Mathematics for Finance Dr. Ananda Sabil Hussein.

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Presentation transcript:

Mathematics for Finance Dr. Ananda Sabil Hussein

Math For Finance Household spending A base year is chosen and the value of 100 is allocated to that year. I f we choose 1998 as the base year then the index number of 1998 is 100. Calculate the index number of 1999 and 2000 !

Interest Rate and Investment Appraisal P = principal S = future value r = interest rate t = time

Question This table shows the number of items (in thousands) produced from a factory production line during the course of a year. Taking the second quarter as the base quarter, calculate the associated index numbers. Q1Q2Q3Q4 Output

Practice You are given the opportunity of investing in one of the three projects. Projects A, B and C require initial outlays of $20000, $30000 and $ and are guaranteed to return $25000, $37000 and $ respectively in three years time. Which of these projects would you invest in if the market rate is 5% compounded annually?