FINANCIAL

MATHEMATICS

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 PRESENTATION

This practice material has been designed in such a way that it can be used as a

Work Manual for a Course on Financial Mathematics . It contains a varied selection of

problems that cover the general concepts of a basic level of Financial Mathematics:

Percentages, Simple and Compound Interest, Promissory Note Discounting, Commercial

Discounts, Partial Payments, Equivalent Value Equations, Bank Discount, Annuities,

Amortization of Debts, Constitution of Amortization Funds, etc.

We have endeavored to present an ordered set of Ten (10) Practices that illustrate

and expand the key principles of the subject that are discussed by the teacher in the

classroom, and on whose solution the student's effective learning will depend.

We appreciate the collaborations received and we hope that this material can be

used by teachers and students, while we commit to reviewing it periodically taking into

account criticism, suggestions, as well as the Academy's curricular requirements.

PROF. TULIO MATEO DUVAL

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 Financial Mathematics Practice Manual
CONTENT
P.

PRACTICE No. 1 6
PRACTICE No. 2 10
PRACTICE No. 3 13
PRACTICE No. 4 19
PRACTICE No. 5 28
PRACTICE No. 6 38
PRACTICE No. 7 45
PRACTICE No. 8 51
PRACTICE No. 9 57
PRACTICE No. 10 63
BIBLIOGRAPHY 73
TABLE FOR CALCULATION OF EXACT TIME BETWEEN TWO DATES 82
1.
• Time in Days between two Dates. Exact (Real) and Approximate Times.
• Ordinary Interest and Exact Interest.
• Combinations of Interest (I o , I e ) and Times (t e , t a ).
• Choice between Payment Options or Investment Alternatives.
• Rational or Mathematical Discounting.

2. PRACTICE No.4 19
• Equations of Values Equivalent to Simple Interest.
• Partial payments. Commercial Rule and Simple Interest Balance Rule.
• Installment Sales at Simple Interest.
• Global Interest and Interest on Unpaid Balances.

3. PRACTICE No.5 27
• Simple Discount. Bank Discount. Equivalent Interest and Discount Rates.
• Discount of Promissory Notes with Bank Discount.
• Commercial discounts.

4. PRACTICE No.6 37
• Compound interest. Amount and Current Value at Compound Interest.
• Equivalence between Simple Interest Rate and Compound Interest Rate.

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 • Equivalence between Compound Interest Rates.
• Nominal Interest Rate and Effective Interest Rate.
• Choice between Payment Options or Investment Alternatives.

Financial Mathematics Practice Manual

CONTENT
P.

5. PRACTICE No.7 45
• Discount of Compound Interest Promissory Notes.
• Equations of Values Equivalent to Compound Interest.
• Equivalent Time.
• Partial payments. Commercial Rule and Compound Interest Balance Rule.

PRACTICE No. 1...............................................................................................................................................6

PRACTICE No. 2.............................................................................................................................................10
PRACTICE No. 3.............................................................................................................................................13
PRACTICE No. 4.............................................................................................................................................19
PRACTICE No. 5.............................................................................................................................................28
PRACTICE No. 6.............................................................................................................................................38
PRACTICE No. 7.............................................................................................................................................45
PRACTICE No. 8.............................................................................................................................................51
PRACTICE No. 9.............................................................................................................................................57
PRACTICE No. 10...........................................................................................................................................63
BIBLIOGRAPHY..............................................................................................................................................73
TABLE FOR CALCULATION OF EXACT TIME BETWEEN TWO DATES...........................................82
6.
• Amount and Present Value of Simple, Certain, Due and Immediate Annuities.
• Debt Amortization. Amortization table.
• Constitution of Amortization Funds. Capital Accumulation Chart.
• General Past Due Annuities.
• Simple Advance Annuities. Amount and Current Value.
• General Advance Annuities.
• General Deferred Annuities.
• Perpetual Annuities.

PRACTICE No. 1...............................................................................................................................................6

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PRACTICE No. 2.............................................................................................................................................10
PRACTICE No. 3.............................................................................................................................................13
PRACTICE No. 4.............................................................................................................................................19
PRACTICE No. 5.............................................................................................................................................28
PRACTICE No. 6.............................................................................................................................................38
PRACTICE No. 7.............................................................................................................................................45
PRACTICE No. 8.............................................................................................................................................51
PRACTICE No. 9.............................................................................................................................................57
PRACTICE No. 10...........................................................................................................................................63
BIBLIOGRAPHY..............................................................................................................................................73
TABLE FOR CALCULATION OF EXACT TIME BETWEEN TWO DATES...........................................82
7.

■■■■■■■■■■■■■■■■■■■■

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 FINANCIAL MATHEMATICS
PRACTICE No. 1
TAMD

1.- Express each of the following percentages in decimal form:

to) 9% = g) 4 ½% =

b) 31.4% = h) ⅞% =

c) 0.1875% = i) 20 ¾% =

d) 235% = j) 3/5 % =
an
6.235% = k) 15 ⅔% =
d)
F) 0.5% = l) 14 1/5% =

2.- Express each of the following quantities in percentages:

to) 0.02 = f) 0.8 =

b) 0.0078 = g) 0.215 =

c) 0.8725 = h) 10 ½ =

d) 17.3 = i) 3/8 =
an
d) 6.9 = j) 8 ¾ =

3.- Carry out the indicated operations:

to) 13.5% of 90,000 = h) What percentage of 560 is 207.2?

b) 0.5% of $60,000 = i) What percentage is 279 out of 900?

c) 35% of 4,000 = j) What percentage is 24.9 of 166?

d) 20% of $1,737.25 = k) What percentage of 18,500 is 2,220?

an
33 ⅓% of $9,720 = l) What number is 3,570 40%?
d)
F) 12 ¼% of $15,600 = m) What number is 4,914 35%?

g) 320% of 900 = n) What number is 3,198 13%?

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4 .- Carry out the indicated operations (using a calculator) without writing intermediate results. Round to
two decimal places when necessary.
a) 1,322.67 + 65.79 ∗ 15.06 = f) ( 201 e3 – 140.08 ∗ 5 1.85 )
=
(1+0.045) 4

b) 4 + 2 ⅜ – 3 ½ = g) 24,000 [ (1 + 0.17 ) 1/8 – 1] =

3

⎛ 30 ,060
c) 14,500 (1 + 0.085 ∗ 124/360 ) = h) 18 ⎜
-1
⎝17 ,657

d) 37,583 ( 1 + 0.158 ∗ 7/12 ) – 21,030.40 i) 53,400 * 0.02

= [1 – (1+ 0.02) 30 ] –

e) (1,262.43 – 818.47) + 132.19 =

3.15 log ⎜ ⎛ 1.0245 - 4,600 *0.0245
⎝ 511.69
j) 1 -
log1.0245

5 .- Solve the following equations:

a) 17 x - 8 = 3(5 x - 2 I 3)

b) 3( y + 4) - 2.8 = 1.4

Z
c) 2,450 = 1,500
1,02
+
5
d) 2 I 5 P - 4,200 = 1,800(1 + 0.24 ∗ 11/12) - 1/10 P

e) 9,800(1 - 3 d ) = 4,508

F 1 + x ⎟ ⎞ = 243
12⎠
)

g) 4 4 + 3/5 w = 2

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h) x 2 + 5 = 3

1) 2 x 2 + 7 x - 15 = 0

j) log 2 (3 x - 4) = 5

k) 24,225.63 = 18,000(1 + 0.02) n

l) 10 4x + 1
= 132

m) 5 3 x - 4 = 25

n) e 2 x - 6
= 44.7

ñ) 6ln x = 7.2

6.- Solve:

a) How much do you pay for an item that is sold at a 30% discount, if its price is $3,640.00?

b) What was the price of a desk that now costs $8,512.00, if its value had recently increased by 12%?

c) A salesperson earns $26,000.00 per month plus a 4.8% commission on sales made. If last month you
received $34,832.00, how much did your sales total in that month?

d) If a pig farmer sold 70% of his pigs and kept 186, how many pigs did he have?
e) How do you write A x = 12.4 in logarithmic form?

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f) How do you express log ( x - 3) = 2.29 in exponential form?
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g) What is the value of the base “a” if log a (142.06) = 7 ?

h) Determine the eighth term and the sum of the first twelve terms of the arithmetic progression:
1, 4, 7, . . .

i) Find the common difference of an arithmetic progression of 6 terms whose sum is 129 and its first term
is 4.

j) Determine the tenth term and the sum of the first six terms of the geometric progression:
6, 3, 3/2, . . .

7.- ANSWER CORRECTLY:

a) What is an algebraic expression?

b) What is an equation?

c) What is the solution of an equation?

d) When is an equation linear and when is it quadratic?

e) What is the decimal logarithm of a number?

f) What is an arithmetic progression?

g) What is a geometric progression?

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 FINANCIAL MATHEMATICS
PRACTICE No. 2
TAMD

1 .- Luís Mena obtains a loan for $120,000.00 payable in three years. If you agreed to pay the interest
generated monthly at a simple semiannual rate of 17%, how much interest will you have to pay each month?

2 .- A man has the amount of $500,000.00 to invest. You place 60% of your capital at 10% simple annually
and want to invest the rest at an annual rate that produces the same semiannual interest as that generated by
the first investment. Determine at what annual interest rate you should make the second investment.

3 .- Marta Soto gets divorced and upon dividing the assets of the marital estate, she receives the sum of
$700,000.00. He decides to invest this sum to receive the interest produced quarterly, so he places 55% of the
$700,000.00 in a savings account that pays 14% simple annually and the rest in a financial account that pays
1.5% simple monthly. How much will you receive in total interest each quarter?

4 .- Carlos Hidalgo receives $4,200.00 every two months for the interest produced by an investment made at
12% simple annual rate. What capital does Mr. Hidalgo have invested?

5 .- A man deposits capital in a bank account that pays 11% simple annually, generating $797.50 in monthly
interest. If the bank increases the rate paid, bringing it to 12% simple annually, what amount must said man
withdraw from the deposited capital to continue charging the same monthly interest?
6 .- José García, before traveling abroad, deposited $20,000.00 in a savings account. Three and a half
months later he returned to the country and verified that during that period the account generated interest
amounting to $787.50. Determine what annual simple interest rate was paid to the account.

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7 .- Calculate for what time (months) a capital at 18% simple annual rate should be invested to generate
interest amounting to 15% of the capital.

