BSc Actuarial Science and Mathematics / Course details

The module will be methods-based, with examples throughout based on the financial products described in the introduction section. It is appropriate for first year Actuarial Science and Maths with Finance students, as well as being an option for second year Mathematics students. The unit aims to improve students’ financial literacy, as well as achieving the stated ILOs. Taking current examples from the news/ comparing real financial products will empower students to evaluate real financial decisions they will encounter in their lives. Students will consider social responsibility as it relates to investing, and the implications of financial risks.

The unit aims to:  

• Enable students to evaluate and compare financial products that they will encounter in their everyday lives (savings, loans, mortgages, pensions, bonds, investments, etc), considering tax, inflation, yield, payback periods and profits.
• Consider social responsibility, risks, false advertising and other factors when making financial decisions.
• Teach students about the immunization of liabilities and assets. 

On the successful completion of the course, students will be able to:  

• State the cash flow from descriptions of different financial projects such as savings accounts, loans, bonds and investment schemes. 
• Calculate and convert between compound interest, p-thly payable interest, the force of interest and accumulation/discount factors. 
• Use a cash flow to state, manipulate and simplify expressions for the net present value and accumulated profits. 
• Assess and compare financial projects by calculating yields, discounted payback periods, and accumulated profits. 
• Identify and discuss practical and ethical considerations that may impact financial decisions, such as investment limits, market volatility, access to capital and social responsibility factors. 
• Examine whether a pension fund can be immunized, by evaluating functions of its assets and liabilities.

1. Introduction – basics of financial products (some commonplace and some from finance) and cashflows
2. Interest rates, accumulating and discounting, tax and inflation  
3. Yield, DPP and profit – including evaluating and comparing projects
4. Immunization 

The main content delivery will be via two interactive lectures per week.

There will be notes, quizzes, example Excel calculations, copies of the lecture materials and tutorial sheets on Blackboard.  

There will be one tutorial per week. The students will attempt a sheet of exercises before the tutorial class. In the tutorial class, some questions from this sheet will be discussed and additional new exercises will be covered.

Exam: Generic feedback supplied after exam period  

Coursework: Marked on gradescope and model solutions released 0-2 weeks after assessment

Steven J. Garrett, An introduction to the mathematics of finance: a deterministic approach