• Class Number 4032
• Term Code 3430
• Class Info
• Unit Value 6 units
• Mode of Delivery In Person
• COURSE CONVENER
• Jacie Liu
• LECTURER
• Jacie Liu
• Class Dates
• Class Start Date 19/02/2024
• Class End Date 24/05/2024
• Census Date 05/04/2024
• Last Date to Enrol 26/02/2024
SELT Survey Results

Financial Mathematics (STAT2032)

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

Wherever possible the examples used in this course will reflect real world situations to emphasize the use of the techniques covered.

## Examination Material or equipment

The final exam is closed-book and covers the whole unit. The exam will be centrally timetabled by Examinations, Graduations & Prizes prior to the examination period. Please check ANU Timetabling for further information. You will require a non-programmable scientific calculator for the duration of the exam. Details of the examination materials and conditions will be noticed to all students via Wattle and the examination office.

## 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. Some classwork and tutorial questions and solutions may be illustrated using MS Excel. Short videos on Excel applications to relevant actuarial problems will be made available on the Wattle course site . Some assignment questions may require the use of MS Excel at a rudimentary level. You are assumed to have beginner Excel skills for this course (e.g. perform basic mathematical calculations in Excel). Excel software is available for free to ANU students through Microsoft Office 365 .

There are no prescribed textbooks for this course.

## Staff Feedback

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

• Tutorial solutions and discussions;
• Whole of class feedback via discussion forums/in-class;
• Individual feedback during consultations and following each assignment.

## 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). Feedback can also be provided to Course Conveners and teachers via the Student Experience of Learning & Teaching (SELT) feedback program. SELT surveys are confidential and also provide the Colleges and ANU Executive with opportunities to recognise excellent teaching, and opportunities for improvement.

## Other Information

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/.

Co- Teaching

STAT2032/STAT6046 are taught jointly. Certain assessment tasks may differ between these codes. The different cohorts of students will be treated separately in grading and any scaling that is applied.

## 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. Assignment 1 Due
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.
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. Assignment 2 Due
10 Yield curve and term structure of interest rates. Calculating forward and spot rates.
11 Interest rate risk: duration, effective duration and convexity. Conditions for and determination of immunisation.
12 Self-Revision / Revision

## Tutorial Registration

Tutorials will be conducted on campus and will not be recorded. 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.

## Assessment Summary

Assessment task Value Due Date Return of assessment Learning Outcomes
Assignment 1 10 % 15/03/2024 26/03/2024 1
Assignment 2 20 % 03/05/2024 20/05/2024 1,2,3,4
Final Exam 70 % 30/05/2024 27/06/2024 1,2,3,4,5,6,7

* 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 Integrity Rule before the commencement of their course. Other key policies and guidelines include:

## 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 Skills website. 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

All lectures will be conducted on campus (recorded and available via echo360 on Wattle). Tutorials start from week 2 on campus (not recorded). Participation is strongly encouraged in tutorials.

Attendance at lectures and tutorials, while not compulsory, is expected in line with “Code of Practice for Teaching and Learning”, clause 2 paragraph (b).

## Examination(s)

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

Value: 10 %
Due Date: 15/03/2024
Return of Assessment: 26/03/2024
Learning Outcomes: 1

Assignment 1

Assignment 1 covers lecture materials in Week 1 and 2. The assignment, including any relevant details, will be released on Wednesday 6 March (Week 3).

Value: 10%

Due date: Friday 15 March 21:00 (Week 4).

Grade release date: Tuesday 26 March 17:00 (Week 6). Short individual feedback may be provided online along with the grade. More detailed feedback from the marker will be available by appointment/ email.

Submission: Online on Wattle via Turnitin.

Note: This assignment is non-redeemable and to be completed individually. Late submissions will not be accepted without prior permission from the course convenor and students will receive a mark of zero for the assignment if it is submitted after the due date.

Value: 20 %
Due Date: 03/05/2024
Return of Assessment: 20/05/2024
Learning Outcomes: 1,2,3,4

Assignment 2

Assignment 2 covers lecture materials in Week 1 to 6. The assignment, including any relevant details, will be released on Friday 19 April (Week 7)

Value: 20%

Due date: Friday 3 May 21:00 (Week 9).

Grade release date: Monday 20 May 17:00 (Week 12). Short individual feedback may be provided online along with the grade. More detailed feedback from the marker may be available by appointment/ email.

Submission: Online on Wattle via Turnitin.

Note: This assignment is non-redeemable and to be completed individually. Late submissions will not be accepted without prior permission from the course convenor and students will receive a mark of zero for the assignment if it is submitted after the due date.

Value: 70 %
Due Date: 30/05/2024
Return of Assessment: 27/06/2024
Learning Outcomes: 1,2,3,4,5,6,7

Final Exam

The final exam will be held on-site during the exam period with details to be advised no later than week 10 of the semester.

Value: 70%

Format: The final exam is closed book and consists of written-answer questions. A formula package will be provided during the exam.

Date: The exam will be centrally timetabled. Details of the final examination timetable will be made available on the ANU Timetabling website. The onus is upon students to acquire their own scheduling details.

Academic integrity is a core part of the ANU culture as a community of scholars. The University’s students are an integral part of that community. The academic integrity principle commits all students to engage in academic work in ways that are consistent with, and actively support, academic integrity, and to uphold this commitment by behaving honestly, responsibly and ethically, and with respect and fairness, in scholarly practice.

The University expects all staff and students to be familiar with the academic integrity principle, the Academic Integrity Rule 2021, the Policy: Student Academic Integrity and Procedure: Student Academic Integrity, and to uphold high standards of academic integrity to ensure the quality and value of our qualifications.

The Academic Integrity Rule 2021 is a legal document that the University uses to promote academic integrity, and manage breaches of the academic integrity principle. The Policy and Procedure support the Rule by outlining overarching principles, responsibilities and processes. The Academic Integrity Rule 2021 commences on 1 December 2021 and applies to courses commencing on or after that date, as well as to research conduct occurring on or after that date. Prior to this, the Academic Misconduct Rule 2015 applies.

The University commits to assisting all students to understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. All coursework students must complete the online Academic Integrity Module (Epigeum), and Higher Degree Research (HDR) students are required to complete research integrity training. The Academic Integrity website provides information about services available to assist students with their assignments, examinations and other learning activities, as well as understanding and upholding academic integrity.

## 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. Unless an exemption has been approved by the Associate Dean (Education) submission must be through Turnitin.

## Hardcopy Submission

There are no hardcopy submission for the assignments of 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

The Academic Skills website has information to assist you with your writing and assessments. The website includes information about Academic Integrity including referencing requirements for different disciplines. There is also information on Plagiarism and different ways to use source material.

## 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

Students will not be permitted to resubmit assignments.

## 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.
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.

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).

## Convener

 Jacie Liu 61254508

jia.liu3@anu.edu.au

### Research Interests

Actuarial studies, mortality modelling, Bayesian modelling, GLM, Copula, panel data analysis

### Jacie Liu

 Monday 15:00 16:00 Monday 15:00 16:00

## Instructor

 Jacie Liu 61254508 jia.liu3@anu.edu.au

### Jacie Liu

 Monday 15:00 16:00 Monday 15:00 16:00