CHAPTER 1 :

Time value of money

1
.
Problem on time value of money :
Calc : value KI , time 1 , know value Ko time O
. ,

value Ko time O
, ,
know value KI ,
time 1.

2
. Key assumption :
t t
k1 k1 = k(1 + r)
-

1) = ko .
(1 + r) (2)

> Cash flow = equivalent at rate r

.

~ equal

Diagrammatic representation
K

t Time
x(1+ vin With n = t -
+ (years)
S
KI r= annual interest rate
t Time
K

t - N Time
x/(1+ v)
k

t Time
.
3 Genalisation :
·
Real rate of return r : Real RoR ,
internal RoR or IRR , effective annual rate

LEAR) ,
annualised rate internal , yield
.
·
Always convert the time a rate to a yearly scale same scale
.

.
4
Equivalence of rate :
M
1+ r = 1 + APR
M
.
5 Group of cash flows :
·
Cash flow : Cash received & spent thru transactions
.

·
Determinants : Timing ,
size, degree of certainty ,
sanctions
.

· In a diagram :
Kok1 K2 3 kn
>
to +, ty +z tn

. The rule
6 of the rules
Fair value of cash flow
the
·
:

Ko -
t
=
kt(1+ r)

-
t=1
w
Price of the financial
instrument

=> Pu *
PV
(cash inflow) (cash outflow

> Time adjusted by TVM at time O = Price paid for the instrument
.

7 .
Classical problem
 4.71
4
9 38
1
.

.
7
2008 2013

r= ? k = k(r + 174

n= 5
years => 9 38. = 4 71(r +
. 1)5
r 59 38 0 1477
(= = .
-
1 = .

4 71 .

10 000 P
2 r= 3%
.
>
1492 1515

k= 10000/1 + 3 % )23

= 19735 87 .

.
3 r = 4%
K
2018 = 68000011 + 0 . 0415 = 827323 97 .

(1+ n)15
. k' 31
( 3
4 =
>
= = =

Es r= 153 .
1
r= 0 0760
.

= S r= 76 %.

3825 X
Financial product
5 I > FV = Pu + Lai ?

3 months lar nhin hone chuyeny'

= 14 year r= 9%

X = 3825(1 + 0 09)"4 . = 3908

. 30
r= 1 375 %
2
.

L
250000 ? X
.
6 M =
0 4375 %
> 1 12
.

g 1 25 4 4 2 75
n years
.

=
.

r
114 = 1 375 % 15 months 1 , 25
=
years
.

X= 250000x1 .
00437548 = 308278 28 .

PV = 308278 28
265279 31
.

=
0 0137511
.

.
7 .
Total interest = FV -
PV = PV [(1+ r)" -

1]
0 5% n= 5 years
a .

11/12 = .
S
60
TI = 1000 [11 + 0 5 % ) 1) .
-

= 348 85 .

.
D 1 25 %, n = 30 years
r1112 = .

360
TI = 1000 [(1 + 1 .
25 % -

1]86541 .
00

2000 X1 X2 X3
.
8 I >
years
O 3 7 10
" 5%
1/2 =
414 = 2% "112 = 0 75 %
.

X
z
= 2000 x 1 .
056x 1 .
021 x 1 .
007536 = 4779 09 .

9
. r = (0 84 % .
+ 1)1 -
1 = 0 1056
.

% = 13% + 1)2 -
1 = 0 0609
0 5
.

ro 25 = (0 025 %
.
.
+ 1(30x3 -
1 = 0 0228 .

11/12 =
65 % + 1 -
1 = 0 0082 .

·
10 Option 1 :
M1112 = 0 9375 %
. = > r= 10 9375 % .
+ 1(12 -
1 =
0 1185
. = 11 85 %
.

Option 2 :
ro 5 .
= 6 75 %
.
=> v = 16 75 % + . 1)2 -
1 = 0 1396
. = 13 96 %
.

Option 3 : r = 11 75 % .

=> Option 2 .
is the best

11
. In 5 years

.
9 r
1/12 = 1%

Option 1 : FV = 30000 x 1 .
0160 = 54500

Optiona : FV = 12000 x 1 .
0160 + 12000 x 1 .
0136 + 12000 = 50969 59 .

> Option 1 better .

b 0 67 % First 3 yrs 1 5% Next 2

11112 1114 .
yrs
- -
= .
=
,
. .

Option 1 : FV = 30000 X 1 .
006736 x 1 .
0158 = 42978 .
5384

Option 2 : FV = 12000 x 1 .
006736 x 1 .
0158 + 12000 x 1 .
00671x1 0158 + .
12000

= 43837 14 .

> Option 2 better

.
 1203
12
. V=
E-1 = M
1 0 0092
-

= = .

13 .
N = ? 2800 = 2000 x 1 .
025n
=> n =
1091 .
025E = 13 63 . /quarters)

14 6 years = 6 12 . = 72 month
O
FV 2 = = (v + 1)72 = > p+ 1 = 722
Py

·
Triple : 3 = (r + 1)n
= n =
109722 3 = 114 12 months
.
.

15 .
FV = 2500

n = 7 12
.
= 84 months

r1/12 = 0 84 %
.

A X =
2500 = 1673 26 .

1 .
008448
· X = 2500 x 1 .
008436 = 3378 49 .

. Semestrial
16 :
every 6 months
L

-0000 -
X -
X -
X
S
On 4 12 16 semester
M

X X & 50000
=
t &
1 .
064 . 0612
1 1 .
0616

= > 1
. 061X + 1 06 "X
.
+ X = 50000 x 1 .
061
X 50000 x 1 06 29713 99
4 =)
.

= = .

1 .
0612 + 1 064 .
+ 1
 ↑112= 1 %

172500 X

g 5
"months
0110119401/05/94

FV = 2500 x 1 .
0148 = 3722 16 .

On May 1 94, ,
no
· of months left = 40-4 = 36 (months) = 12 quarters
3
=
years
= Price sold-price
Profit bought
=
3722 16 .
3722 16 .

(1 13)3
. (1 033125)12
.

Y 62 20.

.
18
2
· Account 1 :"12 = 6% = v= 1 06 .
-
1 = 12 36 %
.

value on Jan 1 83 (after 3 yrs) ,

PV = 500 x 1 .
12363 = 709 26 .
, Fufrom 01101/83 : FV = 709 26 x 1
. .
1236"
· Account 2 : PV = 400
S
FV = 400 x 1 .
1557
2 2
2 account have the same value
Es FV1 = FVa
Es 709 26 .
x 1 .
1236" = 400 x 1 .
1557
. 1236
1 n 400
=) =

. 155
1 709 26 .

