This course provides an introduction to the valuation of cash flows. Topics include: compound interest functions; valuation of annuities certain; loans repayable by instalments; comparison of value and yield of cash flow transactions; valuation of fixed interest securities, with and without tax on interest and capital gains; duration and volatility of securities; introduction to concept of immunisation and matching; consumer credit contracts.

Learning Outcomes

Upon successful completion, students will have the knowledge and skills to:

1. Define and describe the use of cash flow models, simple and compound rates of interest and discount as well as compare and distinguish between nominal and effective rates of interest and discount;
2. Describe various types of annuities and perpetuities and use them to solve financial transaction problems;
3. Describe equations of value and various tools like linear interpolation & annuity tables;
4. Compare capital budgeting decision tools like Net Present Values, Internal Rates of Return and Discounted Payback Periods;
5. Analyse basic fixed interest financial transactions like Loan Valuation, Fixed Interest securities (eg. Bonds) and employ the skills developed in this course to evaluate such transactions. Incorporate the effects of taxation on such financial transactions;
6. Understand and employ the term structure of interest rates to calculate forward and spot rates; and
7. Define interest rate risk in terms of duration and convexity of fixed interest products, using this to define immunisation and assess its use in mitigating interest rate risk.

Research-Led Teaching

This course covers the relevant parts of the professional Actuaries Institute syllabus, for the subject of CM1: Actuarial Mathematics Core Principles. Wherever possible the examples used in this course will reflect real-world situations to emphasize the use of the techniques covered.

Field Trips

N/A

Additional Course Costs

N/A

Examination Material or equipment

Formula Sheet, Standard Normal Cumulative Probability Table and Interest Rate Table will be provided in the final exam. You will need reliable access to Wattle and a calculator for the duration of the online quizzes and the online exam.

Required Resources

All course notes and materials will be provided via Wattle. You will need access to a calculator to complete exercises required for this course. You will need access to a computer to get the materials necessary for the course. We will use MS Excel in this course. Some classwork and tutorial questions and solutions will be illustrated using MS Excel. Learning guides and short video lectures will be made available on wattle for students to learn the application of the concepts taught in this course. Some assignment questions will require the use of MS Excel or a spreadsheet program.

Recommended Resources

There are no prescribed textbooks for this course.

Staff Feedback

Students will be given feedback in the following forms in this course:

• Following the Quiz 1 and 2, feedback may be given to the whole class about the general performance on the quiz.
• Students will also have the opportunity to speak with the tutors and the lecturer about their individual performance in the assignments.
• Zoom consultations. Times and instructions will be advised on wattle.

Student Feedback

ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. The Surveys and Evaluation website provides more information on student surveys at ANU and reports on the feedback provided on ANU courses.

Other Information

Assessment Requirements

As a further academic integrity control, students may be selected for a 15 minute individual oral examination of their written assessment submissions.

Any student identified, either during the current semester or in retrospect, as having used ghost writing services will be investigated under the University’s Academic Misconduct Rule.

Scaling

Your final mark for the course will be based on the raw marks allocated for each of your assessment items. However, your final mark may not be the same number as produced by that formula, as marks may be scaled. Any scaling applied will preserve the rank order of raw marks (i.e. if your raw mark exceeds that of another student, then your scaled mark will exceed the scaled mark of that student) and may be either up or down.

Referencing Requirements

Please see the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. For a more interactive guide on what this is all about, please see http://library.acadiau.ca/tutorials/plagiarism/.

Support for Students

The University offers a number of support services for students. Information on these is available online from http://students.anu.edu.au/studentlife/

Exemption from Actuarial Professional examination

This course along with Life Contingencies (STAT3037) makes up for the CM1 examination of the Actuaries Institute. More details regarding the grades required for exemption and the procedure to follow is detailed on this webpage: Actuaries Institute requirements.