Capital P ($) i (%) annual Time Interest I ($)

to) 130,000 10 3/4 2 years
b) 20 1 month 450.00
c) 20,600 1½ years 3,831.60
d) 80,000 17 _____months 10,200.00
and) 10,000 12 3/8 1 year 2 months
F) 32,500 10.85 _____ weeks 542.50
g) 106,000 20 fortnights 12,587.50
h) 20 1/5 10 months 33,835.00
Yo) 75,000 22 ___years ___months 26,125.00
j) 290,100 3 weeks 4,318.03
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9 .- Ángel Acosta obtains a loan for $84,000.00 for an 8-month term, with a simple interest rate of 28.2%
per year. How much will you have to pay in total in interest? With what amount is the loan settled at the end
of the term?

10 .- Carmen Abreu upon receiving her Christmas bonus for $120,000.00 decided to give her husband a
fifth of the value received so that he could repair his vehicle and give her parents 30% of the remaining
value. If you invested what you had left at a simple 3% quarterly, what amount will you have at your
disposal after 1 year and 3 months?

11 .- Juan Martínez purchases a washing machine valued at $32,000.00 on credit. You agree to make a
cash payment of $20,000.00 and a final payment in 3 months. If you agree to pay a simple 3.5% bimonthly
on the debt balance, how much will you have to pay within 3 months to pay off the debt?

12 .- A man wishes to invest an amount such that, accumulated at 4% simple monthly, it amounts to the
sum of $150,000.00 within 10½ months. How much would you have to invest?

13 .- A debt contracted at 21% simple annual rate was settled after 16 fortnights by paying the sum of
$83,220.00. Determine how much the debt was and how much was paid in interest.

14 .- A loan for $135,000.00 payable in 15 months was settled through a single payment of $163,687.50.
What was the quarterly simple interest rate applied?

15 .- A man buys a desk valued at $14,000.00 on credit. You pay 15% of the initial value and pay the rest
after 1½ months with a 5% surcharge on the cash price. What amount did you pay to settle the debt? What
annual simple interest rate will the buyer pay?
16 .- At what annual simple interest rate does capital double in 48 months?

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17 .- If $60,000.00 is invested at 13% simple annual rate, how long (weeks) will it be required for the
investment to reach the sum of $64,350.00?

18 .- In what time (years) does an investment made at 8% simple annual increase by 40%?

19 .- A father deposits $300,000.00 in a savings account on his minor child's birthday. If the bank pays
10½% annual simple interest and at the time the boy turns 19 the account has a balance of $552,000.00,
how old was the child when the $300,000.00 was deposited?

20 .- ANSWER CORRECTLY:

b) What is called interest?

b) What is the difference between simple interest and compound interest?

c) What is greater, the capital or the amount?

d) What other name is given to the amount of capital?

e) What produces more interest: investing at 24.76% simple annually or 6.19% simple quarterly?

f) In what time (months) does a capital that is invested double at a simple annual rate of 24%?
FINANCIAL MATHEMATICS
PRACTICE No. 3
TAMD

1 .- Determine the exact time and approximate time between the following dates:

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a) From 5/13/2009 to 12/30/2009

b) From 6/20/2003 to 11/14/2004

c) From 10/23/2001 to 3/8/2010

2 .- Calculate the ordinary and exact simple interest generated by a loan of $90,000.00, from January 17
to October 13, 2008, if the interest rate was 18% simple annual. Use tea

3 .- A man wants to deposit $400,000.00 for a period of 140 days and has two options to place his money:
Banco del Norte, which pays 15.25% annual ordinary interest, and Banco Capital, which pays 15.32%
annual exact interest. Which bank should you choose?

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4.- A debt for $36,000.00 contracted on February 8 was settled on July 8 of the same year.
Determine the ordinary and exact amount, if the interest rate was 2.5% simple monthly. Use ta

5.- On 4/15/2009, Gustavo Ochoa obtained a loan for $70,000.00 at a rate of 22½% annual simple interest.
If the loan was paid off on 2/25/2010, how much should you have paid for
interests? What amount did Mr. Ochoa have to pay to pay off the loan? Use Io,
you

6.- On 9/20/2008 an investment of $300,000.00 was made at a simple interest rate of 1.3% monthly with
liquidated yield at maturity. How much was the amount (investment + interest) for the
investment maturity date which was 4/13/2009? Use Io, ta

7.- Nelson Marrero had to pay $78,000.00 on 6/18/2007. Not being able to pay off on that date, he
renegotiated the debt by paying 40% of the value immediately, committing to pay interest on the remaining
value at a rate of 2.15% monthly simple interest. If the debt was paid off after 125 days, what was the
balance date? How much should Mr. Marrero have to pay to settle the debt? Use Ie, you

8.- How much should be invested on November 9 in a savings account that pays 14½% simple annually to
have $155,512.00 on April 23 of the following year? Use Ie, ta

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9.- On 2/10/2009 a loan at 17 3/8 % simple annual rate, which was settled with the payment of
$61,353.00 on 6/25/2009. Determine the amount of the loan and the total interest paid. Use Io, you

10 .- Teresa Villar made an investment of $450,000.00 on 2/21/2008. If said investment, with a yield
liquidated at maturity, reached the sum of $499,795.00 on its maturity date, which was 10/28/2008,
determine what annual interest rate it earned. Use Ie, you

11 .- A buyer purchased a bicycle valued at $4,200.00 on credit. If on 4/23/2009 you paid 30% of the value
and then on 7/10/2009 you settled the debt by paying $3,213.54, calculate what annual interest rate was
applied. Use Io, ta

12 .- Calculate how long (days) a capital was invested at 21.95% simple annual rate if it was increased by
5%.

13 .- Ana Olivares invested $66,400.00 at a rate of 1.45% simple monthly on 8/9/2009. What day did you
withdraw your investment if it had been capitalized up to the sum of $70,515.00? Use Ie, you

14 .- On 5/21/2009, a man purchased a music system valued at $38,000.00, making an initial payment of
65% of the value, agreeing to pay 29% simple annually on the remaining value. If the balance (debt +
interest) was subsequently settled with a single payment of $14,317.82, determine: Use Io, you
a) The value of the initial payment.

b) The value of the debt just after the initial payment has been made.

c) What amount was paid in interest?

d) The date of cancellation of the debt.

15 .- A wholesaler made a purchase of grocery items worth $300,000.00, paying in cash 70% of the value
of the purchase and agreeing to pay 27% annual interest on the remaining value. If the debt was settled on

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2/22/2010 by paying $101,137.50, determine what date the purchase was made. Use Io, you

16 .- In what time (y/m/d) would a capital that is invested at 38.5% annual simple interest double?

17 .- Ramón Cruz bought a small car at the dealer “AGUILA MOTORS” and the seller gave him the choice
between two payment methods:
a) $615,000.00 in cash, or
b) Pay an initial 20% of the cash price and sign a 120-day promissory note for $532,740.00.
What payment method would be most advantageous to Mr. Cruz, if he could safely invest the available
money at a simple 26% per year?

18 .- On April 10, a woman was evaluating 3 options to pay for a washing machine:
a) $30,000.00 cash;
b) $12,000.00 initial and $20,000.00 to be paid on June 10; either
c) Make 3 payments of $10,290.00 each on dates: May 10, June 10 and July 10.
Compare the values of the options on the purchase date considering that the woman has the funds to
buy cash and the facilities to invest her money with a simple 2% monthly return.
19 .- Which of the following ways best suits the interests of an employee to receive a bonus?
a) Receive now $38,500.00;
b) Receive $20,000.00 now and another $20,000.00 in 2 months; either
c) Receive 3 payments of $14,000.00 each in 30, 60 and 90 days.
Suppose that by investing the money you earn interest of 31.4% simple per year.

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20 .- What is more convenient: a) deposit in a financial certificate that pays 3.4% simple quarterly, or b)
invest in a chocolate industry that guarantees that the amount invested increases by 70% every 5 years?

21 .- A promissory note for $174,300.00 due on 11/24/2009 was discounted on 9/20/2009 at a simple
annual rate of 20¾%. Determine the liquid or cash value of the note and the rational discount applied to it.
Use Ie, you

22 .- On 7/20/2008 a promissory note was signed for $96,000.00 with 24% annual simple interest and
maturity in 190 days. With 70 days remaining until maturity, the note was sold at a simple 26½% annual
discount. Determine: Use Io, you
a) The maturity date of the note.

b) The value of the note at maturity.

c) The date of sale of the note.

d) The sales value (liquid or cash) of the note.

e) The value of the rational discount applied.

23 .- What rational discount is made to a promissory note whose maturity value is $120,000.00, 45 days
before maturity and with a simple annual rate of 26.5%?

24 .- VEFISA, SA discounted on 12/2/2009 a promissory note worth $114,750.00 maturing on 2/4/2010

and only received $110,972.00. At what annual rational discount rate was the note discounted?

25 .- Elsa Díaz purchases a dining room set of 8 chairs from TITO MUEBLES, SA. She pays $20,000.00

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down and signs a promissory note for the remaining 75%, which generates interest at an annual interest
rate until maturity, which will be in 9 months. The promissory note was then sold by the furniture store to
FINACOM, SA for $65,367.36, as it was rationally discounted at a rate of 20% per year, with 2½ months
remaining until its maturity. Determine;
a) The cash price of the dining set.

b) The annual simple interest rate that the promissory note accrued.

26.- ANSWER CORRECTLY:

a) What is more productive for the investor, exact interest or ordinary interest?

b) Which way of calculating time, approximate or exact, produces a greater amount of interest?

c) What is a promissory note?

d) Obtain the liquid or discounted value of a promissory note with a maturity value of $75,600.00, 3 months
before maturity and a rational discount rate of 32% simple annual rate.
FINANCIAL MATHEMATICS
PRACTICE No. 4
TAMD

1.- Carmen Gómez acquires a washing machine valued at $34,000.00, paying an initial payment of 30% of
its value and agreeing to pay the rest within a period of 6 months with interest at a simple annual rate of
21%. If you pay $8,000.00 after 1 month and $10,000.00 after 4 months, what amount will you have to pay
at maturity to fully pay off the debt? Use as FF : a) Month six
b) The moment of purchase

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2 .- On 10/13/2009 a debt was contracted for $110,000.00 with 2.5% simple monthly interest and maturity
on 3/10/2010. If the debt was settled through two equal installments on dates 12/16/2009 and 1/15/2010
and a final payment upon maturity for $28,728.80, obtain the amount of the installments. Use Io, te and FF on
1/15/2010.

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3 .- For the purchase of a safe, $5,000.00 was paid initially and 3 equal monthly payments of $3,800.00. If
the interest rate applied was 24% simple per year, calculate the cash price of the safe. Use as FF on the day
of purchase.

4 .- On 7/20/2009 a person had the following debts with the same creditor: $35,000.00 to be paid on
9/15/2009; $40,000.00 on 11/20/2009 and $60,000.00 on 1/30/2010. If you subsequently agree to cancel
said debts through a single payment, equivalent to the sum of the values of the aforementioned payments,
determine the due date of the new payment, considering that the agreed interest rate was 18% simple
annual rate. Use Ie, te and FF on 7/20/2009.

