NYU Stern School of Business

Undergraduate College

STAT-UB.0027.001 (C22.0027): MATHEMATICS OF INVESTMNT

Fall 2011

Instructor Details

Tenenbein, Aaron

atenenbe@stern.nyu.edu

212 998 0474

TBA

KMC 8-50

 

Course Meetings

TR, 11:00am to 12:15pm

Tisch T-UC24


Final Exam:

Schedule exceptions
    Class will not meet on:
    Class will meet on:

 

Course Description and Learning Goals

This course is a mathematical treatment of the methods used in the evaluation of fixed income securities. It will cover the Financial Mathematics topics in the second Actuarial Examination that is jointly sponsored by the Society of Actuaries (Course FM) and the Casualty Actuarial Society (Course 2) and is required for students majoring in Actuarial Science.  It is also recommended to students majoring in Finance who have a strong interest in mathematics and its applications to finance.  The course will include the applications of mathematical methods to such areas as refinancing of mortgages, present values of benefits in structured settlements, car leasing, and measurement of interest rate risk in bonds.  These ideas will be demonstrated in a series of cases which will be assigned.

 

Course Pre-Requisites

The prerequisite for this course is the equivalent of V63.0121 and V63.0122 or a grade of 4 or 5 in the Advanced Placement BC examination in Calculus.  It is also strongly recommended that students have taken or currently take C15.0002: Foundations of Financial Markets.

 

Course Outline

  1. The measurement of interest and discount.
  2. Equations of value, including determination of term and interest rate of an investment.
  3. Basic annuities with level payments, with application to real estate mortgages and refinancing strategies.
  4. General annuities, including varying payments, and different frequencies with applications to structured settlements in lawsuits.
  5. Loan Amortization schedules and sinking funds.
  6. Bond Evaluation and Pricing with applications to Automobile Leasing.
  7. The determination of Yield Rates, or Rates of Return on an Investment.
  8. The Term Structure of Interest Rates
  9. Introduction to duration and convexity, with applications to the measurement of interest rate risk in bond pricing, and debt immunization.
  10. Other topics, including: stock evaluation, mutual funds, money market funds, and certificates of deposit.

 

Required Course Materials

Required Readings

  1. B: Broverman, Samuel A. (2009).  Mathematics of Investment and Credit Winsted, CT: ACTEX Publications, Inc. (Third Edition).
  2. C:  Tenenbein, Aaron (2008). Course Supplement.

Allocation of Readings to Topics

TOPIC NUMBERS

READINGS

1 and 2

B:  Chapter 1: All.

 

3 and 4

B:  Chapter 2:

     All except Sections 2.4.2 and 2.4.3.

C:  Pages 8-9.

5

B:  Chapter 3: All except Section 3.4.

C:  Pages 32 – 34.

6

B:  Chapter 4: All except Section 4.3.2.

C:  Pages 10-15, 35, 36.

7

B:  Chapter 5:

     All except Sections 5.1.3 and 5.1.4.

8

B:  Chapter 6: All except Section 6.4.

 

9

B:  Chapter 7: All.

C:  Pages 16 - 30, 37, 38.

10

B:  Chapter 8:

     Sections: 8.2.1, 8.2.4, 8.3.1, 8.3.2.                

Calculator

You should obtain a financial calculator, which should be brought to class and can be used in any examination.  If you are sitting for the actuarial examination, you should obtain a calculator that is allowed for the actuarial examinations, such as the Texas Instruments (TI) BA-35 or the BA II plus.

 

Assessment Components

Basis for Grade

 

There will be a midterm and final examination and weekly homework assignments.  Detailed solutions are provided on the day that the assignments are due.  Consequently, there is no credit for late homeworks unless there is a valid reason and you contact me by email or otherwise.

The final will count will count for 50% of the grade; the midterm will count for 30% of the grade, and the homeworks will count for 20% of the grade.

 

Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.

 

Grading

At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

Note that while the School uses these ranges  as a guide, the actual distribution for this course and your own grade will depend upon how well  you actually perform in this course.

 

Re-Grading

The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.

 

Professional Responsibilities For This Course

Attendance

 

Participation

In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:

 

Assignments

 

Classroom Norms

 

Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 

 

Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 

 

Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.

 

Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.

 

Recording of Classes

Your class may be recorded for educational purposes

 

Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.

 

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