Test of Financial Mathematics, February 10, 2015

Name:......................................Surname:................................. Matriculation number:........................

1. Study the definition of the following quadratic form on R3 : q(x, y, z) = −x2 − y 2 − z 2 − 2yz;

2. Determine the nature of the stationary points of the following function: f (x, y) = x2 + y − xy 2 ;

3. Determine (in the exponential regime) the the three-months interest rate i[4] corresponding to the
force of interest δ = 0.04;

4. Determine the present value of a perpetuity-due paying 500 euros at 0, 1, 2, ... if the annual interest
rate in the regime of the compound interest is i = 4%.

5. The amortization of a debt of 9000 euros is made by means of the payment of 9 instalments alterna-
tively equal to R and 2R (the first is due after two years) payed every six months. Determine R in
case that the annual interest rate is i = 4%.

6. Let f : (R2 ⊃)D −→ R be a real function of 2 real variables and consider a point x0 ∈ D. Then x0
is a saddle point if
√
(a) there exists r > 0 such that f (x) ≥ f (x0 ) for all x ∈ D with (x1 − x01 )2 + (x2 − x02 )2 < r;
√
(b) there exists r > 0 such that f (x) ≤ f (x0 ) for all x ∈ D with (x1 − x01 )2 + (x2 − x02 )2 < r;
√
(c) for
√ every r > 0 there exist x1 and x2 in D such that (x11 − x01 )2 + (x12 − x02 )2 < r,
(x1 − x1 ) + (x2 − x2 ) < r, f (x ) > f (x ). f (x ) < f (x ) ;
2 0 2 2 0 2 1 0 2 0

(d) none of the previous assertions is true.

7. Let q(x) be a quadratic form on R2 and let A be the symmetric matrix associate to q(x). Then

(a) q(x) is positive definite if some principal minor of A is positive;

(b) q(x) is negative semidefinite if some principal minor of A is negative;
(c) q(x) is positive definite if det(A1 ) det(A2 ) > 0;
(d) none of the previous assertions is true.

8. The present value at t = 0 of a perpetuity paying 1 euro at t = 2, 3, ... is

u2
(a) i ;
v2
(b) d ;
v2
(c) i ;
(d) none of the previous assertions is true.

9. Consider the amortization of a debt C at t = 0 by means of n constant instalments R payable at

t = 1, ..., n, and denote by Cn the principal share at t = n. Then
Cn−1
(a) (1+i)2
= R;
Cn−1
(b) R = (1 + i)2 ;
R
(c) Cn−1 = (1 + i)2 ;
(d) none of the previous assertions is true.

10. Consider the following inequalities for any fixed annual interest rate i > 0 with d the corresponding
annual discount rate:
1
(a) 1−dt < (1 + i)t for all 0 < t < 1;
1
(b) (1 + i)t > 1−dt for all t > 1;
1
(c) (1 + i)t < 1−dt for all 0 < t < 1;
(d) None of the previous inequalities is true.