5 .- Elena Ríos made a credit purchase of household items worth $23,200.00. Agreed to pay the entire
purchase within 6 months with 3 equal bimonthly payments. If the interest charged on the transaction was
1.75% simple monthly, determine the amount of the payments and the total amount paid in interest.
Establish FF at 6 months.

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6 .- Rebeca Ruiz had to pay $18,500.00 on 5/13/2008; $9,900.00 on 7/28/2008 and $21,400.00 on
9/18/2008 to Mr. Miguel Almonte. Since he was unable to pay off on said dates, he agreed to pay the 3
debts through 2 payments: the first on 6/15/2008 and the second, for an amount equal to double the first, on
10/15/2008. Obtain the value of these payments based on an interest rate of 21% simple annually and FF on
10/15/2008. Use Ie, you

7 .- Alejandro Solano opened a bank account with an initial deposit of $10,800.00. After a month and a half,
he withdraws $4,200.00, after 4 months he deposits $6,100.00, after 7 months he withdraws $9,000.00 and
after 11 months he deposits $5,400.00. Obtain the balance of the account after one year, knowing that the
bank pays interest at a simple 1% monthly. Use as FF : 1 year.

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8 .- A used car whose cash price was $510,000.00 was paid with an initial payment of $200,000.00 and 2
equal payments at 3 and 8 months of $178,790.70 each. What annual simple interest rate did they charge?
Use FF at 8 months.

9 .- On 8/10/2009 a man agreed to pay a debt amounting to $41,000.00 through the following payment
plan: $12,000.00 on 9/30/2009, $18,000.00 on 12/1/2009 and $13,717.64 on 2/4/2010. What annual simple
interest rate was applied to the debt? Use Io, te and FF on 4/2/2010.

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10 .- The owner of a bakery purchased tools and accessories for his business on credit for a value of
$56,000.00, agreeing to a payment term of 10 months and interest at a simple annual rate of 15%. If you
made the following payments: $30,000.00 at 3 months and $15,000.00 at 5½ months, determine the
balance payable on the due date. Solve using the Business Rule and the Balance Rule.

11.- On 8/20/2008 a merchant contracted a debt for $38,500.00 at 20% annual simple interest and maturity
on 4/20/2009. If on 10/25/2008 you made a payment of $11,000.00; On 12/12/2008 he made another
payment of $14,000.00 and on 2/26/2009 he made a payment of $8,500.00. Determine what amount should
have been paid on the due date to completely pay off the debt. Solve using the Business Rule and the
Balance Rule. Use Io, you

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12.- Obtain the value of the monthly payment with which a debt of $54,000.00 would be paid off in 1½
years, if a global simple interest rate of 26% per year is charged.

13.- A watch valued at $14,500.00 is purchased on credit with an initial payment of $2,500.00 and 8 equal
biweekly payments. If an interest rate of 24% annual global is charged, calculate:
a) The total interest paid on the financing.

b) The total amount paid for the watch when purchased on credit.

c) The amount of the biweekly fixed payment.

14.- A debt was settled through 16 monthly payments of $7,350.00, which included interest based on a
global 2.5% monthly payment. How much was the capital owed?

15.- Miguel Luna purchased equipment for his pastry shop valued at $160,000.00 on credit, with an initial
payment of 25% of its value and biweekly payments of $6,310.00 each for one year. Calculate the overall
annual interest rate charged.

16.- A loan for $24,800.00 was paid off through 5 monthly payments. Interest was calculated on unpaid
balances with a simple interest rate of 2.5% monthly. Prepare the amortization table.

UNSOLUTE BALANCE
PERIOD (MONTH) AMORTIZATION ($) INTEREST ($) SUBSCRIBE ($)
($)
0 24,800.00
1
2
3
4

5
TOTALS

17 .- What amount would be paid as total interest and what fixed biweekly payment would amortize a debt

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of $72,000.00 payable in 6 months, if the interest rate charged is 26.4% simple annual rate on unpaid
balances?

18 .- A loan with interest at 28.8% simple annual rate on unpaid balances must be settled by paying 24
monthly payments of $8,476.00 each. Determine the amount of the loan and the total amount paid in
interest.

19 .- An inverter with 4 batteries valued at $38,000.00 can be purchased on credit by paying an initial
payment of 30% of its value and 10 monthly payments of $3,128.16 each. Obtain the annual interest rate
on unpaid balances applied to the financing.

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20 .- A debt for $51,000.00 at 33% annual simple interest on unpaid balances was settled through a series
of monthly payments of $3,742.50 each. How many monthly payments were paid to fully pay off the debt?

21 .- ANSWER CORRECTLY:

a) What is a time-value diagram or temporal diagram?

b) What is an equation of equivalent values or value equation?

c) What is the basic rule of the financial sum of capitals?

d) What is called focal date?

e) What is meant by repaying a debt?

f) What is meant by unpaid balance?

FINANCIAL MATHEMATICS

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PRACTICE No. 5
TAMD

1 .- A man requests a loan for $60,000.00 in a savings and loan entity that operates with a simple annual
discount rate of 26%. Calculate how much the discount will be and what amount the man will actually
receive, if the loan term is 2½ months.

2 .- What annual discount rate was applied to a loan of $35,600.00 payable in 3 months, if the discount
made was $2,848.00?

3 .- A discount of $2,950.00 was applied to a bank loan payable in 4 months with a discount rate of 2.5%
per month. What amount was requested in loan? What amount did the applicant receive?

4 .- Ricardo Pérez borrowed a sum of money for a 55-day term from a financial company that applies a
discount rate of 1.6% fortnightly to all its credit operations. If the sum received by Mr. Pérez amounted to
$35,300.00, what amount did he request as a loan?

5 .- How many months in advance was a promissory note with a maturity value of $17,800.00 discounted,
if the discount rate was 6.75% quarterly and the discount applied amounted to $1,401.75?
6 .- On what date was a promissory note with a maturity value of $21,200.00 discounted, if it matured on
1/19/2010, the discount rate applied was 15% semi-annual and the sum received amounted to $19,875.00?

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7 .- 6 months ago a promissory note was signed for $28,560.00 and a term of 8 months. If today it is
discounted in a bank at a simple annual discount rate of 30%, determine:
a) What amount of money is received?

b) How much was the discount?

c) What annual rate of return does the bank earn?

8 .- On 4/11/2007 Editora Mayo, SA sold merchandise for $90,000.00 to a client and gave him credit for
180 days through a promissory note with a simple interest rate of 28% per year. With 45 days left until the
maturity of the promissory note, Editora Mayo, SA decides to discount said promissory note in a bank to
have cash immediately. If the bank applies a simple discount rate of 29.25% per year, determine:
a) The maturity date of the note.

b) The value of the note at maturity.

c) The discount date of the note.

d) The amount that Editora Mayo, SA receives from the bank.

9 .- On 7/15/2007 a promissory note was discounted, receiving an amount equal to 95% of its maturity
value. If the note matured on 9/28/2007, determine the annual discount rate applied.

10 .- On 3/25/2006 the firm Pisos Claros, SA made a sale for $51,500.00 at a cash price to Arq. Lucas
Mesa, which signed a promissory note at a simple interest rate of 22% per year and maturity on

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12/28/2006. On 9/6/2006 the company decided to discount said promissory note in a bank, receiving the
sum of $55,672.68. What was the annual simple discount rate applied? What annual rate of return did the
bank earn?

11 .- What annual discount rate is equivalent to a rate of return of 24.5% per year, for a period of 2½
months?

12 .- A company supplies merchandise to a client, granting credit by signing a 60-day promissory note with
a simple interest rate of 45½% per year. 20 days after the sale was made, said company decided to
discount the promissory note in a bank, receiving the sum of $44,750.00. If the bank applied a simple 48%
annual discount rate, what was the cash price of the goods sold?

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13 .- On 7/27/2005 Tienda Mi Capricho, SA sold a refrigerator, receiving an initial payment of $13,605.00
and a promissory note for the remaining 70% with 32% annual simple interest and maturity on 2/23/2006.
Before maturity, Tienda Mi Capricho, SA received the sum of $35,976.32 when selling the promissory note
to the firm Comercializadora de Valores, SA, which applied a simple annual discount rate of 35%. Get:
a) The cash value of the refrigerator.

b) The date of sale of the note.

14 .- On 10/17/2009 ALMACOM, SA sold merchandise to a client for a cash value of $62,000.00. The client
signs a promissory note for said sum with a simple annual interest rate and maturity on 1/25/2010. On
12/11/2009 ALMACOM, SA sold the promissory note to a bank that works with a discount rate of 29%
annually, receiving for it the sum of $64,428.13. Calculate what annual interest rate the note earned.

15 .- On February 23, Banco del Norte discounts a promissory note to Mario Pérez based on a simple
annual discount rate of 49%. Said promissory note with a maturity value of $95,700.00 matures on the
following August 22. On the same day, Banco del Norte transfers the promissory note to Banco del
Pacífico, which discounts it by applying a simple annual discount rate of 46.5%. How much was the profit of
Banco del Norte?
16 .- A scientific calculator that appears in a store with a list price of $2,900.00 is sold with a 15% discount
percentage. Determine how much the trade discount is and what the net price to pay is.

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17 .- Determine the net price of a rice cooker whose list price is $1,680.00, if it was sold with a discount of
18%.

18 .- When purchasing an item, a 12% discount was obtained, which represented a reduction of $370.80.
Determine the list price and net price of the item.

19 .- A ream of paper whose list price is $180.00, Papelería Núñez sells it wholesale for $150.30. Obtain
the discount percentage applied to sales made in large quantities.

20 .- Determine the list price of a refrigerator for which a net price of $53,475.00 was paid, after obtaining a
discount of 13.75%.

21 .- A furniture manufacturer offers a wholesale customer the following discounts: 7% for buying in bulk,
10% for special promotions and 6% for buying without packaging. Determine the net amount to be paid by
the customer for an order amounting to $352,820.00.
22 .- How much did the owner of a bookstore pay for 100 algebra books, whose list price is $1,300.00
each, if he obtained the series discounts of 9%, 7% and 5%? Also determine the discount rate equivalent to
that series of discounts.

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23 .- A company acquired 20 chairs marked at $3,215.00 each with a 12% discount and 32 chairs marked
at $2,790.00 each with discounts of 10% and 6%. Find the net value to pay for the order.

24 .- Two department stores have the same list price for an item. Store “A” offers serial commercial
discounts of 18% and 23%; and store “B” offers serial discounts of 22%, 11% and 8%. Which store is best
for a buyer?

25 .- The manager of a store establishes that the net price of an item is $2,169.76 after discounts of 15%,
9% and 4%. What should the list price of the item be?