= n = 20 78
. (years)
=
20 years , 9 months , 11 days
.

1000 200 - Y -
X -
X
19
-

.
>
O 1 2 4 quarter

r 2 5%
114 = .

200 X X X
+ t + = 1000
1 025
.
. 0252
1 . 0253
1 .
1 0254

>
=

= 288 86 .
 3000 2030 52
20 .
PV1 = - .

. 058
1

4000
PV2 = = 2702 26 .

1 .
0410

= ) PV of the consolidated loan = 2030 52 .

+ 2702 26 .
= 4732 78
.

- X - X
>
O 2 half year
1112 = 6%

X + X 4732 78
= = .

1 .
06 2

2= X = 2504 . 12

-
500 -
500 -
X
21
.

O 6 12 months

Balance after the time of purchase = 1500 -

500 = 1000
At time O , the PV = 1000 interest 1 5% =
,
+1112 = .

500 X
1000 =
+
. 0155
1 1 .
01512

=> X = 648 .
90

22. The PV = 2000

obligation : 1000 + = 2471 .
95
(1 + 0 028 % 365x3
.

Replace by 2 equal payments X at the end of 6months

a 2 years :

X X
2471 95 .
=
+
(1 + 0 028 % )6x30
.
11 + 0 028 % 365x2
.

=> X = 1399 73 .
23 .
1112 = 1 25 %
.

5000 X 2X 3X

O 2 5 10 month
X 2x 3X 5000
t + =

. 01252
1 . 01255
1 . 012510
1

= X = 908 34 .

24. r = 14 % net cash inflow

~
Proposal A : Total PV of =
95408 39000 12000
+ t
1 14 .
1 142 .
1 .
143

= 121793 10 .

Net PVa = 121793 10 .

-
80000 = 41793 10 .

Proposal B : Total PV of net cash inflow = 35000 58000 80000

+ +
1 14
.
1 .
142 1 143
.

= 129328 .
59
Net PV = 129 328 59 .
-
100 000 = 29328 .
59
B
Net PVA > Net PVB = Proposal A is better
.

ro 5 = 6 %
. Y ro 5 = 5%
25
.

.
of 111
>
01/14 07/17

30m 42m
~ 5 semiannual
~7 semi annual
payments payments

=> Y= 20000 x 1 .
065 + 30000 + 35000 = 81638 36 .

1 057
.

2000 -
800 -
400 -
500 - X
26
. 7
06116 08116 11/16 02/17 04/17

r = 12 % 2000 800 400 500 X

=
t + +
. 1216
1 1 . 125/12 1 12 %3
.
1 . 1256
=> X = 406 . 43
 2 5%
r1 / 4 = 1 .
75 % r
112
= .

1000 2000 I
27
.
>

01/09 07/11 10/11 ---

04/13
2 5%
r1 / 4 = 1 .
75 % r
112
= .

1000 2000 I
>
months
O 30 33 -
51
18 months
~ 1 . 5 years
X= 1000 x 1 .
0175" X 1 .
0253 + 2000x 1 0175x1 .
.
0253
= 3494 79 .

21
3494 79 . = 100011 + r (51 + 2000/r + 1)
1/12 ,12
4 86x18 3
-

= ) 1/12
= .

= 0 49 % .

50000 X X 100000
.
28
O 45 1011 year
v= 60/

50000 100000 X X
t = t
1 .
064 . 0611
1 1 .
065 1 .
0670

=> X= 70679 91 .

-
3000 -
4000 - 4000
29
. >

O 1 2 year

10000 = 3000 + 4000 +

4000
r+ 1 (r + 1)2

= r= 0 0938
.
= 9 38 %
.

Previous exam question :

10000 5000 -
2x -
X -
3000
7
X :
money spent on decoration stuffs
02/19 03/1904119 07/19 09/2019
r= 2%

10000 5000 -
2x -
X 3000
7
month
O 1 2 5 7
10000 + 5000 2x X 3000
=
+ t

. 02112
1 1 .
0216 1 .
02521 027112.

=> X= 4028 62
. :
Money they can spent on decoration

=> Money they spent on furniture stuff = 2x = 8057 24 /euros)

.
 CHAPTER 2 Annuities
1
1 Definition
·
Annuity Sequence of cash flows made at equal interval of time
: . ,

·
Payment interval Period between 2 successive payments.
:

·
Payment dates Cash flows of annuities carried
: .
· 2 types Constant Equal payments :
-

Simple Payment interval-Interest compounding period

: .
K K K
·
Const .
annuity by diagram :
--

>

1 ...
2 n time

2
. Accumulated value
> FV right after the n-th payment
.
K kK --- K
>
1 2 3- ...
N time
FV
FU the third
E g
. .
after payment :

Fu = 1) + ((r + 1) + 1)(r + 1)2

+ (r + 1) + (v + 1)2)
= ((1
-
S3r = (1 + r)3 -
1
r

FV = K (1 + r3" -
1 = K S
. .
n r
r

Sn r
: S at nangle r

= Acc value factor for

.
n payments at rate r
Final value

*
Solve with T184 :
Step 1 Step 2

> Real % format

> Don't need = 0
~
Payment = K
Step 3 ALPHA ENTER
·
Payment vs
. FV opposite

at 1
> Check the sign
Alway

PMT at end !!!

.
3 Present value

K K K

-
K
>
" ---
N

PV = K IC K
: 3
E g .
payments :
t t
1+ r [1 + r)2 (1 + n)3
3
K 1
= .

t= 1 (1 + r)t
-
= an r

-n
PV = k .
1 -

(1 + r) = k .
an
r

* Solve w/ calculator : FV set at 0

.
 12
E . g1
12 500 000 2250000 2250 000 -
2250000

↓ ! 2
--

36
>

r
1/12 = 1 .
5%
Number of deposit = 36 times
12500000 + 2250000a361 5 % .
= 12500000 + 62236539 7 .

E .
g2780 = 80 +
Xa241 25 = 74736539 7 .

X = 33 94 .

Eg3 4000 = 400 . A

n 6 %

= n= 15 73 semiannual payment
.

How much debt is paid

Discounted value of the 15th payment
PV = 400 3884 9
.
9756 % = .

= PV of remaining debt = 4000 -

3884 9 . = 115 1.

15
Forward 15sem = 115 1. x (1 06). = 274 84 .

.
4
Perpetuity
= when u receive a const cash flow till infinity
PV = K K K
t + ....

