Financial Mathematics .

Financial Mathematics . Study the interest rates . Implicitly include studies of credits , investments , capitalizations and, in general, the development of financial operations .

Summary

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• 1 Interest rate
• 2 Financial operations
  • 1 Types of financial operations
    • 1.1 Simple financial operations
    • 1.2 Compound financial operations
  • 3 Simple interest, present value and future value
  • 4 Compound interest
  • 5 Source

Interest rate

The interest rate is the relationship between the amount of money paid or received and the amount of money used, that is, the relationship between profit and investment , shown in percentage terms .

Financial operations

Financial operation any action by which a capital exchange of non-simultaneous maturities takes place. The elements involved in a financial operation are:

• Benefit : set of capital that the person who initiates the operation agrees to deliver .
• Consideration : total commitment acquired by the person who initiates the operation as a debtor .
• Origin of the operation: Moment of time when the first capital matures .
• End of the operation: Corresponds to the maturity of the last of the capital exchanged.
• Duration of the operation : It will be the time between the origin and the end of the operation.

Types of financial operations

The financial operations that are carried out are divided into two main groups:

• Simple
• Compounds

Simple financial operations

Simple financial laws are used in these operations . They are summative financial laws in which the interests that are generated throughout a given period of time are not added to the Capital for the calculation of the interests of the following period.

The operations that use this type of financial law are:

• Simple capitalization .
• Simple discount .
• Commercial discount .

Compound financial operations

They are operations that use compound financial laws, that is to say cumulative, in which the interests are incorporated into the principal for the calculation of the interests of the following period.

The operations that use this type of financial law are:

• Constitution of capital.
• Amortization or loan of capital.

Simple interest, present value and future value

In simple interest, the interest is always calculated based on the initial value (capital invested). Thus, in each period, the interest is equal to the initial value multiplied by the interest rate .

Simple Interest Formulas

I = C * t * i

VF = C (1 + i * t)

C = VF (1 + i * t) -1

VF = C + I

I = interest; VF = future value; C = Capital; i = rate.

Compound interest

It is known as interest on interest, it is defined as the capitalization of the interest at the end of its maturity .

Compound Interest Formulas:

M = C (1 + i) n

C = M (1 + i) -n

M = amount or also called VF; C = capital; i = rate; n = time