26 .- On an invoice, the following discounts are granted in series: 8% for purchasing in bulk and 3½% for
purchasing without home delivery, which provide a total value of the discount amounting to $841.50.
Determine the list price and the net invoice price.
27 .- On March 10, Empresas García, SA invoices a client for 16 televisions valued at $15,800.00 each
with discounts of 10% and 7%, in addition to the following payment conditions: 8/c, 5/15 and n/45.
Determine:

a) How much must be paid to settle the bill in cash?

b) How much must be paid to settle the bill on March 30?

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c) If the customer pays $90,000.00 on March 24, what amount must he pay when due to settle the
bill?

d) If the customer pays the bill on March 20, calculate how much he would pay and what annual
simple interest rate would be earned by making the payment on that date.

28 .- A merchant receives merchandise worth $300,800.00 with the following conditions: 6/10, 3/30 and
n/60. Thirty days after receiving the invoice, they offer you a deal, in which investing the value with which
the invoice is settled on that date and for 30 days you would earn 30% annual simple interest. Determine if
it is better for you to pay the invoice in 30 days or invest in the business.

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29 .- On 1/14/2010, a retail merchant purchased merchandise worth $13,000.00 with the following
payment terms: 10/10, 5/20, 2/30 and n/45. Determine:
a) What was the due date of the invoice?

b) If the merchant paid $4,000.00 on 1/23/2010 and $2,300.00 on 2/8/2010, what amount must he
have paid to settle the invoice on its due date?

c) Within 30 days of receiving the invoice, the merchant is offered to participate in a business with
the promise that by investing the value of the invoice on that date and for 15 days, 60% annual
simple interest would be earned. Determine what was best for the merchant: pay the invoice in
30 days or invest in the business.

30 .- An invoice for $18,442.00 dated 5/13/2009 was granted a 7% discount and had the following payment
terms: 8/c, 10/10, 5/30, 2/40 and n/60. If the debtor paid $9,000.00 on 5/28/2009, what amount must have
been paid on 6/17/2009 to settle the bill?

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31 .- For an invoice for $89,320.00 dated June 5 with discounts of 7% and 4%, the following payment
conditions are established: 10/c, 8/10, 5/20, 3/30 and n/45. Answer:

a) How much must be paid to settle the bill in cash?

b) How much must be paid to settle the bill on June 26?

c) If $26,000.00 was paid on June 13, what amount should have been paid on July 2 to settle the
bill?

d) If $30,000.00 was paid on the same date as the invoice and $24,000.00 was paid on June 19,
what amount should have been paid when the invoice was due to pay it in full?

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32.- ANSWER CORRECTLY:

a) Difference between simple interest and simple discount.

b) What is called bank discount?

c) What is the discount of a promissory note?

d) When are two rates, interest and discount, equivalent?

e) What is the commercial value (liquid or cash) of a promissory note?

f) What is called a commercial discount?

g) Difference between list price and net price.

h) What are serial discounts?

i) What is called a single discount rate or percentage equivalent to a series of discounts?

j) What are early payment discounts?

FINANCIAL MATHEMATICS

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PRACTICE No. 6
TAMD

1 .- Find the interest rate "i" per capitalization period and the number "n" of capitalization periods when a
capital "P" is invested:
a) for 5 years at 10¼% compounded annually

b) for 6 years at 13% annually compounded weekly

c) for 2 years 3 months at 16.8% nominal bimonthly

d) from 5/20/2009 to 9/2/2009 at 18% annually compounded biweekly

e) from 10/13/2008 to 12/26/2008 at 32.4% compounded daily

2 .- Find the amount composed of:

a) $150,000.00 for 2½ years at 10% annually compounded quarterly

b) $80,000.00 for 6 years at 12% compounded quarterly

c) $210,000.00 for 7 years 3 months at 22% nominal semiannual

d) $74,000.00 for 39 weeks at 15% compounded monthly

e) $40,000.00 for 26 months at 7% bimonthly

3 .- A lot whose market price is currently $620,000.00 is estimated to increase in value each year by 4%
over the value of the previous year, for the next 7 years. How much will its value be at the end of the term?

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4 .- Emilio Ortega began working in an industry with a monthly salary of $22,400.00. If they promised him a
3% increase every two months for the first 3 years, how much will Mr. Ortega's salary be at the end of said
period?

5 .- Manuel Melo upon receiving his Christmas bonus for $110,000.00 decided to spend 15% of the value
received on the balance of his debts and 35% of the remaining value on the paint of his vehicle. If you
invested what you had left at 20% per year, compounded quarterly, what amount would you have at your
disposal after 3½ years?

6 .- How much interest will a loan for $200,000.00 generate at 18.4% compounded monthly for a term of a
year and a half?

7 .- Manuel Santos lends a friend $60,000.00 for 5 months, charging him a simple interest rate of 1.25%
monthly. At the end of that period, you deposit the amount obtained in a savings account that pays you 18%
annually compounded biweekly. How much money will Mr. Santos have at the end of 30 months? How
much will the total interest earned be?
8 .- $160,000.00 was deposited in a bank account for 5 years. When the deposit was made, the bank was
paying 13.4% compounded quarterly. Three and a half years later, the rate changed to 18% per year
compounded monthly. Calculate the amount at the end of 5 years.

9 .- An investment of $350,000.00 is made over 10 years. During the first 6 years the interest rate is 11%
annually, compounded semiannually. Subsequently, the rate drops to 9.6% annually compounded quarterly

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for a year and a half. The rest of the time the rate increases to 10% per year, compounded monthly. What is
the final amount of the investment?

10 .- $90,000.00 is deposited in a savings account that pays 18% annually convertible biweekly. After 6
months, the interest rate changes to 21% annual convertible monthly and at that time $40,000.00 is
withdrawn. After 10 months, the interest rate increases again, reaching 21.6% annual convertible monthly
and at that time $35,000.00 is deposited. Get the amount after 3 years from the first deposit.

11 .- What amount was invested at 2.75% bimonthly, if interest of $28,504.35 was earned after 14 months?
12 .- How much should be deposited in a savings account that pays 13% compounded weekly, if you wish
to accumulate the sum of $1,150,000.00 over a period of 8 years? How much interest would be earned?

13 .- How much should I pay today for a debt of $92,700.00 that matures in 9 months, if the value of
money is 18% annually convertible quarterly?

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14 .- What amount of money did Lic. Marcos Núñez on 11/20/2009, if he signed a loan contract for
$129,712.00 that included principal + interest at 30% compounded quarterly, and its maturity date was
7/18/2010?

15 .- What is the annual rate of return, capitalized every 2 months, of a capital amounting to $400,000.00,
if after 3 years it increases reaching the amount of $634,910.50?

16 .- If Marta Pérez intends to invest $513,840.00, with the aspiration that said sum will be capitalized until
reaching $700,000.00 in 2 years and 5 months, at what quarterly compounded compound rate should she
invest to achieve the desired amount?
17 .- At what monthly convertible annual rate, an investment made in one year generates interest in the
order of 17% of its value?

18 .- At what daily convertible annual rate does an investment made in 3½ years double?

19 .- How long (years) did it take to pay off a loan of $170,000.00 with interest at 24.96% annually,
compounded biweekly, if it was settled with a single payment of $246,722.68?

20 .- A person deposits $12,700.00 in a savings account that pays 13% annually convertible weekly. In
what time (months) will the investment generate interest or dividends of $1,299.00?

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21 .- How long (y/m/d) will it take for an investment to increase by 60%, if the interest rate is 34.8% per
year, compounded monthly?

22 .- Benjamín Gómez, before traveling to fulfill a work contract abroad, made a deposit of $360,000.00 in
a savings account that pays 11.6% compounded semiannually. Determine how long (y/m/d) Mr. Gómez
remained out of the country if upon his return he found that the account balance was $519,350.00.

23 .- What annual simple interest rate is equivalent to 18% compounded bimonthly, if the money is
invested for 2 years?

24 .- What is the biweekly nominal rate equivalent to 20% simple annual rate for a period of 18 months?
25 .- What is the monthly convertible annual rate equivalent to 18% semi-annual convertible annual rate?

26 .- What is the rate compounded quarterly equivalent to 10% weekly convertible annual rate?

27 .- Determine the effective interest rate, equivalent to 25% annually compounded biweekly.

28 .- What is the annual rate compounded every 2 months equivalent to an effective rate of 32.4%?

29 .- If on April 10 capital was invested at an effective rate of 31.75%, determine by which date the
investment would have increased by 18%.

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30 .- Using effective interest rates, determine what is best for an investor, whether to place their money in:
a) 7.95% compounded biweekly.
b) 8% compounded quarterly.
c) 8.25% compounded annually.

31 .- Assuming a return on money of 2% per month, say which option is most convenient for the buyer of a
property if they are offered the following payment conditions:
a) $1,690,000.00 cash; either
b) $500,000.00 initially, $600,000.00 after 10 months and $861,000.00 after 1½ years.
32 .- A debtor can settle a debt by paying:
a) $70,000.00 after 8 months and $43,000.00 after 1½ years.
b) $50,000.00 after 6 months and $60,000.00 after 1 year, or
Which option is more favorable to you assuming a return on money of 18% compounded convertible
bimonthly?

33 .- An appliance store offers its customers 2 payment plans for their purchases: Cash with a 10%
discount on the list price; and in installments, 50% of the list price as an initial payment and 50% after 6
months. Say which payment option (cash or installment) is best for a person making a purchase worth
$100,000.00, assuming a return on money of 48% per year convertible weekly.

34 .- Determine what is best for the buyer of a car whose list price is $620,000.00, assuming a 36% return
on money compounded monthly:
a) Pay it in cash with a 5% discount;
b) Pay it with an initial 40% of the list price and two payments 3 and 4 months after the purchase
for $195,000.00 each; and
c) Pay it through 3 payments at 1, 2 and 3 months for $205,000.00 each.

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35 .- Determine what is more profitable: deposit in a bank account that pays 7.9% annually, compounded
bimonthly, or invest in a business selling spare parts and vehicle parts that guarantees that the amount
invested increases by 50% over a period of time. 5 years.
36 .- What is more productive: a) invest at 30% annually convertible bimonthly, or b) do it at 31% annually
convertible semiannually?

37 .- If Eduardo Aquino has the investment options listed below, determine using equivalent interest rates,
which option generates more interest.
a) Fixed-term investment with interest of 21.5% compounded semiannually.
b) Financial certificates that pay 20.6% compounded weekly.
c) Mortgage bonds that earn you 20.68% compounded monthly.

