, do you prefer I2 or I3?
5.12 According to the EAA criterion, which investment is better : I1 or I2?

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