Simon Fraser University
Engaging the World

Course Outlines

Spring 2022 - ACMA 201 D100

Interest Theory and Applications (3)

Class Number: 6919

Delivery Method: In Person

Overview

  • Course Times + Location:

    Jan 10 – Apr 11, 2022: Mon, 10:30 a.m.–12:20 p.m.
    Burnaby

    Jan 10 – Apr 11, 2022: Wed, 10:30–11:20 a.m.
    Burnaby

  • Exam Times + Location:

    Apr 25, 2022
    Mon, 12:00–3:00 p.m.
    Burnaby

  • Prerequisites:

    MATH 152 with a minimum grade of C; or MATH 155 or MATH 158, with a grade of at least B.

Description

CALENDAR DESCRIPTION:

Measurement of interest, present value. Equations of value. Annuities. Loans and amortization schedules. Bonds and other securities. Cash flows: yield rates, duration, convexity, immunization. Yield curves: spot rates, forward rates. Interest rate swaps. Covers part of the syllabus for Exam FM of the Society of Actuaries and Exam 2 of the Casualty Actuarial Society. Students with credit for ACMA 210 cannot take ACMA 201 for further credit. Quantitative.

COURSE DETAILS:


Course Outline:

This course is an introduction to financial mathematics. The material covered is useful for everyday applications involving sequences of predetermined (non-contingent) payments, such as loans, mortgages, annuities and fixed income investments. It is also fundamental to working with more complex, contingent cash flows in actuarial practice (pricing, reserving, asset-liability management and capital budgeting). Topics include:

  • Measurement of Interest: Simple interest, compound interest, accumulation functions, present value, effective and nominal rates, force of interest, inflation, real rates, determinants of interest rates.
  • Equations of value: Basic problem, unknown time, unknown rate of interest. 
  • Basic Annuities: Immediate, due, perpetuities. 
  • General Annuities: Payments at a different frequency than interest is convertible, continuous annuities, varying annuities.
  • Yield Rates: Cash flow analysis, reinvestment rate, rates of return.
  • Amortization Schedules: Principal and interest payments, outstanding loan balance, varying series of payments, continuous payments.
  • Bonds and Other Securities: Types of securities, price of a bond, premium and discount, yield rates. 
  • Other: Yield curves, forward rates, spot rates, duration, convexity, immunization, interest rate swaps.

This course is accredited under the Canadian Institute of Actuaries (CIA) University Accreditation Program (UAP). Details of required courses and grades at Simon Fraser University are available here (https://www.cia-ica.ca/membership/university-accreditation-program-home/accredited-universities/accredited-university-detail?pav_universityid=236ca8c4-60e5-e511-80b9-00155d111030).


In addition to the specific university’s internal policies on conduct, including academic misconduct, candidates pursuing credits for writing professional examinations shall also be subject to the Code of Conduct and Ethics for Candidates in the CIA Education System and the associated Policy on Conduct and Ethics for Candidates in the CIA Education System. For more information, please visit Obtaining UAP Credits (https://www.cia-ica.ca/membership/university-accreditation-program-home/information-for-candidates/obtaining-uap-credits).

Grading

  • Assignments 15%
  • Participation 5%
  • Midterm 1 23%
  • Midterm 2 23%
  • Final Exam 34%

NOTES:

Above grading is subject to change.

Materials

REQUIRED READING:

Financial Mathematics: Theory and Practice, Authors: Brown, R. and Kopp, S., Publisher: McGraw-Hill Ryerson (2012)

Required SOA Study Notes:

Using Duration and Convexity to Approximate Change in Present Value by R. Alps, SOA, FM-24-17.

Interest Rate Swaps by J. Beckley, SOA, FM-25-17.

Determinants of Interest Rates by M. A. Bean, SOA, FM-26-17.


RECOMMENDED READING:

The Theory of Interest (3rd ed.) Author: S.G. Kellison, Publisher: Richard D. Irwin Inc. (2008)

Interest Theory: Financial Mathematics and Deterministic Valuation, 2nd ed. Authors: Francis, J. and Ruckman, C., Publisher: ActuarialBrew (2018)

Mathematics of Investment and Credit (7th ed.) by Samuel A. Broverman. Publisher: ACTEX

Department Undergraduate Notes:

Tutor Requests:
Students looking for a tutor should visit https://www.sfu.ca/stat-actsci/all-students/other-resources/tutoring.html. We accept no responsibility for the consequences of any actions taken related to tutors.

Registrar Notes:

ACADEMIC INTEGRITY: YOUR WORK, YOUR SUCCESS

SFU’s Academic Integrity web site http://www.sfu.ca/students/academicintegrity.html is filled with information on what is meant by academic dishonesty, where you can find resources to help with your studies and the consequences of cheating.  Check out the site for more information and videos that help explain the issues in plain English.

Each student is responsible for his or her conduct as it affects the University community.  Academic dishonesty, in whatever form, is ultimately destructive of the values of the University. Furthermore, it is unfair and discouraging to the majority of students who pursue their studies honestly. Scholarly integrity is required of all members of the University. http://www.sfu.ca/policies/gazette/student/s10-01.html

TEACHING AT SFU IN SPRING 2022

Teaching at SFU in spring 2022 will involve primarily in-person instruction, with safety plans in place.  Some courses will still be offered through remote methods, and if so, this will be clearly identified in the schedule of classes.  You will also know at enrollment whether remote course components will be “live” (synchronous) or at your own pace (asynchronous).

Enrolling in a course acknowledges that you are able to attend in whatever format is required.  You should not enroll in a course that is in-person if you are not able to return to campus, and should be aware that remote study may entail different modes of learning, interaction with your instructor, and ways of getting feedback on your work than may be the case for in-person classes.

Students with hidden or visible disabilities who may need class or exam accommodations, including in the context of remote learning, are advised to register with the SFU Centre for Accessible Learning (caladmin@sfu.ca or 778-782-3112) as early as possible in order to prepare for the spring 2022 term.