38.- ANSWER CORRECTLY:

a) What is meant by compound interest?

b) What is called nominal interest rate or nominal rate?

c) What is called the capitalization or conversion period?

d) Define capitalization or conversion frequency.

e) What is meant by interest rate per capitalization period?

d) Define amount or future value of capital at compound interest.

g) Define current value of an amount at compound interest.

h) When are two compound interest rates said to be equivalent?

i) Why is the interest rate per compounding period also called the effective rate per compounding period?

j) What is called annual effective interest rate or effective rate?

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 FINANCIAL MATHEMATICS
PRACTICE No. 7
TAMD

1 .- A financial company receives a promissory note for $125,000.00 with a 13-month term and interest at
24% annually, compounded semiannually. What is the net (or cash) value of the note, with 5 months
remaining until maturity, if the company discounts it in a bank with an interest rate of 27% compounded
monthly?

2 .- When a woman sold her car, she received an initial payment and a promissory note for $280,000.00
with a 2½-year term. If after one year, the woman decides to discount said promissory note in a bank that
operates with a biweekly nominal interest rate of 33.6%, determine the rational compound discount applied
and the effective value of the promissory note.

3 .- Hipólito Mena made a purchase of construction materials in a hardware store, signing a promissory
note for the value of the purchase with interest at 21% compounded quarterly and maturing in 1 year and 7
months. If 9 months before maturity the note was discounted with an annual interest rate of 26%
compounded weekly, its effective value being $101,912.57, what was the value of the purchase?

4 .- Julio Pinedo signed a promissory note for $34,180.00 at an annual interest rate compounded quarterly
and maturing in 2 years. If a year and a half after signing, the promissory note was discounted with a
bimonthly nominal interest rate of 21%, with its net value being $45,201.72, determine the quarterly
compounded annual rate that the promissory note accrued.
5 .- A promissory note worth $92,000.00 with interest at 33% per year, compounded monthly, matures in
150 days and is discounted in a bank with 55 days remaining until maturity, with its effective value being
$99,729.29. Determine the daily convertible annual rate at which the promissory note was discounted and
the effective rate equivalent to the one obtained previously.

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6 .- On 5/8/2009, a promissory note was signed for $76,000.00 with interest at 36% per year, compounded
biweekly and maturing on 11/6/2009. The note was discounted, prior to maturity, with an interest rate of
43.2% convertible daily, with its effective value being $86,264.16. On what date was the discount of the
promissory note made?

7 .- Pedro Pérez acquired on credit (without an initial payment) a refrigerator valued at $52,800.00 with
financing at 30% nominal monthly, agreeing to pay off the debt through 3 payments: $20,000.00 after 2
months, $30,000.00 after 5 months and one payment final after 6 months. Obtain the value of the last
payment and the total interest involved in the financing. Solve using F . F .: a) Month two and b) Month six.

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8 .- A debt of $140,000.00 due 5 months ago and another of $250,000.00 due within 2 years will be settled
today through a single payment. Find the amount of the payment assuming a return on money of 18% per
year convertible bimonthly.

9 .- A person incurs a debt that was initially agreed to be settled through 2 payments: $40,000.00 within 6
months and $60,000.00 in a year and a half. If the creditor subsequently agreed to receive a single debt
settlement payment after 2 years, determine the amount of said payment considering that the interest rate
applied is 24% compounded quarterly.

10 .- Carlos Suriel deposited $75,000.00 in a savings account that paid interest at a rate of 15% per year,
compounded weekly. Six months later he withdrew the entire balance of the account, which was
$45,754.88, because 2½ months earlier he had made a withdrawal. Calculate the amount of the withdrawal.

11 .- A debt payable in 2 items of $250,000.00 each, 6 and 12 months, is decided to be settled through 3
equal semiannual payments, the first due within 2 months. Determine the amount of the payments
considering an interest rate of 22% nominal semiannual.

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12 .- What sums must be deposited in a savings account on April 5 and June 16 in order to have
$40,000.00 on August 21 and $52,000.00 on November 8? Assume that the second deposit is 50% larger
than the first and that the account pays interest at 36% compounded daily.

13 .- A car is sold paying $200,000.00 initially and $90,000.00 quarterly for one year. If the interest rate is
20% per year, compounded quarterly, determine the cash price of the car.

14 .- Lorenzo Diloné deposits $45,000.00 in a savings account that pays 12% annually convertible
biweekly. If after 4 months you withdraw $16,000.00; After 7 months, deposit $9,000.00 and after 11
months withdraw $13,500.00; So, what will the account balance be after 15 months?

15 .- A man purchased electronic equipment valued at $126,000.00 with financing at 24% nominal monthly.
He paid $30,000.00 down and agreed to pay the rest through 3 quarterly payments. If the second payment
is equal to double the first and the third is double the second, determine the amount of the payments.

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16 .- Emilio Suero left one million pesos to his sons Tito and Miguel, aged 13 and 18, respectively, when he
died, with a clause that establishes that Tito receives double what Miguel receives and that both receive the
corresponding sums in the when they turn 21 years of age. If the money is invested at 12% per year,
compounded monthly, how much will each person receive?

17 .- A loan for $121,720.00 was settled through 2 payments: $40,000.00 after 4 months and $95,599.00
after 8 months. What bimonthly convertible annual rate did you apply to the financing?

18 .- Emilio Santos invests $1,500,000.00 in a business distributed in 2 items: $550,000.00 on the initial
date and $950,000.00 in 6 months. If 2 years after investing the first item, he decides to retire from the
business and receives the sum of $2,089,455.20, obtain the effective rate of return that Mr. Santos earned
by investing in the business.

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19 .- A man had the following debts with the same creditor: $3,100.00 within 3 months, $5,300.00 within 6
months and $7,250.00 within 9 months. Determine in how much time (months), a single payment of
$14,505.00 settles the 3 debts, assuming a return on money of 34% per year convertible monthly.

20 .- A company owes the bank $200,000.00 due in 8 months and $600,000.00 due in 2 years. Obtain the
equivalent time (a/m/d) for the payment of said debts, if the agreed interest rate is 0.65% weekly.

21 .- To consolidate all his debts, a person borrows $220,000.00 at 24% annually compounded quarterly to
be paid off in 2 years. If you pay $150,000.00 at the end of 1 year and $80,000.00 after 1½ years, how
much will be the amount to pay after 2 years to pay off the loan? Solve using the Commercial and Balance
Rules.

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 FINANCIAL MATHEMATICS
PRACTICE No. 8
TAMD

1 .- A company is saving $12,000.00 at the end of each quarter with the intention of purchasing new
machinery in 5 years. The money is being deposited in a savings account that pays 10% annually,
compounded quarterly. What will your account balance be at the end of 5 years? How much will the
account have earned in interest?

2 .- $3,500.00 is deposited at the end of each semester in a bank account that pays 11% annually,
compounded semiannually. If no withdrawal is made, how much money will be in the account after 3½
years?

3 .- Olga Mesa makes an initial deposit of $14,000.00 in a bank account in which she will invest her
savings. If you then deposit $2,100.00 at the end of each two-month period and the account pays 12%
compounded every two months, what will your balance be at the end of 4 years? How much of that amount
is interest?

4 .- Lucy Montás deposits $900.00 at the end of each month in a savings account that pays 6% monthly
convertible annual rate. After 3 years, deposits are suspended, but the account is left untouched (neither
deposits nor withdrawals) for another 3 years. What will be your balance after 6 years?
5 .- In an account that pays 15% annually convertible quarterly, deposits are made at the end of each

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quarter for a value of $3,800.00. What will be the balance of the account,
a) right after the seventh deposit?
b) just before the seventh deposit?
c) just before the 9th. deposit?

6 .- Benito Mora deposits $8,000.00 at the end of each quarter for 3 years in a savings account that pays
12% annually convertible quarterly. Yes to the 8th. quarter you make an additional deposit of $5,000.00,
what balance will you have in your account at the end of the 3 years? How much would be earned in
interest?

7 .- A company executive deposits 12% of his monthly salary of $50,000.00 at the end of each month for 2
years, in addition to making 2 additional deposits of $15,000.00 each within 4 and 8 months. If the money
earns 9% per year compounded monthly, how much will you have in the account at the end of the term?

8 .- Melba Olivo gets married and decides to save $2,500.00 at the end of each month in a bank that pays
15% monthly convertible annual rate. After 2 years of doing that, he proceeds to increase his deposits to
$3,000.00 per month. What will your balance be 3½ years after your marriage?
9 .- A man deposits $5,000.00 at the end of each quarter in a savings account that pays 16.8% annually,
compounded quarterly. After 3½ years, the man suspends the quarterly deposits and the amount obtained
up to that point is transferred to an investment fund that pays 20.85% annually compounded monthly. If the

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money stayed in the investment fund for 2 years, obtain the final amount and the total interest earned.

10 .- Antonio Torres plans to take a pleasure trip within 4 years, which he estimates will cost him
$250,000.00. If you intend to accumulate this sum by making equal deposits at the end of each two-month
period in a savings account that pays 12% annually convertible bi-monthly, determine the amount of the bi-
monthly deposits.

11 .- How much should I save at the end of each month in an account that pays 1.65% monthly to
accumulate $170,100.00 over a period of 5 years?

12 .- A farmer bought a new feed mixer in cash and wants to have enough money on hand to buy another
one at the end of the useful life of the one he just acquired, which is 8 years. He estimates that the cost of
the new mixer will be $360,000.00 minus the $40,000.00 he would get by selling the old mixer. If you plan to
make quarterly deposits due into an account that pays 14% per annum convertible quarterly to accumulate
that value, determine the amount of the deposits.

13 .- Ricardo Sánchez has proposed to buy a car within 3 years and pay for it in cash. To fulfill his wish, he
decides to save $10,000.00 at the end of each month in an account that pays him interest at 2% monthly.
Just after making the 24th deposit, the interest rate drops to 1.75% per month and, because of this, Mr.
Sánchez decides to increase his monthly payment to $11,000.00. Get the accumulated amount after 3
years.
14 .- Manuel Ramírez opens a bank account with an initial deposit of $5,420.00 and agrees to make 24
equal deposits at the end of each month, in order to bring the account balance to $60,000.00 at the end of 2
years. Determine the value of the deposits if interest is paid to your account at 18% per annum convertible
monthly.

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15 .- A man needs to raise $450,000.00 in 6 years and for this purpose he decides to make equal deposits
at the end of each semester in a bank account that pays 12% annually convertible semiannually. After 4
years, the bank raises the rate to 14% annually convertible semi-annually. Find the value of the semiannual
deposits, before and after the bank raised the interest rate, assuming that the amount to be accumulated
remains unchanged.

16 .- A pharmaceutical firm intends to raise $2,532,939.00 to replace equipment. If to achieve this purpose,
you make deposits at the end of each quarter for $62,500.00 in a savings account that pays 10.45%
annually convertible quarterly, how many deposits must you make?