1+ r (1 + r(2 (1 + r)0
Co
A
=
K K 1
-

t= 1 (1+ r)t t = 1(1+ r)t

Perpetuity w/ const growth rate g

(2 = k=(1 + g)
((z = 12(1 + g) =
kz(1 +
g)
k19(1
O + 1 + 1
PV = Kt = k1(g + 1) =
+
g) =
PVo =
1
+
t = 1(1
+ r)t t= - (r + 1) t= 1(1 + r)t r -

q
 PMT =- 100 , g= 2 %, r = 5%

PVo 100 100

= I = 3333 : value now of the oil well
0 05-0 02
. .
0 03 .

.
5 Spicy stuffs
* Explanation :

+
Acc value. = on the final payment date lind .
the final payment
PV = value period before the 1st payment date
+ exactly one

· shift forward and shift backward

x(1 + r)n (1 + r)n

E .
g: ro 25 = 1 75 %
.
.

n = 24 trimestrial payment

k = 1758 am
L
O 17501750 ---

↓
-
2 O 1 23... 24 trisemester
= now

3PV 33
= kxan +x(n + 1)
= 1750x9241 75x)1 .
0175723
0175723
.

- 34056 .
20x(1 .

- 33664 58 .

E . g2

1500150150
... 150 -
300 -

300
... -
3003
1010811108
I
7
12108 10/1311/1312/13 10116
... ...

r
1/12 = 05% .

FV of 1500 deposit = 1500 x 1 .

00596 = 2421 21 .

FV of monthly deposit = 150 x 500 0 5 00536 .

x 1 .

= 10465 50x1 00536 .

.

= 12523 86 .

FV of withdrawals = 300 x S36 0 5 = 11800 83 .

.

< Balance 2421 21 12523 86

=
.
+
.
-

11800 83 . = 3114 24
.
Simplified diagram :
1500 150 9600 5
.
.
-
300 . S36 05
.

I
O
I
Time
60 96
 g K K K
1
--

06100 12100
... 12/10 time

ro 5 = 5%
K
.

K K -

2
>

O 1
-

22

=> 250000 x S12 5 = kXS225

3979287 63 103343 97
=> k = .
= .

S225

2000 250 250

.. 250
2
.
>

01 2 --
60

1%
M1112 =

A PV= 2000 + 250 x 900 1 = 13238 76 .

D .

x 1 .
017

2000 250 250 ---

Y ---
250
>
O 1 2 7 60
...
--

X = 2000 x 1 .
017 + 250x5 7 1
+
250x9531
- 2144 27 .
+ 1883 38 .
+ 10246 09 .
+

= 14193 74 .

OR : X = 13238 76 . x 1 .
017 = 14193 74 .

+ 5000
-
40000 -
400 -
400
... -
400
3
.
: Buying
--

0 1 2 72
r = 1 5%
1112 .

PU = -40000 -
400 x 9721 . 5
+ 5000x1 .
015-72 =
-
55826 22
.
 -
1600 1600 1600 1600
- -

Leasing
... -

>

01 2 3 ---
72

PV = -
1600 x 9721 5 = 70151 47 .
.

> they should buy the machine

.

X 1250 1250 1250 1250

-
- - -

4. --
...

>
-

17 --

0 1 2 ...
3 7 time

r= 5%
-
17
X = 1250 xa + 5x1 85 . = 3155 72 .

1000 1000... 1000 500

... 500
5
-
-

>
O 1 ...
2 8g ...
14 time

r= 8%
Balance X = 1000 x Ss8 x 1 .
086 -

500xSs8 = 13211 04 .

2000 2000
... 2000
6 .
7
Ann , 1114 = 2
%
O 1 -..
2 11 quarters
Ann's balance X = 2000 x S112 = 24337 43 .

K IC
Elisa 7%
---

> v=
,

O 2 --
37 months

(r1/12 + 1)12 = r + 1 = > m2 =

121 87 .
-
1

- 0 .
57 %
24337 43 .
= kXS370 57 .
= 592 71 .

7 5% months) (1tr)" 1
r12 FV K S
-

. = n = K . = .
nr
r
1 05 1 0 82%
= M112 = . = .

Let the period being 1 ,

year
= ) 500 x a
25 = kxa120 82 .

[] 929 71 . = k xa120 82 .

=> k = 81 67.
 & 300 300 300
.
8
...

>
-
4 years O 1 ...
2 40 quarters
M

"
r= 12% = 1 12 -
1 2 87 %
4 = . = .

X= 300xa402 87x1 12.4 .

.
= 4501 06 .

-
200... -
200 -
300 ...
-

300 400 -
...
-
400
9
. 0 84 %
> 1112 = .

O 1
... 24 25 ...
3637 ... 60 months
-
24 -
36
PV = 200x9240 84 .
+
300x9120 84x1 .
0084 +
400x9240 84x1 0084 .
. .

24 -
36
3410 91x1 0084 8661 41x1 0084
-

= 4330 70 .
+ . .
+
. .

- 13530 44 .

200 200 ... 200 X

.
10 >
r
1/12 = 0 875 %
.

012 ...
60 months
1

X= 200 x 900 0 875 x

.
1 .
00875 = 15831 10 .

~
K K K
11
. ---

>
O 12 ...
18 11 years
r = (rn/ 12 + 1)1 -
1 = 1 .
00841 -
1 = 10 56 % .

10 000 = 1xS 1010 56 x 1 .

.
1056

=> k= 552 47 .

L
X -
500
... -
500
12
. --

>
O
...
23 24 ...
59 months

1 25 %
1112 = .

PV = 500 xa361 . 25 x 1 .
0725-23 = 10838 . 99
~

500 .. 500 500 ...

500
.
13 > ro 5 = 6%
.

O 1 ...

5 6 ...
18

X= 500x556X 1 06
. = 2987 65 .
 100 100
...
14. >
r= 10%
O 12 N years

259 = 100x1 1n .

=> n=
10g1 .
1
2 59. = 9 98. /years) > deposits made 10 times.
98
Fu = 100 xS1010X 1 .
10 .

= 1749 78 .

80000 - K -
K
15 9%
,
: r=
...

>
O
---

9 10 24 years
+h
55 65th
-

bday bday
PV = 50000 x 1 .
099 = 173751 46 .

173751 46 . = kXa159
=> k = 21555 41 .

80000 - - K -
K
0 67 %
--

16
.
> 11/12 = .

O 4748
... 227 months

180 monthly payments

80000 x 1 .
006747 = kXa1800 67 .

=> k = 1848 .
92

L 300
... 300
17 r 1%
.
> 114 =

O 4 j ---
22 trimesters

15 months = 5 trimesters
"
PV 300 xa161 % 4243 07
-

= x1 01 . = .
Previous exam questions :
- .
now
1 .

25 ...
- 25 40-
...
-
40 -

60 ...
-60
a 7
O 6061 120121 180 months
1
... ...
...