Class Schedule

Week/Session	Summary of Activities	Assessment
1	Cash-flow models. Simple and compound interest. Accumulated and present values.
2	Nominal and effective rates of interest and discount. Force of interest.
3	Introduction to annuities and their valuation.
4	Perpetuities. Continuous, increasing, decreasing and indexed annuities.	Quiz 1 Due (Friday)
5	Equations of value. Introduction to linear interpolation and annuity tables. Dealing with inflation.
6	Loan valuation and payments. Capital budgeting including NPV, IRR and DPP.	Quiz 2 Due (Friday)
7	Measuring investment performance. TWRR and MWRR.
8	Valuation of fixed interest securities, with and without tax on interest and capital gains.
9	Calculating yields. Allowing for callable features and inflation. Extending to property and share valuation.
10	Yield curve and term structure of interest rates. Calculating forward and spot rates.	Assignment Due (Friday)
11	Interest rate risk: duration, effective duration and convexity. Conditions for and determination of immunisation.
12	Immunisation exercises and revision

Tutorial Registration

Tutorials will be available on campus, live through scheduled Zoom sessions and as pre-recorded videos. ANU utilises MyTimetable to enable students to view the timetable for their enrolled courses, browse, then self-allocate to small teaching activities / tutorials so they can better plan their time. Find out more on the Timetable webpage (https://www.anu.edu.au/students/program-administration/timetabling). Information regarding enrolments for these options will be provided on Wattle during the O-Week of the semester.

Assessment Summary

Assessment task	Value	Due Date	Return of assessment	Learning Outcomes
Quiz 1	5 %	19/08/2022	26/08/2022	1
Quiz 2	5 %	02/09/2022	09/09/2022	2
Assignment	20 %	14/10/2022	28/10/2022	1-5
Final Exam	70 %	03/11/2022	01/12/2022	1-7

* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details

Policies

ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Misconduct Rule before the commencement of their course. Other key policies and guidelines include:

• Student Assessment (Coursework) Policy and Procedure
• Special Assessment Consideration Policy and General Information 
• Student Surveys and Evaluations
• Deferred Examinations
• Student Complaint Resolution Policy and Procedure

Assessment Requirements

The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the Academic Integrity . In rare cases where online submission using Turnitin software is not technically possible; or where not using Turnitin software has been justified by the Course Convener and approved by the Associate Dean (Education) on the basis of the teaching model being employed; students shall submit assessment online via ‘Wattle’ outside of Turnitin, or failing that in hard copy, or through a combination of submission methods as approved by the Associate Dean (Education). The submission method is detailed below.

Moderation of Assessment

Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.

Participation

Course content delivery will take the form of weekly on-campus lectures (recorded and available via echo360 on Wattle), weekly workshops (pre-recorded), and weekly tutorials. The tutorials will be delivered in a hybrid format (on-campus, live through scheduled Zoom sessions, and as pre-recorded videos). Weekly consultations with the lecturer and the tutor(s) will be conducted over Zoom.

Examination(s)

Centrally scheduled examinations through Examinations, Graduations & Prizes will be timetabled prior to the examination period. Please check ANU Timetabling for further information.

Assessment Task 1

Quiz 1

Quiz 1 will be available on Wattle from 3:00 pm (AEST) on Friday 12th August in Week 3 and close on Friday 19th August at 3:00 pm (AEST) in Week 4. Once a student opens the quiz, the student will have 45 minutes to complete this quiz. Students need to make sure they start their quiz attempt at least 45 minutes before the due time (Friday 19th August at 3:00 pm AEST). This quiz covers the material from the first two weeks of the course. Students are required to complete this quiz individually. This quiz is worth 5% of the overall grade and is not redeemable. The quiz solution and marks will be provided on the Wattle page within a week after the due date.

Value: 5%

Due date: Friday 19th August 3:00 pm AEST (Week 4)

Assessment Task 2

Quiz 2

Quiz 2 will be available on Wattle from 3:00 pm (AEST) on Friday 26th August in Week 5 and close on Friday 2nd September at 3:00 pm (AEST) in Week 6. Once a student opens the quiz, the student will have 60 minutes to complete this quiz. Students need to make sure they start their quiz attempt at least 60 minutes before the due time (Friday 2nd September at 3:00 pm AEST). This quiz covers the material from week three to week five of the course. Students are required to complete this quiz individually. This quiz is worth 5% of the overall grade and is not redeemable. The quiz solution and marks will be provided on the Wattle page within a week after the due date.

Value: 5%

Due date: Friday 2nd September 3:00 pm AEST (Week 6)

Assessment Task 3

Assignment

Students are expected to complete this assignment individually. Assignment questions will be provided to all students no less than two weeks before the due date on the course Wattle page. The assignment is designed to assess the student's application of the various topics covered in this course, up to and including the material in week 9. Completing this assignment will require the use of MS Excel. This assignment is worth 20% of the overall grade and is not redeemable. More details will be provided during the lectures and on Wattle no later than the week 8's lecture.