17 .- Rosa Navarro deposits $3,400.00 every 2 months in a bank account that pays 15% annually
convertible bimonthly with the purpose of accumulating the sum of $121,080.00. How many deposits will
you need to make and what will be the value of an additional deposit if necessary?
18 .- Milton Peña deposits $2,500.00 at the end of each quarter for 2 years in a savings account. After
making the last deposit, review the movement of the account and observe that the balance is $16,699.60.
Determine what quarterly convertible annual rate the bank paid you.

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19 .- Felipe Núñez made deposits of $4,200.00 at the end of each quarter in a bank account, accumulating
the sum of $90,064.88 after 4 years. Determine:
a) What quarterly convertible annual rate did the bank pay you?
b) What is the effective rate equivalent to the one found above?

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20 .- A person has deposited $1,270.00 at the end of each two-month period in a savings account. If after
5 years you have the amount of $57,846.00 in your account, what annual bimonthly convertible rate have
you earned?

21 .- ANSWER CORRECTLY:

a) What is an income or annuity?

b) Difference between certain and contingent annuities.

c) What is meant by immediate annuity?

d) What is meant by deferred annuity?

e) Difference between expired and anticipated annuities.

f) Difference between simple and general annuities.

g) What is meant by perpetual annuity or perpetuity?

h) What is called the amount of a simple annuity due?

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 FINANCIAL MATHEMATICS
PRACTICE No. 9
TAMD

1 .- What is the current value of 18 weekly payments due of $1,200.00, if interest is considered at a rate of
26% annually convertible weekly?

2 .- José Santos paid $5,000.00 down and 15 monthly payments due of $2,395.00 for a personal computer
that he acquired on credit. Determine the cash price of the computer if the agreed interest rate was 30%
convertible monthly.

3 .- Sandra Lora deposits a sum of money in an investment account that yields a nominal 12% quarterly in
order to guarantee a fixed income of $36,000.00 every 3 months for 5 years. How much is the deposit made
by Mrs. Lora? How much would you earn in interest?

4 .- What is the cash price of a printer that is paid with an initial payment of 20% of the cash price and 10
biweekly payments due of $352.00 each? The interest rate is 1.36% biweekly.

5 .- A man made a financed purchase of a lot, with no initial payment and making bimonthly payments due
of $55,000.00 during the first 2 years and $70,000.00 monthly during the third year. If the interest rate
charged was 27% annual convertible bimonthly in the first 2 years and 24% annual convertible monthly in
the third year, find the cash price of the lot.
6 .- Which option is most convenient for the buyer of a car valued at $480,000.00 if he or she has the
following payment methods: a) Pay in cash with a 10% discount or b) pay 50% down and 36 monthly
payments due $8,800.00? Assume a return on money of 3.64% per month.

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7 .- When purchasing a concrete binder that is sold for $180,000.00, a master builder can choose between
3 payment plans. Say which one is best for you, if the return on money is 34.8% per year, compounded
monthly:
a) Cash with 8% discount
b) An initial payment of $45,000.00 and 18 monthly payments due of $8,750.00 each
c) An initial payment of 30% of the value and 8 monthly payments due of $15,725.00 each.

8 .- Carlos Díaz will finance 80% of the value of a truck that he intends to buy, whose cash value is
$900,000.00. The idea is to pay off the bank financing through biweekly payments due for 2½ years. If the
interest rate that the bank will apply is 18% per year convertible biweekly, obtain the value of the biweekly
fixed installment to be paid.

9 .- Luís Mejía must pay $90,000.00 to Héctor Olmos today. Since he cannot fulfill his commitment, he
agrees to cancel his debt through 6 equal payments to be made at the end of each semester. Determine
the value of these payments, if the agreed interest rate is 14% per year, compounded semiannually.
10 .- A man invests $250,000.00 in a savings account that pays 21% annually convertible quarterly with the
purpose of guaranteeing a fixed quarterly income for 4 years. What fixed sum will this gentleman be able to
withdraw quarterly?

11 .- A computer valued at $24,000.00 was acquired by paying an initial payment + 8 monthly payments
due of $2,548.00. What sum of money was paid as an initial amount, if the financing was arranged based
on 28% per year convertible monthly?

12 .- Gerardo Mieses bought a dining room set of 8 chairs valued at $84,000.00, paying 40% of its price as

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an initial payment and financing the rest to pay it through 36 equal and due biweekly installments with
interest at 1.5% biweekly. Determine the amount of the initial payment and the fixed installments to be paid
biweekly.

13 .- When purchasing a new car valued at $800,000.00 on credit, a woman receives as an initial payment:
a used car for $230,000.00 + a sum of cash. How much did the woman pay in cash, if she will settle the
remaining balance through payments of $28,342.76 at the end of each two-month period for 4 years,
including interest at 18% nominal bimonthly?

14 .- Sergio Marte contracted a debt for $72,000.00 at 22% capitalized semiannually to be settled through
semiannual payments due for 6 years. Just after having made the seventh payment, you refinance your
debt to finish paying it off with semi-annual payments over the next 7 years. Determine the value of the
payments before and after refinancing.
15 .- The purchase of a 20” television is made by paying $12,000.00 initially and 12 biweekly payments of
$802.78, beginning to make those payments within 2 months. Determine the cash value of the television, if
the periodic payments were charged interest at 2% biweekly.

16 .- Not being able to settle a debt of $20,000.00 that expires today, the debtor renegotiates it with his
creditor, paying him 30% of it and agreeing to settle the remaining balance through 7 equal semiannual
payments, the first due within one year and half. Determine the value of these payments, if they are
charged interest at 30% per annum convertible semiannually.

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17 .- How many quarterly payments of $3,520.00 each will be necessary to settle a debt of $36,225.80
contracted today with interest at 25% annual convertible quarterly?

18 .- The Car Wash “Mi Carro” acquires a powerful vacuum cleaner with an initial payment of $30,000.00
(equivalent to 40% of the price) and monthly payments of $4,300.00 each. If interest is charged on the debt
at a rate of 28.2% per annum convertible monthly, determine how many payments of $4,300.00 must be
made and the value of an additional payment if necessary.

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19 .- Sergio Mancebo deposits $200,000.00 in a savings account that pays 15% annually, compounded
bimonthly. The purpose of this deposit is to enable your oldest child, who has just entered university, to
withdraw the sum of $18,000.00 at the end of each two-month period. How many full withdrawals will you
be able to make and what will be the value of an additional withdrawal?

20 .- A house is for sale for a cash value of $2,500,000.00 and a father agrees to buy it on credit,
advancing 30% of the value as a down payment and financing the rest long-term with a bank, committing to
make monthly payments of $24,000.00 each that include interest at 1.2% monthly. How many full payments
will you need to make and what will be the value of an additional payment if necessary?

21 .- Fernando Piña today incurs a debt of $10,075.00 that he must pay with a payment of $3,000.00 within
3 months and, then, as many monthly payments of $725.00 as necessary until the total is paid, beginning
the payments within 6 months. If the interest at which the loan was contracted is 37.68% per year,
compounded monthly, how many monthly payments will you have to make?

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22 .- To pay a debt of $16,465.00, 6 overdue quarterly installments of $3,630.00 each are paid. What
quarterly convertible annual rate was charged to the operation?

23 .- What bimonthly compounded annual rate was applied to a loan of $140,000.00, if it was settled
through 18 due bimonthly payments of $12,239.87? What is the effective rate equivalent to the one found
above?

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 FINANCIAL MATHEMATICS
PRACTICE No. 10
TAMD

1 .- Juan Lugo makes an initial deposit of $8,000.00 in a bank account that pays 9% annually convertible
semi-annually. A year and a half later, he withdraws $2,000.00 and then makes a deposit of $5,000.00 after
1½ years. You then withdraw $2,850.00 at the end of each semester for the next 3 years, and then deposit
$2,000.00 at the end of each semester for 4 years. Determine the account balance after 10 years.

2 .- A woman deposits $2,000.00 at the end of each quarter for 4 years in a savings account that pays
12% annually convertible quarterly. Then withdraw $7,000.00 at the end of each quarter for one year, and
then deposit $800.00 at the end of each quarter for 1½ years. After those 6½ years, 1½ more years pass
where the account does not record deposits or withdrawals. Determine the account balance after 8 years.

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3 .- Felipe Cuello owes Mario Melo the amount of $10,000.00 and agrees to pay him $2,000.00 at the end
of each of the next 4 two-month periods and a final payment at the end of the sixth two-month period. What
is the amount of the final payment, if the interest rate is 30%, compounded bimonthly?

4 .- A loan of $32,000.00 at 12% annual convertible semiannual will be paid through equal payments at the
end of each semester for 3 years. Determine the value of each payment and construct a debt amortization
schedule.

PERIODIC INTEREST ON UNSOLUTE BALANCE

PERIOD ( SEMESTER ) PAYMENT ($) BALANCE ($) AMORTIZATION ($) ($)
0

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5 .- Juan Martínez should have paid $56,000.00 today to a financial company that charges 24%
compounded monthly, but since he could not fully comply with said commitment, he renegotiated the debt
by immediately paying 25% of it and agreeing to pay the rest through 7 payments monthly due. Determine
the value of each payment and construct a debt amortization schedule.

PERIODIC INTEREST ON UNSOLUTE BALANCE

PERIOD ( MONTH ) PAYMENT ($) BALANCE ($) AMORTIZATION ($) ($)
0

6 .- A company must pay within 5 months the sum of $554,000.00 and to accumulate said sum it is decided
to constitute a fund through monthly deposits due, placing them in an investment account that yields 24%
per year convertible monthly. Determine the amount of the 5 deposits and make a table showing how the
fund is accumulated.

PERIODIC DEPOSIT ACCUMULATIVE ACCUMULATIVE

INTEREST ($) VALUE OF THE
PERIOD ( MONTH ) ($) VALUE TOTAL ($)
PERIOD ($)
1

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7 .- Sara Cueto intends to accumulate the sum of $80,000.00 to pay off a loan that expires in one year. If to
pay it you decide to establish a fund through bimonthly deposits due in an account that yields 15% nominal
bimonthly, determine the value of the deposits and make a table showing the accumulation of the fund.

PERIODIC DEPOSIT ACCUMULATIVE ACCUMULATIVE

INTEREST ($) VALUE OF THE VALUE
PERIOD ( BIMESTER ) ($)
PERIOD ($) TOTAL ($)
1

8 .- A person makes deposits of $12,500.00 at the end of each quarter in a bank account that pays 12%
convertible monthly. What balance will you have in your account after 2 years?

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9 .- Luisa Gil took out a loan of $18,000.00 and paid it off through 24 monthly payments due of $1,054.14.
What annual rate, compounded quarterly, was charged to the operation?