5 years 5 years 5 years

syears 7 years
V 4 2%
r=
= .

3 5%.

12
r = 1 042 -
1 = 0 34 %
1/12 . .

12
ri/12 = . 035
1 -
1 = 0 29 % .

FV first 5 years = 25 x S60 0 34.

x 1 .
0423 x 1 .
0357
- 1660 84x1 . .
0423x1 8357 .

= 2390 .
64 ~
40x9360 .
34x1 0357 + 40x9240 29x1 0355
.
. .

#V of the next 5 years = (40 x S36 0 34.

+ 40x S240 29) x 1 0355 .
.

= 11529 08 * + 992 71 (x 1 8355

0357
. . .

1 .

2996
= .
003124 . 44

FV of the last 5 years = 60 x 500 0 29 .

= 3925 .
9 ~
=> Total FU of the fund = 2390 64 .
+ 2996 00 .
+ 3925 9 .
+ 3124 44 .

= 9312 .
549440 98 .

Carla entitled 9440 9824720 49

X = amount right now =
.

Right ans = 4720

. 54 (Approx
 L
L 500 500
... 500
D .
>
r = 3%
O 123 ---

9 10 semesters 1 03 -1
=> re = .

4720 54 .
= 500xa 8 1 .
49x1 .
01491 + Xx1 .
055 = 1 49 %
.

1 5
3744 59x1 0149
-

E) 4720 54 .
= . .
+ Xx 1 83
.

= X= 1195 12
.

-
250 -
250
...
.
C
X
O 12 60
---

65+h 70 +h
bday bday
CHAPTER 3 : Loans
1
.
Definition

·
Loans Debtors

Creditors
·
A lan contract typically specifies
+ Nominal/face value or principal of the lan : Basis for computation

+
Detailed schedule All payment dates

The installments or amount paid

The remaining outstanding principal after each payment

. Amortization Loans
2

·
Repaid thru periodic payments I like annuity (
X X X --
X
7
1 2 3 20

S
E g . : Loan n= 20 payments v
20 yrs
,

K (money repaid each year =? (

r = 10 75 %
.

PV = 40000

40000 =
kXa20 10 75.

·
Amortisation schedule :

Eg : Deb+ PV = 6000
~ = 8% => m/2 = 1 08
.
-
1 = 3 92 %
.
24%

semiannual payment by 3 yrs => n = G

XXXX X X
>
o 23k5d
ro 5.
= 4%

X =
6000 1 14
= .

964 %
 Amortisation schedule : = interest rate x
remaining principle
T

Payment number Payment Interest share 4% Principle repaid Remaining principle

6000
1 1144 57 .
240 904 57.
5095 43 .

2 1144 57 .
203 82 .
940 75 .
4154 68 .

3 1144 57 .
166 .
19 978 38 .
3176 3 .

4 1144 57 .
127 05 .
1017 52 .
2158 78 .

5 1144 57 . 86 .
35 1058 22 . . 56
1100

6 1144 57 . 44 02 . 1100 55 .
0 01
.

Formula for each individual elements :

Consider a loan for a principle P that is to be repaid in n equal installments of

Size T at an interest rate .
r per period

1
.
Remaining (outstanding) balance after the k-th payment :
bal(k) = +xan -
kn

Balance
T
PU of all installments
:
remaining .

.
2 Interest share in the
K-th payment :

Int(k k) = P an -k+ 1rXr

,
x

ann

TX an - (k
= -
1)nXn
- bal(k 1) -
Xr

Interest share = Rate x Balance of the prev. .

period

3
. Principle repaid in the k-th payment

Prn(k, k) = T -
Pxan -
k+ 1 rxr
an r

= T -
Int (k , k)

Principle repaid : Installment -

Interest share
*
All function mentioned can be used on a "cumulative basis".
· Int (k , e) is the nominal sum of all interest shares from the k-th to the 1-th

one included
.

·
Prn (K e) is the nominal
, sum of all principle repaid from the k-th to the 1-th
one included
.

More spicy stuffs (Calc use

·

Eg1 .
PV = P = 100 000

11/12 = 1%

n = 120 monthly repayment.

a Monthly payment T = ? 100000 = TX &
.
120 1 %

=> T= 1434 71 .

b .
K= 48 , outstanding principle after 48th payment = ?

bal (48) = T x &120 -

481 % =
73385 95 .

c . When is the monthly repayment of principle interest share ?

Prn (1, k) > 1434 71 .

T Int (k , k) >
1434 71 .

=
-

3
. Loans with constant principle repayments
·
Principle repayment is const = /n

x
Periodic installment = Principle repayment t interest rate x principle remain

-ing (Balance).
+
Interest rate ↓ overtime
.

E g P 100 000 N = 240 Principle repayment = P/n 100000 416 67

: .
= = > = = .

240
Installment : 11/12 = 0 2% .

Month 1 : 416 67
.
+ 0 2 % x 100000
. = 616 67 .

Month 101 : 416 67 .

+ 0 2% x . (100000 -
10x416 67) . = 533 34
.
4
. Bullet Wan
·
Endowment mortgage : Periodic investment w/ a future value P to
pay off the bullet
wan
.
P Pxrn Parn
X P
Snrp =

ide
.

01XXX P
X
=> X = Sn up
·
Installment T = Annuity that consists of the interest payment on the principal
and the periodic investment in the fund
.

Un = interest rate on the loan

.

Up = return on the investment in the fund

.
P
T= PXrn +

Sn rp

Annual
interes
Money saved up
for principle
payment .

Endowment Mortgage : Fund tret kiem tien detra principal

.
Bullet Loan : Loan ma chi can tra lai trong ca's period , principal tra on

the
maturity date
.
 1
.
P= 8000

r= 15 % r
15 % 1 25 %
= , 12
= = .

12

8000 =
XX9241 . 25 % = > x = 387 89 .

bal (7) = 5907 78 .

Prn (8
, 8) = 314 05 = Principal
.

Int 18 8) = ,
78 84 : Interest
. .

.
2 APR = 7 5% 75 % 12 0 625 %
. = > 1112 = .
= .

255000 = TX a2400 625 % .

= T

Prn (1 12) , = 5720 13 .

Prn (13, 24) = 6164 20 .

Prn (229 , 240) = 23678 24 .

3
. Calculate in 2 ways :

150000 = Txa 1800 74 . %

T = 1510 72 .

Interest of the first S years

1
. Int (1 96) = 89281 26
, .

. Total
2 Payment = 96 x 1510 71 = 145 028 16 . .

Principal = Pnn (1 96) ,

= 55746 97 .

