The aim of this module is to introduce students to financial mathematics, to demonstrate the use of mathematical functions in financial and macroeconomic models, to introduce students to matrix algebra and the basic principles of calculus and to lay a foundation for further learning.
Financial Arithmetic: Arithmetic and geometric progressions. Simple and compound interest. Continuous compounding. Nominal and effective interest rates. Discounting, present values, annuities, sinking funds, loan repayments. Net present value and internal rate of return. Investment appraisal.
Functions: Linear and non-Linear Functions. Logarithm and Exponential Functions. Applications in Economics and Finance.
Calculus: The Derivative. Techniques of differentiation. Optimisation, application to economic variables: marginal revenue and marginal cost, maximisation of profit, minimisation of costs. Elasticity. The definite integral. Areas and Riemann sums. The Fundamental Theorem. Applications of the definite integral.
The Fundamentals of Matrix Algebra: The role of matrix algebra. Addition and subtraction of matrices. Scalar and vector multiplication. Commutative, associative and distributive laws in matrix algebra. Identity and null matrices. Matrix inversion (determinants and non-singularity). Solving matrix equations with the inverse Cramer’s rule for Matrix solutions. Application to simple Macroeconomic models.
The module will be taught using a combination of lectures, tutorials and laboratory sessions. Course notes and problem sheets will be supplied, while an emphasis will be placed on problem solving and business applications.
| Module Content & Assessment | |
|---|---|
| Assessment Breakdown | % |
| Formal Examination | 80 |
| Other Assessment(s) | 20 |