Value: 20%

Due date: Friday 14th October 3:00 pm AEST (Week 10)

Assessment Task 4

Final Exam

The final examination will be a Wattle-based online exam during the university examination period at the end of the semester. The final examination will be 3-hour long and cover the entire syllabus. Examination materials and conditions will be notified to all students via Wattle no later than Week 10 of the semester. The exam will be centrally timetabled and details of the final examination timetable will be made available on the ANU Timetabling website.

Value: 70%

Date: Specific date to be advised.

Academic Integrity

Academic integrity is a core part of the ANU culture as a community of scholars. At its heart, academic integrity is about behaving ethically, committing to honest and responsible scholarly practice and upholding these values with respect and fairness.

The ANU commits to assisting all members of our community to understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. The ANU expects staff and students to be familiar with the academic integrity principle and Academic Misconduct Rule, uphold high standards of academic integrity and act ethically and honestly, to ensure the quality and value of the qualification that you will graduate with.

The Academic Misconduct Rule is in place to promote academic integrity and manage academic misconduct. Very minor breaches of the academic integrity principle may result in a reduction of marks of up to 10% of the total marks available for the assessment. The ANU offers a number of online and in person services to assist students with their assignments, examinations, and other learning activities. Visit the Academic Skills website for more information about academic integrity, your responsibilities and for assistance with your assignments, writing skills and study.

Online Submission

The assignment is to be submitted online on Wattle at the pre-specified location via Turnitin. You must attach an assignment cover sheet. Please keep a copy of tasks completed for your records.

Hardcopy Submission

There are no hardcopy submission for this course.

Late Submission

No submission of assessment tasks without an extension after the due date will be permitted. If an assessment task is not submitted by the due date, a mark of 0 will be awarded.

Referencing Requirements

Accepted academic practice for referencing sources that you use in presentations can be found via the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. Alternatively, you can seek help through the Students Learning Development website.

Returning Assignments

Assignments will be returned via Wattle.

Extensions and Penalties

Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure. Extensions may be granted for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.

Resubmission of Assignments

More details will be provided during the lectures and on Wattle no later than the week 8's lecture.

Privacy Notice

The ANU has made a number of third party, online, databases available for students to use. Use of each online database is conditional on student end users first agreeing to the database licensor’s terms of service and/or privacy policy. Students should read these carefully. In some cases student end users will be required to register an account with the database licensor and submit personal information, including their: first name; last name; ANU email address; and other information.
In cases where student end users are asked to submit ‘content’ to a database, such as an assignment or short answers, the database licensor may only use the student’s ‘content’ in accordance with the terms of service – including any (copyright) licence the student grants to the database licensor. Any personal information or content a student submits may be stored by the licensor, potentially offshore, and will be used to process the database service in accordance with the licensors terms of service and/or privacy policy.
If any student chooses not to agree to the database licensor’s terms of service or privacy policy, the student will not be able to access and use the database. In these circumstances students should contact their lecturer to enquire about alternative arrangements that are available.

Distribution of grades policy

Academic Quality Assurance Committee monitors the performance of students, including attrition, further study and employment rates and grade distribution, and College reports on quality assurance processes for assessment activities, including alignment with national and international disciplinary and interdisciplinary standards, as well as qualification type learning outcomes.

Since first semester 1994, ANU uses a grading scale for all courses. This grading scale is used by all academic areas of the University.

Support for students

The University offers students support through several different services. You may contact the services listed below directly or seek advice from your Course Convener, Student Administrators, or your College and Course representatives (if applicable).

• ANU Health, safety & wellbeing for medical services, counselling, mental health and spiritual support
• ANU Diversity and inclusion for students with a disability or ongoing or chronic illness
• ANU Dean of Students for confidential, impartial advice and help to resolve problems between students and the academic or administrative areas of the University
• ANU Academic Skills and Learning Centre supports you make your own decisions about how you learn and manage your workload.
• ANU Counselling Centre promotes, supports and enhances mental health and wellbeing within the University student community.
• ANUSA supports and represents undergraduate and ANU College students
• PARSA supports and represents postgraduate and research students