150000 -
bal (96) =
150000 -
94253 03
.
= 55746 97
.

Int (1 , 96) = 145028 16 .

-
55746 97 . = 89281 . 26

.
4
n = 5x12 = 60

P= 10000

APR = 12 % = > = 1%
1112

T= 10000 = 222 44 .

a 60 1 %
Outstanding principle <1/2 original amount

bal(k) = 5000 = +Xan -

kr

=> 222 44 xa60 k1 %. - = 5000

Es 60 -
k = 25 59
.

k 34 4135 months
() = .

=> After 35 months of

payment
.

*
Addition way to solve :
1000 = 222 . 44x9 1% +
5000.
5 -
T
S=
3000 ,
n = 25
4
r = 10 % = 14 = 1 1
.
-
1= 2 41%
.

P = 3000 x 92510% = 27231 12 .

Number of payment made after Dec 31, 1999 : 5 payment

bal (5) = 25540 69 .

time left : 20 years = So quarters

.

25540 69 = . TX 9802 41 % .

= T = 723 14 .

6
. $21400 = D

APR = 15 % => = 1 25 %
1112 .

n = 36

T= 21400 741 84
= .

936 1 25 %
.

bal (12) = 15299 84 .

+ 15299 84x0 0125x3 = 15873 58
. . .

r1112 =
8%
=
0 67 % .

12

15873 58 . = XX9240 67 % .
= > X = 718 21 .

The monthly installment decreases ,

so it's better that they refinance their
loan
.
 Refinancing at the beginning of the loan :

·
Higher penalty (Outstanding debt is higher
·
More time to benefit from refinancing when it's ur advantage
.

F .
ro 5 ·
= 5 25 %
. = > 1/12
= 1 .
0525 -
1 = 0 86 %
.

120000 TX a = T= 1117 63
300 0 86
=
.
% .

bal (60) = 113312 97 .

+ 3x0 86 % x113312 97 . .
= 116232 44 .

G
New monthly payment .
New rate :111 = 1 .
035-1 = 0 58 %
.

↑x a
2400 58 % = 116232 44 .
.

=> T= 898 . 39

.
8 EAR = 6 09 %
. => 11/12 = 1 0609
.
-
1 = 3%

a 50000 = Xxa303% => X = 2550 96 .

b
. bal(k) = 2550 96 .
x a
30-k 3 = 50000x0 6 .

=> 30 -
k = 14 7 .

= k = 15 3 .
=> After the 16th payment .

.
c Outstanding balance now bal 120) 21760 23 1 0609-1 0 99 %
: = .
, 1116 = .
= .

21760 23 . = TX9300 99 % .

=> T= 841 94 .

.
9 P = 500 000 euros

n = 3 x12 = 36 monthly payments

APR = 7 % = r = 0 58 %
, 12 .

a .
The old installment :

500000 =
TX9360 58 % .

=> T= 15429 41 .

b New
. monthly installment

Bal (12) = 344756 93 .

-

50000 = 294756 93 .

294756 93 = .
4 x 180 58 % = >T= 17292 45 .
.
10 .
APR = 7 2 %= . r
, 12 = 06% .

P= 200 000

n = 180 monthly installments = 15 years

The original monthly installment :

T = 200000 = 1820 09 .

& 180 0 6%.

APR = 8 4% . = > r, 112 = 0 7 %

.

bal (120) = 91481 78 .

= 1820 .
09x9600 7 % + XX930 7 % .

1 .
00760

= > X = 1314 88 .

0
11. ro 5 = 6 % = +112 = 1 06 .
-
1 = 0 98 % .
.

n= 20

P = 60000

Original semestrial installment : T= 60000 = 5231 07

.

& 206 %

Outstanding debt after 10th payment : bal (10) = 38501 16 .

New monthly installment : 38501 16 . = X X 9600 98 % .

=>
X = 851 77
.

. P = 100000
12

n = 14

T = 4758
104900
10000 = 4750xa14 +

(1 + r(14

. P = 100 000
13

n = 120

r = 0 9%
, 12 .

T= 100000 833 33
= .

120
a .
Balance after 4 years = 100000 -
48x833 33 .
= 60000 16 .

. Interest of the
D 49th payment = 60000 16 . x 0 9% . = 540 00 .

C Total
.
monthly payment of month 49th = 540 + 833 33 .
= 1373 33 .

14. P = 50000

n = 5

r= 5%

Amortization schedule

I I I I
Payment number Payment Interest share 5 % Principle repaid remaining principal
50 000

1 12500 2500 10000 40 000

2 12 000 2000 1000 30 000

3 11500 1500 10000 20 000

4 11000 10000 10000

5 10500 Noe 10000 O

-
paid ro 5 .
= 6% =
Interest each month = 80000 + 6% = 4800

P = 80 000

↑ 4800 + 80000 4800 + 2902 31 7702 31

a = .
= .

S20 3 25 %
.

.
b Real annual rate

80000 7702 31xa

= .

20 m/2
=> r112 = 7 26%
.

=> RAR = 1 .
07262 -
1 = 15 05 % .

16
. P= 20000 =>
Interest paid each year = 20000 + 0 04 . = 800

m = 4%
a
. Amount Marc should save each year : X =
20000 = 3409 13.

S5 8%
b Amount Marc
.
pay each year X = 500 + 3409 13 .
= 4209 13 .

c .
20000 = 4209 13 xa zr .

=> r= 1 72
.
%

Prev . exam questions :

1 P = 180
. 000
.

12
r= 36%
.
= 7 11/12 = 1 036
.
-
1 =
0 295 % .

n = 20 x 12 = 240

a .
Monthly installment T = 180000 = 1047 63 .

& 2400 295 % .

Int (1 , 144) = 58333 .

14

b .
bal(144) = 87474 27 .

~ = 2 2%
.
=
V1112 12 1 022
= .
-
1 = 0 18 %
.

Amount Carla needs to pay now = 0 .

5 x/320000 -
87474 27) = 116262 87
. .

116262 87 = . TX92400 18 % =)T 597 .

=

Monthly installment if Carla also continues to pay off the old can :

X = 597 + 1047 63 = 1644 63

. .

.
2 87474 27 . =
500x960m 12 x(1 + r 12160 + ,
, 750x960N, 12

=>
87474 27 = .
500x(1+ r)60 1x(1 + r)60 -
+ 750x(1+ r360 -
1
V R

=>
M1112 =...

=) r =...

12
3
. APR = 3% => M1112 = 1 03.
-
1 = 0 25 %
.

value of the current mortgage :

X = 5000
xa510 25 % .
= 239133 02 .

