MIDLANDS STATE UNIVERSITY

FACULTY OF COMMERCE
DEPARTMENT OF FINANCE, INVESTMENTS & BANKING
COURSE OUTLINE
Module : Financial Mathematics
Course Code : BF131
Lecturer : Mr M. Mudzamba Email:mudzambam@staff.msu.ac.zw
Office : Room 11, Old Admin Block, Graduate School Campus

1. COURSE BRIEF
Financial Mathematics (BF131) is a foundation course for learners in the field of finance,
investment and banking. The module introduce of techniques useful for evaluating financial
information to aid decision making in commercial financial transactions. The module
challenges learners to be analytical and creative thinkers, drawing on mathematical concepts
for solving societal problems in familiar and unfamiliar contexts in finance, investments and
banking. The content is prerequisite for studying concrete financial problems at higher levels.

2. AIMS
2.1 To equip students with relevant mathematical skills that are prerequisite in the study of
finance, investments and banking programme.
2.2 To demonstrate the usefulness of mathematics in solving societal problems drawn from
industry, commerce and financial services.

3. OBJECTIVES
On completion of the module, successful students shall be able to:
3.1 Apply basic and advanced rules of differentiation to various financial problems.
3.3 Compute elementary problems involving basic concepts in probability theory.
3.4 Apply probability theory to solve problems frequently faced by practitioners finance.
3.5 Use different methods for calculating interest, understanding dynamics of cash flows and
time value.
3.6 Calculate the present and future values of various types of annuities.
3.7 Apply the concepts of annuities in solving amortisation and sinking funds problems.

4. STUDENT ASSESSMENT
The course is assessed on 30% continuous assessment and 70% final examination at the
end of semester. Continuous assessment is composed of two inclass tests administered
during the semester.

Page 1 of 3 @2020
5. MODULE CONTENT

5.1 Simple Interests and Discounts

 Simple interest and discounts
 Time lines
 Counting days
 The time value of money
5.2 Compound Interest
 Compound interest
 Nominal and effective interest rates
 Odd-period calculations
 Fractional compounding
 Continuous compounding
 Doubling times
5.3 Annuities
 Ordinary annuity
 Annuity due
 Perpetuities
 Present and future values of annuities
 Deferred annuities
 Increasing annuities
o Application of annuities in finance and banking
 Amortisation
 Sinking funds
5.4 Security Market Indices
 Price weighted index
 Equal weighted index
 Market capitalization-weighted index
 Index rebalancing
 Index reconstruction
 Commodity indices
 Real estate indices
5.5 Probability
 Basic probability concepts
 Random variables
 Events
 Outcomes
 Conditional probability
 Joint probability
 Probability rules
 Addition rule
 Multiplication rule

Page 2 of 3 @2020
5.6 Differentiation and Integration
 Differentiation
 Differentiation from first principle
 Sums, differences, powers, product and quotient rules
 The chain rule
 Implicit differentiation
 Differentiation of exponential functions
 Integration
 Indefinite integral+s
 Definite integrals
 Integration by parts
 Integration by substitution

RECOMMENDED READING MATERIAL

A number of mathematical textbooks are suitable for content covered in this course. The
following are easy to follow and recommended;
 Day, A., (2005). Mastering Financial Mathematics in Microsoft Excel: A practical
guide for business calculations. Prentice Hall Financial Times:: Great Britain
 McCutcheon, J. J., & Scott, W.F., (1995). An introduction to mathematics of
finance. Butterworth Heinemann: Oxford
 UNIVERSITY OF SOUTH AFRICA, (2004). Introductory financial mathematics.
UNISA: Pretoria
 Sydsaeter, K. & Hammond, P. (2006)., Mathematics for economics 1. University of
Zimbabwe publications.

Page 3 of 3 @2020