10 .- José Pineda wants to accumulate $78,000.00 in 3 years by making quarterly deposits due in a bank
account that pays 18% convertible semiannually. Calculate the value of quarterly deposits.

11 .- An automobile loan of $150,000.00 is agreed to be paid in 4 years through monthly installments due
with interest at 34.8% annual convertible monthly. Exactly after the twelfth payment has been made, it is
agreed that the remaining balance will be settled through quarterly payments due without exceeding the
originally established period. Determine the amount of the new quarterly payments.

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12 .- Determine the cash price of a refrigerator that can be purchased through payments of $1,300.00 that
are due at the beginning of each month for 1½ years, if the interest rate is 18% convertible monthly.

13 .- Lorenzo Luna must pay the sum of $46,000.00 today. Since he cannot fulfill his commitment, he
agrees to cancel his debt through eight equal annual payments, beginning to pay immediately. Determine
the value of those payments, if the interest rate is 14% compounded annually.

14 .- What will be the amount of each of the 20 anticipated semiannual deposits that will be placed in an
investment fund that yields 9% convertible semiannually in order to make a payment of $800,000.00 that
matures exactly in 10 years?

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15 .- What quarterly convertible annual interest rate was charged on a debt of $400,000.00, if it was settled
through 10 advance quarterly payments of $44,476.69 each?

16 .- Lourdes Astacio opened a savings account and set out to accumulate $200,000.00 in 2 years through
advance bimonthly deposits of $14,494.50 each. What bimonthly convertible annual rate does the savings
account pay?

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17 .- A merchant sells knitting machines for $125,000.00 cash. To promote your sales, you decide to offer
them in 18 monthly payments, charging 24% annual interest compounded monthly. What is the value of the
monthly payments? a) Without initial payment and b) With a fee as an initial payment.

18 .- Miguel Martínez owns a compact car valued at $400,000.00 and decides to sell it, receiving the
following offers: a) $50,000.00 down payment and 6 bimonthly payments due of $65,000.00 each; and b) 12
monthly payments of $40,000.00 each, making the first payment immediately. What is the best offer if the
average return on money is 12% effective?

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19 .- What sum must be deposited at the beginning of each year, in a fund that pays 6% compounded
annually, to provide for the replacement of a company's equipment whose cost is $2,000,000.00, if its useful
life is 5 years and its value salvage is estimated at 10% of the cost?

20 .- In a store, a chair is sold for $4,600.00 in cash, or through monthly advance payments of $511.69. If
the interest is 29.40% compounded monthly, how many payments do you need to make?

21 .- A debt of $30,000.00 at 12% annually, capitalized semiannually, is agreed to be paid through

semiannual payments of $5,000.00 beginning immediately. Find the number of installments and the value of
an additional payment if necessary.

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22 .- Vicente Campos intends to accumulate the sum of $190,000.00 in 2 years and to achieve this he will
make deposits in a savings account that pays 10% compounded quarterly. What amount must you deposit
at the beginning of each fortnight to accumulate said sum? How much interest would be earned?

23 .- María Solano purchases a used car on credit valued at $366,000.00, committing to pay off the debt
through 18 bimonthly payments of $27,441.89 beginning immediately. What annual rate, compounded
biweekly, was charged to the operation? What is the equivalent effective rate?

24 .- Rosa Peña opens a savings account with $12,000.00 and then deposits $500.00 biweekly, starting 3
months after the initial deposit is made. If the interest rate paid is 12.3% compounded monthly, what will be
the accumulated amount 3 years after opening the account?

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25 .- In a department store that has its Christmas offer of “ buy now and start paying in 4 months ” a
customer presents himself to buy a stove valued at $14,600.00, which will be paid off (according to the
promotion) through 8 monthly payments . If the store charges an effective interest rate of 23%, what is the
amount of the monthly payment? What is the total interest to pay for the use of the credit?

26 .- Mr. Rafael Casado becomes disabled as a result of an accident and decides to make an investment
that guarantees him an indefinite monthly income. If the gentleman invests $600,000.00 in a fund that yields
15.6% nominal monthly, how much will he receive monthly if he wishes to keep the invested capital intact?

BIBLIOGRAPHY

1. FINANCIAL MATHEMATICS. Author: Hector M. Vidaurri Aguirre. Publisher

Cengage Learning.

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2. FINANCIAL MATHEMATICS. Authors: Esther H. Highland and Roberta S.
Rosenbaum. Editor Prentice Hall.

3. FINANCIAL MATHEMATICS. Author: Osiris Bonilla.

4. FINANCIAL MATHEMATICS AND SYSTEMS.

Author: Guillermo Baca Currea. Limusa, Noriega Editores.

5. FINANCIAL MATHEMATICS. Author: Frank Ayres, Jr.

Schaum series. McGraw Hill Editor.

6. FINANCIAL MATHEMATICS. Author: Lincoyán Portus Govinden. McGraw Hill

Editor.

7. FINANCIAL MATHEMATICS. Author: Enrique García González. McGraw Hill

Editor.

8. FINANCIAL MATHEMATICS. Authors: Alfredo Díaz Mata and Víctor M. Aguilera

Gomez. McGraw Hill Editor.

9. FINANCIAL MATHEMATICS. Author: Ricardo Lora.

UCMM Editor.

FINANCIAL MATHEMATICS

MATHEMATICAL FOUNDATIONS
EXPONENTS____________________________________________________________________
The term (l " is expressed as " a" raised to the nth power", where "a" is known as the base and "n" is the exponent or power . The exponent
indicates the number of times the base "a" is taken as a factor .
If "a" is a real number and n is a positive integer, then:
a" = n*a* a*a..*a
"n" factors

LAWS OF EXPONENTS
POSITIVE EXPONENT: Let "a" and "b" be real numbers other than zero, ZERO EXPONENT: either ,
and "m" and "n" be positive integers. a=1
1. a” * a" = a m " 4 (a*b)" = a" *b" ,1
nm /\ n , NEGATIVE EXPONENT: a= —

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2. — = a m - n 5 (a _d” FRACTIONARY EXPONENTS:
to n ' \b) b K m¡n
3. (a")" - a""
1.a^” =a 2. a = (a m ^ n =
LOGARITHMS
a"
Let "N" be a positive number and "a" be a positive number different from 1 ; then the logarithms of ”N" to the base "a" is the exponent "x" to which
the base "a" must be raised to obtain said number "N".

In logarithmic form: N=X In exponential form: a"= N

PROPERTIES OF LOGARITHMS
Let 'W and "P" be positive real numbers, "a" be a positive number different from 1 , and "m" and "k" be any real numbers:
p
1. log.1 = 0 4. log. (N * P) = log. N + log
P
2. log.A = 15. logo(N/P) = log N - log
3. log.(N)*= k log. N 6. log "/p = log,P
m
PROGRESSIONS
ARITHMETIC PROGRESSIONS: Let "a " be the first term of not." the general term, "d" the common difference and "n" the number
terms, then:
Nth term of an arithmetic progression: Sum of the first "n" terms of an arithmetic progression:

a, =4,+(n-1)d S,=,(a,+a,) or S,='[2a,+(-I)d]

GEOMETRIC PROGRESSIONS: Let "ai" be the first t of terms, term, "an" the general term, r ' the common ratio and "n the number
then:
Nth term of a geometric progression: Sum of the first n terms of a geometric progression:

a, =a, p'- S. =—:------------------- if 7=1 or S =a,n if 7=1

" (1-7) " 1

EQUATIONS
LINEAR EQUATION (or 1st. degree)
Root of a linear equation of the form: aX + b = 0 — X = — b/fi YES to + 0

QUADRATIC EQUATION (or 2nd. degree) , ,, g ,

n. . . .. .,, nY2-hY+c-0 -b±^b —4ac
Roots of a quadratic equation of the form: " """T —> 1=--------------------------------
2a

Tulio A. Mateo Duval

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 FORMULAS RELATING TO INTEREST SIMPLE
SIMPLE INTEREST

P : Capital or principal / Current value [1] I = Pit [7] p=s-i

i: Interest rate
t: Time (term) of the loan or investment [2] P=— [8] P = S(1 + it)
1 : Simple interest l/
S: Simple amount/Value with future maturity
[3] . YO ? = [9]
------- Pt P_s

1- go

[4]
It=— [10]
Pi
t

[5] SP+I
[11] ,_(S/PI
[6] I = SP Yo

RATIONAL DISCOUNT 0 MATHEMATICAL

Dr: Rational or mathematical discounting

S: Amount or value with future maturity [12] Dr = S-Pd [14] S' = P d - D r

Pd : Present value / Effective or liquid value i : Interest
rate applicable to the discount t : Time (term) of the [13] Pd=S~Dr [15] D - Sit
discount ' 1+it

SALES IN INSTALLMENTS WITH LOBAL AND FIXED PERIODIC FERTILIZATIONS

INTEREST
P: G
Initial debt value

S: Debt amount (capital + overall interest ) [16] A p f = S/n

n : Number of periods (or payments )
i: Global interest rate [17] S = nA P f
Ig : Global interest
Apf: Fixed periodic subscription
[18] I g =SP = it Apf-P

SALES IN INSTALLMENTS WITH INTEREST ON UNSOLUTED BALANCES AND FIXED PERIODIC PAYMENTS
P: Debt value or initial unpaid balance F I IÍ
n : Number of periods (or payments ) [19]
I, =— 2p
" 2L -R (n-1] [21]
4 + ~ '-R
¡ : Interest rate per period 15 » “ «
R - P/n= Fixed periodic amortization fee
It: Total interest on unpaid balances Apf: Fixed [20] I, 1221 I r =nA pf -P
periodic payment " " n2P- R(n-1)]

Tulio A. Mateo Duval

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 MATHEMATICS AS FINAN JIER AS
FORMULAS RELATING TO DISCOUNTSIMPLE
SIMPLE DISCOUNT, BANK DISCOUNT and PROMISSORY DISCOUNT
D: Bank discount (or discount)
S : Amount requested in loan / Amount [1] D =sai [7] S=Pa +D
pay at a future date / Sales value
foundation of a promissory note
d: Tosa discount [2] s_d d t [8] p á = S (i - a t)
t : Time (term) of the discount
Pa : Sum received / Cash or liquid value of a
promissory note [3] _D Yes [9] s Pa
1-ar

Dt = —
[4] Yeah [10]
Yo

[5] Pa = SD [11]
[1-^/5) d

[6] D=SP íl

EQUIVALENT INTEREST AND DISCOUNT RATES

i : Interest rate d 2
d : Discount rate [12] [13]
' 1 -dt 1 + it
Tulio A. Msteo Duval

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 M ATEMATIC
ACE FINANCIAL ACE