Amount she has to pay right now :

Y = 4000000 -

2500000 + 239133 02 .
= 1739133 02 .
 1739133 22 . = TXa2400 25 % .
x1 .
0025-2
=> E 9693 48 .

.
4
T= 7500 r
p= 0
% = > Vp1/12 = 11 .
06 - 1 = 0 49 %
.

n= 15 x 12 = 180 months

bal (60) = 1403 668 55 .

P
7500 = Px0 .
4 % +
=> P= 1003495 57 .

S180 0 49 %
.
 CHAPTER 4 Bonds
1 . Simple bands D
C C +C
C
: Buyer
b
>

1 3 n time
2
in return for
P
: Seller
b
>

1 2 3 n time

·
n : number of coupon

·
Other quantities :
quoted as a % of the nominal value face value of the bond

+
P : The issue price P
+
D : Redemption value

+ C : Coupon rate

E g . : Assume
·
The number of coupon n = 5
·
The issue price P= 99 75 % .
> P= 0 9975
.
x 2000 = 1995

·
The redemption value D = 101 5 % .
1015 x 2000 = 2030

·
The coupon(rate) c = 7 35 %
.
coupon payment = 0 0735 x 2000 =
.
147
·
The nominal value is $2000

E g .

n = 5 You
·
pay a total of 100 575 % .
x 25000 = 25143 75 for
.

c = 5 4 % .
your bonds
P = 100 575 % .
·
Each of the 9 coupons is worth 5 4 % .
x 25000 = 1350

Face value : 5000 ·

The bond will be repaid at total 100 % x 25000 =

25 000

a .
Valuation problems upon issues

Fundamental bond equation

C D
P =
t
t = 1(1 + t)t (1 + r(n
 P= D
or cXanr +
(1 + r)4

· The equation links all defining quantities to the real rate of return for this

group of cash flow-yield to maturity .

r

C C C C -
+C
>
time
p
O 1 = at yield r n
7
O 12 3 4
-
U

Redeemed at par < => Redemption val. .

D = par/nominal value.

. Transactions
b on coupon dates :

After :
payment P
. market price

n : coupons left

D : Redemption value = const !

C : Coupon rate = const !

>
- Changeable values : P and n (YTM)

c .
Transaction between 2 coupon dates
·
Bonds can be traded at anytime
.
-
11 +)C
-
C C + C
time
--

>
!
0 25 g t = 0 75 .
+ + 1 --- c+ n -
1
= 0 75
.

·
Band market convention-quylide :
Buyer must pay sellers the accrued
interest on transaction dates
.

·
Accrued interest = cx(1 -t)

·
Full diagram :

-
CX(1 +) +C
-
+C +C +C
--

> time
g t ++ 1 ++ 2 ++ 3 ... ++ n -
1
P = at yield r
--

> time
g t ++ 1 ++ 2 ++ 3 ... ++ n -
1
· Different way :
-
CX(1 +) +C
-
+C +C +C
--

> time
Ot ++ 1 ++ 2 ++ 3 ... ++ n -
1
-
P + C(1 +) -
= at yield r
--

> time
Ot ++ 1 ++ 2 ++ 3 ... ++ n -
1

-clean price , dirty price

·
Reducing everything to time OI transaction date
P + c(1 +) = (CXanv D r)1
-
+

1)n)X(1
-
+ +

(r +

E . g1 : c= 3 95 %, .
-

7
time
0 75 0 1 9
lysm
-

D = 100 % . -

Sm 3m
Sy3m
n = 9 ~ m

1y 1y
r= 4%
dirty price
Equation : -
9)x(1 + 04)1 0 25
- -

p= 0 0395x 0 75 10 0395xag4 % 1(1 + 0 04) 0

.
-

.
+ +
. . . .

-
~ PV of bond at + = 1
0 9964 .

-
clean price

E g2 :
.
P= 100 25% .

+ = 7/12 (next coupon after 7 months , pay annually

D = 103 5 % .

r = 6 42 %
.

Equation :

1 035
064215/12
P=
ex +
12xa166 + x (1 + 0
.
-

. 42 % .

16
(1 0 0642)
-

+ .
d . Zero coupon bonds

·
No coupon payment, only payment of the face value at maturity
.
· P =
D
(1 + n)n

e
. Perpetual bonds
·
Coupon payment tile co
.
Co
C
· P= C D
- t
W
+= 1( + n) +
(1 + +10
 1
.
Nominal value = 5000

D = 103 %

C = 5 25 %
.

r = 4 75 % .

103 %
p= 5 25
154 75 %+
.
x
.

1 . 047515

= p= 106 78 % .

= 106 78 % x5000
. = 5339

. Nominal value
2 = 1000

D = 100 % = 1000

c = 4 5%. = 45

r= 4%

woo
P= 45x954 %+ = 1022 26 .

1
. 045

95 68 100
.
3 . = 3xa4r, 2 +

(1 + r
- 2)4
=> r1 / 2 = 0 04204 .

=> r = 1 .
0422 -
1 = 8 58 %
.

4
.

·
First 4 years : c = 5%

Last 4 years : 6%
Cz
·
=

· D = 102%

·
r = 4 53%
.

-
4
12
p= 5xa44 53% .
+
6xa44 53% .
x1 . 0453 +

1 04538
.

I 17 93 .
+ 18 02 . + 71 56 .

- 107 51 %
.
.
5 Face value = Woo

c = 3% = 30

D = 100 % = 1000

r = 1 85 %
.

Withholding tax = 30% = Nhan ve 70 % dia coupon !

.
a P= 30x70% x a 81 85 % +
1000 = 1018 43 .
.

1 .
01858

b
. Gross return/tax excl ( .

1000
1018 43 . = 30xa8n +

21 + r)8

= r = 2 74 %
.

.
6 D = 101 %

c = 4%

r = 3 8%.

a Accrued interest = 2x(1 -t) = 4%

X = 3 33
%.

.
b p + 3 33.
=
(4xa-3 8%
.
+
101
( x 1 .
03856
1 .
0385

=> p = 101 61 %
.

4 4 4 4 4
Y
D 11 2 3 k 5
accrued
--
interest ! + 2n
4y
-m
1y
3 95%
.

--

I 3
O
---

7
. P = 104 37% .
1 2 6
3m 9m
C = 3 95 %
.

--
D = 105 % 1y 1y
r=
r= ? 14 37 3
95x7 (3 95xafn 1) (1 + 3 88
.
+ = +
. . .

Accrued interest
8 .
P = 99 6 % .

D= 102 36 % .

C= 6 35 %
.

r= Y >
+ D
>
! 1 234 5 6
um
5m

D = 102 36 .
+ 6 .
95x5/12 = 105 26.

