MATH 2228 Course Outline

Math 2228 – Actuarial Science IA: Math Theory of Interest

Required Text book: ASM Study Manual for Exam FM/2, Financial Mathematics, 13th Edition, By Cherry/Shaban

Course Content: Math 2228 is the first of two preparatory courses for the SOA Actuarial Exam FM – Financial Mathematics. The second course is Math 3228. This course covers the following six topics:

I. Interest Rates and Discount Rates

1. Accumulation Functions
2. Effective and Simple Interest Rates
3. Present Values and Future Values
4. Discount Rates
5. Nominal Rates
6. Force of Interest
7. Equivalent Rates

II. Practical Applications

1. Equations of Value
2. Time Value of Money
3. Time Diagrams
4. Unknown Time and Unknown Interest Rate

III. Annuities

1. Annuity-Immediate and Annuity-Due
2. Deferred Annuities
3. Annuities with Block Payments
4. Perpetuities
5. Unknown and Variable Interest Rates

IV. Complex Annuities

1. Annuities with “Off-Payments”
2. Continuous Annuities
3. Annuities in Arithmetic Progression
4. Annuities in Geometric Progression
5. Continuous Varying Annuities

V. Comparing Investments

1. NPV and IRR
2. Reinvestment Rates
3. Yield Rate Earned by a Fund
4. Dollar-Weighted and Time-Weighted Interest Rates

VI. Loans

1. Amortizing a Loan and Amortization Schedules
2. Varying Series of Payments
3. Equal Principal Repayments
4. Final Payments (Balloon and Drop Payments)