Mathematics of Interest Rates and Finance PDF Download Ebook. Gary C. Guthrie and Larry D. Lemon present the basic core of mathematics needed to understand the impact of interest on the world of investments, real estate, corporate planning, insurance, and securities transactions. The value of a good foundation in the mathematical principles of finance and interest becomes apparent if you peruse the mathematics found in an investment or financial management text.
Basic ideas like the present value of an annuity, the net present value, the internal rate of return, and discounted cash flows are often burdened with cumbersome notation and messy formulas. The novice learner with no previous experience often finds these to be difficult and perplexing. This text has avoided the tedious arithmetic and transcription of data from finance tables by requiring the use of financial calculators.
Authors emphasize the use of technology with preprogrammed features, but in the advanced sections we also encourage students to program their calculators. We feel this exercise will give them an understanding of the formulas and how their financial calculators perform the various computations. Because this is a problem-solving course, students will have to demonstrate an understanding that goes beyond the numbers spit out by a calculator.
This understanding comes from recognizing and diagramming the structure of the problem so that the application of a formula is natural and not just an educated guess. Our goal is for students to understand well those few underlying principles that play out in nearly every finance and interest problem.
Students are often frustrated trying to decide whether an exercise requires present value or future value, so authors teach them how to recognize certain scenarios and clue words that simplify the decision process. Most of our students reach the point at which they always get the present value/future value issue correct.
This text is intended to open the door of financial understanding to many other academic majors besides business, accounting, and the actuarial sciences. To emphasize this principle, authors have coined a phrase called the Golden Rule of Finance: Monies cannot be added or reconciled unless they are valued at the same point in time. This concept drives the development of formulas and equations of value so pieces of money can be moved both forward and backward on the time line.
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