-
(5/12 + 6)
9. 6
9 = 6 35
.
xagr + 105 26x(1+ r)
.

= r = 6 77 %
.

2
45x7 98 26
9 .
p = 97 65 .
+
.
= .

102 07
45x1
D= 101 25 .
+ 2 . = .

98 26 =
.
2 .
45xaor + 12 07x(1+ .
rj(8 + 1/12)
= r= 2 9
.

4m

2 45
. 2 45.
---
2 45
.
D
7
-
py 1 2 ---
S -9
3m Sm
m
14

Previous exam questions

1
. Face value = 100

P = 10 %

C= 3%

D = 12 13% .
2months Sdays = 66/360 years
---
L

>
g 2 506117
2012 2013 2014 ---
2017
a .
Accrued interest = 3 x 66 = 0 .
55 %
360

b .
Buyer buy them today at price P= 102 13 % .
+ 0 55 %
. = 102 .
68 %

12 68 = .
3xa32 8 % + D x 1 .
02866/368 = D = 101 73%
.

0283
.

1 .

.
2 P = 101 5 % .

C = 3%
wo
a .
101 5 .
=
3x915r t >
= r= 2 88 %
.

(1 + r)15

P 10
b .
Zero band = - = 65 32 %
.

(1 + 2 88 %
.
)15

100 r)1/4
.
3 98 75
.
+
3xy =
(3x9 , 3r +
x(1 + = >r = 3 12 %
.

(r+ 1)13
 CHAP5 Derivatives
1
1. Definition
·
value is determined by another /underlying) financial instrument
.

·
such as Options, warrants, futures
,...

Speculation , hedging

. Future
2 : An agreement to purchase an asset at a determined price on a

specified future date

.

Contract
·
on spot market : transaction now ,
settlement now
.

Contract on forward market

·
: transaction how , settlement later
.

Future= a forward contract w/ market to market.

Buy future $100000 >

-
futures price 3 months $/ = = 1 02
.

< pay , 000 in 3 months

102

·
Day 1 : $/E = 1 04
.
-
> new contract : =104000 >
-
receive 2000

· Day 2 $/ = = 1 01
.
+ new contract : =101000 >
-

pay E 3000
--

·
Day 0 + 3m : $/E = 1 01-
. pay 10 1 000
+ 3000 -
2000

E 102 000

3
. Options

= A right owned by someone .

·
E g:
.
If u have an option to buy a house , u have the right to buy it
in the meantime
·
In reality ,
the owner op the option will look for financing (mortgages
in the period in between
· Who owns an option ,
either has

+
The right to buy 5th / = call option (

+ Or the right to sell 5th ( = put option (

An option can be on each type of asset , usually it's an option on stocks
 To trade an option , 2 parties should be involved
·
The buyer

·
= the"writer
The seller ""

*
Call option :

The
·

buyer of the call has the right to buy an number of shares within a

certain period /on a specific date at a pre-agreed price.

·
The seller of the call has the obligation to deliver/sell the shares to

the owner of the call option is schel wishes to exercise his/her right.
·
The stock on which you have an option = the underlying value
·
Number of shares : the unit of
trading for an option on Euronext Derivatives
is usually 100 shares
.

·
Price at which I can buy - strike price/exercise price.
·
The price of share = S
· Period in which
a have the option = maturity
·
Option that can be exercised within a specific time period
= American style .

·
Option that can be exercised on specific date = European style
.

* Put option
·
The buyer of a put has the right to sell a specified number of shares
within a certain period or on a specific date at a pre-agreed price .

·
The seller of a put has the obligation to buy the shares to the owner of the put
option if she) wants to exercise his chers right.
·

Exercising option :

↑ The owner of a call option will only use his right if he can buy the share cheaper
using the option ,
then on the market so
only if strike <market price
price
Calls

+
The diff .
between the market price of share and the strike price is the

intrinsic value of the option .

I can never be 1- cuz "right" , "obligation"
not

+
A call =s max 10; S-X) ;
A put 10 ; X-S)
·
strike price = market price : The option is "at-the-money"
Strike price > ()
·
market price :
"in-the-money" >
-
It) intrinsic value

· No intrinsic value :
"out-of-the-money".
The value of an option consists of 2 parts
.

+ Intrinsic value

+ Time value

·
Reflects the possibility that the option will be more valuable in the future /'in-the
1

money) in the time remaining

.
=
O at maturity
.

4 . Graphs
E g
: .
ABInber ,
c , maturity 03/24 ,
strike price = 54

·
Price AB Inber : 55 88.

·
Price option : =4 92 .
Intrinsic val = max 10 , S-X)

= max 10 , 55 88
.
-

54)
- 1 88
.

Time val = 492-1 88

. .
= 3 04 euros
.
.

Price share Payoff buyers call Payoff seller call

52 5 .
O &

53 O O

53 5
.
O O

54 g &

54 5
.
+ 05 .
-
0 5 .

55 I -
1

55 5 . .5
1 -
1 5.

56 2 -
2
 Graph call option
n
Intrinsic value

Buyer call

Writer call

Buyer : Maximum profit is unlimited

.

Loss is limited to the price paid for the option

Writer : .
Maximum Loss is unlimited

Profit is limited to the option price received

.

Graph of the buyer is the opposite of the graph of the buyer

.

·
The advantage of options is the ability to achieve high return w/ a limited investment
.

= Leverage effect .

Buy stock at 55 88 .
-
> Share prices ↑ to 56 88.

Return =
56 88
.
.
55 88
.
= 1 79 %
.

55 88
.

Buy call option at 4 92

.
>
-
Assume call price ↑ with E 0 5 .

5 92-4 92 0 5
Return =
.
.

=
.

= 10 16 %
.

4 92
. . 92
4

Graph call option lind .

price of the option (
1
Intrinsic value

Buyer call
4 92
.

>

-
4 92
Writer call
.
 In the same the graph for the buyer of a put option can be made
way ,

Eg :
AB Inber p ., maturity 03/24 ,
strike price EGO , price AB Inbev : E 55 68 .

Price option = EG 15 .

· Intrinsic value = max 10 , X-S)

= max 10 , 60 -
55 88)
.

= 4 12.

·
Time value = 6 15-4 12
. . = E 2 03.

Graph :

Price share Payoff buyer put Pay off writer put

57 5 .
25 .
-
2 5 .

58 2 -
2

58 5
.
1 . 5 -
1 .
5

59 1 -
1

59 5 .
0 5 .
-
0 5 .

60 & g

60 .
5 & O

61 O &

Graph put option Incl the price

.
of the option :
Intrinsic value
~ Intrinsic value 1

60
Writer put
6 15 .

Buyer put
> >
60 Writer put -
6 15
.

