Mathematics Stack Exchange
Mathematics Stack Exchange

Questions tagged [finance]

Questions related to the various aspects of financial mathematics. Topics include option pricing, arbitrage theory, market completeness and stochastic analysis.

Mathematical finance, also known as quantitative finance, deal with finance and financial markets in a mathematical manner.

Some examples of mathematical finance are the fundamental theorem of asset pricing which provides the conditions for a market to be arbitrage-free and complete, and the Black–Scholes equation, which uses partial differential equations to describe the price of an option over time.

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2637 questions
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Deferred Annuities

A debt of 8000 is to be amortized by equal monthly payments starting at the end of one year and ending at the end of 2 years if money is worth 9% every month, find each payment. So I was thinking this is a deferred annuity but instead of find the…
SuperMage1
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2 answers

Loan Calculation Wrong

iam creating some simple loan calculation. let say iam taking 1000USD with 8% Interest loan for 1 year, and payable for 12 Month. To get the total interest paid: (1000USD x 8%) + 1000USD = 1080USD (total interest + Principal) For Monthly…
TigaPuluh Saat
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Use sinking fond pay a loan?

A loan of 10,000 is taken out on March 1, 1995 at an effective rate of interest of 8% per year. Interest is paid annually, and a sining fund is established to repay the principal on March 1, 2002. Payments are made annually into the fund beginning…
assiegee
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A mortage problem

I would really appreciate if someone can guide me through this A 90,000 mortgage is repaid by payment at end of each month for the next 25 years. The rate of interest is 11.5% convertible semiannually (a) divide the first payment into principal and…
assiegee
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2 answers

Price of a European Call option is an increasing function of maturity date.

I'm trying to prove that the price of an European call option, denoted by $C(T,K),$ where $T$ is the maturity date and $K$ is the strike, is an increasing function of $T.$ I can't see why the map $T\rightarrow C(T,K)$ is an increasing function.I was…
My little Squid
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4 answers

Is a cash flow stream a vector?

In my notes for 'Financial Maths I', under the topic of 'Present value analysis', we have the following definitions: Suppose we can borrow and lend money at nominal rate $r$ per annum. If we borrow $(1+r)^{-i}V$ pounds now and put it in the bank,…
YinWai Tse
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Business Finance

I have a huge problem in solving this Question. Q: Multinational group of companies has taken loan from Bank in 2015 which they have to repay in year 2022 @ 14% interest rate on biannual compounding. The amount due in 2022 is 1,500,000. Calculate…
Y.Khan
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Financial maths- compound interest rate and equivalent discount rate

I need to find a formula for the compound interest rate i equivalent to a discount rate of d, if the money is discounted over n years. I know that i=d/(1-d), but not how the no. of years comes into it, or how i=d/(1-d) is derived. I'm sure the…
Amy
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Withdraw amount after saving money for 25 years

Walter decides he wants to start saving for retirement. On his 40th birthday he deposits $127000 in an account with an interest rate of 9% annually (compound interest). On his 65th birthday he starts withdrawing money annually from the account for…
adamvincent
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How can I calculate repayments on as loan that has two interest rates?

Let's say I take out a loan of £100,000, and I have to pay it off in exactly 30 years. If the interest rate on the loan is 5 % for the first 5 years, then 6 % for the remaining years, how can I calculate what the regular annual repayments are? I…
danger mouse
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Determine cash price of Treasury bond

Determine the cash price of a 6% Treasury bond that matures in 14 months using the zero rates below. The Treasury bond has semiannual coupon payments. First, I calculated the coupon payments. There are two full coupon payments at months 6 and 12.…
mark
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1 answer

Put-on-call option confusion

So the question asks: Given a 3-steps Binomial Tree model with $S(0) = 50$, $U = 20%,D = 20%$, and $R = 5%$. A European call option has the strike price $X = 40$ and maturity time $T = 3$. Also, a Put-on-Call option is written on this European call…
Betty
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2 answers

How to calculate the interest rate in the below problem?

A loan of £12,000 is issued and is repaid in instalments of £300 at the end of each month for 4 years. Calculate the effective annual rate of interest for this loan. What I tried. The equation of value…
RajSharma
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Calculating retirement amount and time

I am asking for three inputs from the user: How much money do you want to retire?(Savings goal) Initial Investment Annual contribution Interest rate And I want to calculate the amount you end up with in the bank and the retirement time? Sample…
Farhan Ishraq
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The Simple Interest accurued on an amount.

The Simple Interest accurued on an amount of 24000 at the end of 2 years is 11,520. Find the C I accrued on the same amount at the same rate of interest, for the same period? Ans: C I = 12,902.40 My Try: A = 24,000 T = 2 Years S I = 11,520 P R…
Athul Dray
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