Financial Mathematics 101 - Interest Rate, Annuity, Bonds

This course is designed for students who are having their finance 101 at University and people who are curious in learning the basics of financial mathematics. You will learn how to convert single or multiple cash flows that will be received at different points in time to one number. This enables you to make a rational decision between different assets and determine the value of an asset. In this course, you will learn not only the formulas but also understand the intuition behind the formula and practice with examples.

There are three main sections in this course. We will focus on interest rates, annuities, and bonds valuation in each part. In the first section, you will learn the difference between simple rate and compound rate. You will have the opportunity to go through a few examples of converting compounding rates into different compounding periods to suit the payment periods. This is an important skill and we will apply it throughout the course.

In the second section of the course, we will introduce a type of finance asset called annuity. You will learn the concept of this asset, different types of annuity and apply what you will have learnt in the first section to calculate the value of an annuity.

The third section is the application part of this course. You will combine what you have learnt and apply them to evaluate bonds. You will also learn some key relationships of bonds valuation and handy tips towards the end of the course.

Finally, a little background of myself and why I created this course. My name is Qian. I am a qualified Financial Risk Manager(FRM) and a CPA. I have a master degree in Economics from University of Wisconsin - Madison and a master degree of professional accounting from University of Sydney. When facilitating university students in their Finance studies, I found that interest rate is a topic that confuses students a lot. However, it is also an essential part of Finance, either for those who would like to take finance as their career or for those who have to select a Finance course as a compulsory unit. I have seen students suffering from the calculations and some even failed the exams. It’s painful and costly to redo the course for another semester. That’s what motivated me to create this short course. I hope my understanding of finance can make your first steps in Finance firmer.