Buyer put
-
60
.
5 Financial Engineering -
The practical use of options

a .
Put-call parity :

Assume the Heineken stock trades .

at E85 The investment horizon is 2yrs
. An

investor buy a share of Heineken o a put option w/ strike price ES5 /price E3 55) .

of this
What is the payoff at maturity strategy ?
S Zero bond ((X = 85) Zerobond + C
O 85 O Siz Zero-band + C
: : : : Payoff
82 sij g 85 C
85
83 85 O 85 Zero-band

84 gi O 85
85 S
85 85 g 85

86 gi 1 86

87 gi 2 87

88 85 3 SS
: : : :

Assume the Heineken stock trade at E85

. The investment horizon is 2yrs
. An investor

buys a zero-bond w/ a maturity of 2yrs (yield of 2% ) and a call option w/ a strike

price =85
>
-
Face value (F) = 85

What is the payoff at maturity of this strategy ?

S Zero bond ((X = 85) Zeroband + C

O 85 O Siz Zero-band + C
: : : : Payoff
82 sij g 85 C
85
83 85 O 85 Zero-band

84 gi O 85
85 S
85 85 g 85

8685 1 86

87 gy 2 87

8885 3 SS
: : : :
 Share + Put = Zero-bond + call

85 55 Sy call E6 85
+ 3 .
= + => call = .

1 022
price option
.

>
- the of the call

Otherwise :
Arbitrage
Assume call price = E7 5 .
-
> sell call ,
receive 7 5
.

Buy Synthetic call = share + put-zero-bond

>
Pay EG 85 , profit = 0 65
-

Payoff maturity
.

at
.

synthetic call

>

b .
Mutual fund w/ capital protection

How can an investor replicate this ?

1
Payoff
Zero-band + call options on index
1000

g
BEL20

Convertible bonds
·
o reverse convertibles

+
Premium is paid in terms of a lower coupon rate

F= 1000 >
-
conversion ratio = 50
1 Payoff
Zero-bond + call
1000

20
S
·
Reverse convertibles >
- Si
maturity >
-
issuer = financial

Issuer has the right to pay face value institution or a specific number of shares of

another
company
.
M Zero-bond- Put

i
1000

500--- 7
S
w

·
option strategies
+
Straddle : Buy a call - a put option w/ the same strike price
.

+ Long strangle : Combine a put w/ a low strike price w/ a call w/ high strike price.

+ Butterfly Buy : a call w/ low strike price leg E20) , buy a call w/ high strike price

26) and sell 2 calls w/ intermediate strike E23)

leg , price (eg

* Straddle :
Buy call (x = 25) +
buy put (X = 25) Price of options = ES

C P C+ P

S X = 25 X= 25 Payoff
20 O y 5
P
Straddle C
21 O 4 4

22 C 3 3

23 O 2 2 : >
17 3
24 O 1 1
25
25 O O O

26 1 O 1

27 2 O 2

28 3 O 3

29 4 O 4

30 5 & 5
* Long strangle :
Buy put (x = 23) +
buy call (X = 27)

D C P+ C

S X= 23 X = 27

20 3 O 3

21 2 O 2 Price options = -4

22 1 O 1
Pay off
23 O O &

24 O O O
C
25 O O O Long strangle
P
26 O O O

27 O O O

28 & 1 1
ig is as 27 1 S

29 O 2 2

38 O 3 3

* Butterfly Buy : call (X = 20) +

buy call (X = 26) + Sell 2 calls (X = 23)

C C -
2C Butterfly Price option : E1

S X = 20 X = 26 X = 23 O
~
Payoff
O O
18 O g
Butterfly
O C
19 g O O
(x= 20)
20 O O O 1 C
(X = 26)
21 1 O O 2

22 2 O 03 3
20
23 26 S
23 30 02

24 40 -
2 1
2C
-

25 i O -
4 O

26 6 O -

6 O

27 F 1 -
8 O

28 S
2 -
10 O
 strike price
Stock price Risk free
*
Black-Scholes Option Pricing model rate Maturity option
-R+
·
The Black-scholes model was originally C = SN(d , ) -
Ee N(d2)
2
developed to price call options
m(S) +
(r +

2 (t
·
N(d , ) and N(dz) are found using the d, =

cumulative standard normal distribution 6 t

-Volatility
tables de = d= -
0t
 + 500 Woo 2100
.
1
>
01/15 01/17 01/18 07/19

r= 10 %

2100 = 500x1 .
13x(1 + v)15 + 1000x1 1x(1 + .
11 5
.

= r = 12 26 %
.

= (112 = 5 95 %
.

6
2 .
11/12 = . 06
1
-
1 = 0 98 %
.

5000 -
2100 x 1 .
06 =
XXS120 98 % .
X 1 0098 .

=> X = 195 34 .

.
3 250000 = Tx &
300 0 75 % .

=> T= 2097 99 .

Prn (24 , 24) = 264 88 .

or Int (24, 24) = 1833 19 .

Prn = T - Int = 2097 99-1833 19 . .

= 264 80 .

.
4 APR = 9% = 1 r =
9 % /12 = 0 75 %
, 12 .

P 250000 x 0 75 % + 250000 1961 15

T= PXrn + = .
= .

Surp S300 1 2%
.

Real monthly rate : 250000 = 1961 15 .

x a
300 r
, 112

=> 0 68 %
m112 = .

Tax = 30 %
5
P = 98 2 % 98
.2 70 % x4 5xajr
5
10x(1 + r)
-

. = .
+
.

c = 4 5%. => r = 3 55 %
.

n = 5

D = 100%

v = ?
 CHAPTER 5 : DERIVATIVE

.
1 Putoption : X = 25
,
Intrinsic value = 2 Quyenban
Call option : X= 30 , Intrinsic value = ↑ Quyen mua

*
Put option

Market Market Call option

pace Put option
price
26 O

23 2 27 O

23 5 .
.5
1 28 O

24 1 29 O
24 5 . 0 5
. 30 O

25 O 31 1

25 5 .
O 32 2

26 O 33 3

26 5 .
O 34 4
. D = 101 %
6 98 2 .
= 4 .
5xa,v + 101x(1 + r)-

r = 3 => r= 7 43 %
.

.
7 D = 100 + 4 5 . x
3 = 13 375 .

98 2 . = 4 .
5xazr + 103 .
375x(1 + 25314
(r + 1)3

r
1/12
= 5 04 %
.
MOCK TEST
EAR = 2%.
PV = 25 = r,, 12 = 0 17 %
.

10010 10 10 10 10 20 20 20 20 20

o i''h's 's' is

FV = 100 x 1 02 .