FORMULAS RELATING TO THECOMMERCIAL DISCOUNTS

COMMERCIAL DISCOUNTS
d : Commercial discount (discount or rebate)
Ye : List or catalog price [1] D = s.d. [6] S = PD
d : Discount rate or percentage
[► % of discounts in series: di, d2, d3,.,dn
p : Net price [2] s= d [7]
P = S{\-d)
Q, : Net price with series discounts: d
d', ds, ds,-,dn p
r
D- : Total discount with series discounts :
[3] d= — [8] q_
d, ds, ds,-,dn Yes (-d)
d. : Single discount percentage equivalent to series
discounts: di, d2, da,-,dn
[4] p= s-D [9] d = 1 - P/S

[5] D = s -P

[10] p,, = S(l-di) (l-d3) ... (1-dnJ

[11] Dl = S-Pn [12] D, 4.5

[13] d, = 1-(-d,(-d,1-d,)..(1 -d,)

Tulio A. Mateo Duval

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 FINANCIAL MATHEMATICS
FORMULAS RELATING TO COMPOUND INTEREST
COMPOUND INTEREST
P : Capital or principal / Current value
S : Composite amount/Value with future maturity [1] i=j [0] I= P[(1+1)"-1]
1 : Compound interest generated m
J : Annual rate of compound interest (nominal rate ) ni :
Frequency of capitalization of the interest rate i : Interest rate [2] j=j*m [9] P=yes
per capitalization period t: Time or term of the loan or
investment (years) n. Total number of compounding periods [3] n=t(am0s* m [10] P =----------YO,- -
[(1+i)" -1]

n<
[4] [11] +=801*1"

[5] s=P+I [I2] „ = io StS/P^

[6] S = Píl-i)“ [13] i=l(S/P)-1

[7] r=SP [14] j=m[(S/P)-1]

EQUIVALENCE BETWEEN INTEREST RATE SIMPLE AND COMPOUND INTEREST RATE
J : Annual compound interest rate (annual rate) m : Frequency
of interest rate compounding ¡ : Interest rate per
capitalization period 1B i -IG-!,"=1 1B jm[ -1 1
Is : Annual simple interest rate

EQUIVALENCE BETWEEN COMPOUND INTEREST RATES

J2 : Annual compound interest rate (known) m2: Frequency of
capitalization of the rate "J2" [17] j,=m,
«i -1
J1 : Annual compound interest rate (unknown) mi : Frequency
of capitalization of the "J" rate Je : Effective rate (annual)
(1+J2
\ m2)

f■\ -1
[18] j í= 142
l m2 /
COMPOUND RATIONAL DISCOUNT
S : Composite amount/Value with future maturity
Pd : Amount received / Cash or liquid value [19] Pa=s(1+i)"
Dr : Compound rational discounting
j : Annual compound interest rate (of the discount) m - [20] D r =SP d
Frequency of capitalization of the interest rate i - Interest rate
per period (of the discount) [21] Da =SD r
t - Time or term of the discount (cños)

n: Total number of periods (of the discount)

[22] S=P J -D 1

[23] dr =

[24] yes_________________

[1-1147)-"]
]
Tulio A. Mateo Duval

7
9
 FINANCIAL MATHEMATICS
FORMULAS RELATING TO THE ANNUITIES
SIMPLE DUE ANNUITY
Yes Amount of a Simple Past Due Annuity
-(! + /)-"]
ep[
71 — H
A.R. Present Value of a Simple Past Due Annuity S=R [(1+Tk i
Value of Periodic Annuity Payments [1] [8] Yo
PC Yeah
Cash Price of an Asset (movable or immovable)
Yo? —
Go Total Interest Generated [2] [OR ] [9]

।A+
5218
Start Initial Payment of a Credit Payment Agreement Present
I, = s

47
going Value of an Annuity [3] [10]
to PC = bncia! + VAA

E2"F-
Annual Compound Interest Rate (nominal rate )
J. Frequency of Capitalization of the Interest Rate Interest log
m
Rate per Period i = j/m Time or Term of the Annuity [11]
Initial = PC - VAA
[4] [1-í
t (years) Total Number of Capitalization Periods 1+1)"]
neithe —
r log (1 + i) h = nR - TO
[5] [12]
n -log 1_4,
t(years) =
7X —R
6 Yo R [13] log (1+1)

;_AND 1-(-i >'”] A

[7] - - 1 rri [14] Yo 1?
EQUIVALENCE BETWEEN COMPOUND INTEREST RATES
w
j Annual compound interest rate (known) Rate 2
, .mg
m2:
14 to
/”
compounding frequency "]2" Annual compound interest
jl [15] J, = m, [16] J,= 1+J, -1
my: rate (unknown) Rate compounding frequency "]1 " p) 1
m • 2J
heh: Effective rate (annual)
-1
SIMPLE EARLY ANNUITY
Yes Amount of a Simple Advance Annuity Present Value of a
g -1
1- , [1+i-(1+i)-1]
A.R. Simple Advance Annuity Value of Periodic Annuity [17] ■J —Ud-Q"
/í
-
[21] TO. = •
J ni Payments Annual Compound Interest Rate (nominal 1 1] l

[18] g Ai
1 rate) Frequency of Capitalization of the Interest Rate
, Yeah [22]
l" 1
+X
• ■ T b|0 U

1
L1- log ■ [1+1
t
Interest Rate per Period i = j/m Time o Annuity Term -1]
(years) Total Number of Capitalization Periods
11 log -(1+1)"]
'1 -1 (14_4, \ R
=

[23]
log (1 - 1) log (1 - i )
[19]
[<1+I Yes [!-?-(! + z)-"
+1
[24] ]_A
Yo ”R R
[20] Yo
SIMPLE DUE PERPETUITY
Present Value of a Simple Overdue Perpetuity Value of
A.R.
1
the Periodic Payments of the Perpetuity Interest Rate
per Period i = j/m
[25] R = A .Yo [26] 4=i
R [27] ,=R
TO
SIMPLE DUE PERPETUITY PAYABLE EACH n" PERIODS OF CAPITALIZATION
R Value of Periodic Payments every "n" Periods R
n Number of Periods between Successive Payments [23] R = A[(i + iy -1] [29]
[C - I heard]
SIMPLE EARLY PERPETUITY
TO Present Value of a Simple Anticipated Perpetuity g_p. R p 4i
R Value of Periodic Perpetuity Payments [30] Yo [32] “ 1+1 .R
Q Value of the 1st. Perpetuity Payment (Q # R )
R
Interest Rate per Period i = j/m [31] 4 = Q / [33] 4 -R
Tulio A. Mateo Duval

8
0
 TABLE FOR CALCULATION OF
EXACT TIME BETWEEN TWO DATES
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
Days Jan Feb Sea Apr May Jun Jul Aug Sept Oct Nov Die Days Jan Feb Sea Apr May Jun Jul Aug Sept Oct Nov Die
1 1 32 60 91 121 152 182 213 244 274 305 335 1 366 397 425 456 486 517 547 578 609 639 670 700
2 2 33 61 92 122 153 183 214 245 275 306 336 2 367 398 426 457 487 518 548 579 610 640 671 701
3 3 34 62 93 123 154 184 215 246 276 307 337 3 368 399 427 458 488 519 549 580 611 641 672 702
4 4 35 63 94 124 155 185 216 247 277 308 338 4 369 400 428 459 489 520 550 581 612 642 673 703
5 5 36 64 95 125 156 186 217 248 278 309 339 5 370 401 429 460 490 521 551 582 613 643 674 704
6 6 37 65 96 126 157 187 218 249 279 310 340 6 371 402 430 461 491 522 552 583 614 644 675 705
7 7 38 66 97 127 158 188 219 250 280 311 341 7 372 403 431 462 492 523 553 584 615 645 676 706
8 8 39 67 98 128 159 189 220 251 281 312 342 8 373 404 432 463 493 524 554 585 616 646 677 707
9 9 40 68 99 129 160 190 221 252 282 313 343 9 374 405 433 464 494 525 555 586 617 647 678 708
10 10 41 69 100 130 161 191 222 253 283 314 344 10 375 406 434 465 495 526 556 587 618 648 679 709
11 11 42 70 101 131 162 192 223 254 284 315 345 11 376 407 435 466 496 527 557 588 619 649 680 710
12 12 43 71 102 132 163 193 224 255 285 316 346 12 377 408 436 467 497 528 558 589 620 650 681 711
13 13 44 72 103 133 164 194 225 256 286 317 347 13 378 409 437 468 498 529 559 590 621 651 682 712
14 14 45 73 104 134 165 195 226 257 287 318 348 14 379 410 438 469 499 530 560 591 622 652 683 713
15 15 46 74 105 135 166 196 227 258 288 319 349 15 380 411 439 470 500 531 561 592 623 653 684 714
16 16 47 75 106 136 167 197 228 259 289 320 350 16 381 412 440 471 501 532 562 593 624 654 685 715
17 17 48 76 107 137 168 198 229 260 290 321 351 17 382 413 441 472 502 533 563 594 625 655 686 716
18 18 49 77 108 138 169 199 230 261 291 322 352 18 383 414 442 473 503 534 564 595 626 656 687 717
19 19 50 78 109 139 170 200 231 262 292 323 353 19 384 415 443 474 504 535 565 596 627 657 688 718
20 20 51 79 110 140 171 201 232 263 293 324 354 20 385 416 444 475 505 536 566 597 628 658 689 719
21 21 52 80 111 141 172 202 233 264 294 325 355 21 386 417 445 476 506 537 567 598 629 659 690 720
22 22 53 81 112 142 173 203 234 265 295 326 356 22 387 418 446 477 507 538 568 599 630 660 691 721
23 23 54 82 113 143 174 204 235 266 296 327 357 23 388 419 447 478 508 539 569 600 631 661 692 722
24 24 55 83 114 144 175 205 236 267 297 328 358 24 389 420 448 479 509 540 570 601 632 662 693 723
25 25 56 84 115 145 176 206 237 268 298 329 359 25 390 421 449 480 510 541 571 602 633 663 694 724
26 26 57 85 116 146 177 207 238 269 299 330 360 26 391 422 450 481 511 542 572 603 634 664 695 725
27 27 58 86 117 147 178 208 239 270 300 331 361 27 392 423 451 482 512 543 573 604 635 665 696 726
28 28 59 87 118 148 179 209 240 271 301 332 362 28 393 424 452 483 513 544 574 605 636 666 697 727
29 29 88 119 149 180 210 241 272 302 333 363 29 394 453 484 514 545 575 606 637 667 698 728
30 30 89 120 150 181 211 242 273 303 334 364 30 395 454 485 515 546 576 607 638 668 699 729
31 31 90 151 212 243 304 365 31 396 455 516 577 608 669 730

00