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Group Members
Serial no.

Name

Roll

01.

JUEL RANA

114439

02.

SADIA AFRIN

114440

03.

MD. ASADUZZAMAN

114441

04.

MD. JUBAIDUL ISLAM

114442

05.

SIMUL KHONDAKAR

114443

06.

MD. SUNJER RAZI

SHOURAV

114444

07.

SHYFUR RAHMAN

114447

08.

TANJINUL ISLAM
TANIM

114448

09.

MD. AZIMUL HAQUE

114450

10.

MRINAL KANTI DAS

114452

Prepare for
MR. KAZI NASIR UDDIN
Course Instructor
Business Mathematics
Department of Accounting and information system
Faculty of Business Studies
Jagannath University

Mathematics of Finance

Shakil Ahammed
Roll no# B130201046

Interest
Suppose A & B two business man. They are

doing business. When A borrows money from

B, then A has to pay certain amount of money
to B for the use of the money. The amount
paid by A is called Interest.
Here borrowed amount is principal
Interest can be divided in two category:
1. Simple interest
2. compound interest

Simple interest
When interest is payable on the principal only,

it is called simple interest.

If I denotes the interest on a principal P at an
interest rate of r per year for n years, then
we have
I = Pnr
The accumulated amount A, the sum of the

principal and interest after n years is given by

A = P + I = P + Prn
= P(1 + rn)

Compound Interest
Frequently, interest earned is periodically

added to the principal and thereafter earns

interest itself at the same rate. This is called
compound interest.
Formula:
I= P(1+r)n
Where I= compound interest, P=principal
amount
r=rate of interest, n=number of year.

Annuity
An annuity is a series of payment , ordinarily

of a fixed amount payable regularly at equal

intervals.
The intervals may be a year, a half year, a

month and so on.

Different types of
annuities

Annuity
Annuity

AnnuityCertain
Certain
Annuity
(Payments are
are to
to be
be made
made
(Payments
for aa certain
certain or
or fixed
fixed number
number
for
years) )
ofofyears

Annuity due
(Where the first payment
falls due at the beginning
of the ist interval, and so
on)

AnnuityContingent
Contingent
Annuity
(Payments are
are to
to be
be made
made till
till
(Payments
the happening
happening of
of some
some
the
contingent event
event such
such as
as the
the
contingent
deathof
ofaaperson,
person,marriage
marriageof
ofaa
death
girlete.)
ete.)
girl

Annuity immediate
(Where
the
first
payment falls due at the
end of the first interval,
and so on)

2. Formula for the present value of an Immediate Annuity

A
1
V 1
n
i
1 i
3. Formula for the amount of an Immediate Annuity

A
n
1 i 1
M
i

4. Formula for the amount of Annuity due

A
1 i 1 i n 1
M
i
5. Present Value of an Annuity

The present value of an Annuity is the sum of the

present values of its installments.

Here , V 6,000
6
i
0.06
100
n 20
A?


A
1
6000
1
20
0.06
1 0.06
A
1

1
20
0.06
1.06

Log (1.06)20
= 20 log 1.06
=200.0253
=0.506
Antilog 0.506
=3.206
(1.06)20
=3.206

A
1
1

0.06
3.206
A 3..206 1

0.06
3.206
A 2.206

0.06 3.206
6000 0.06 3.206
A
523.19
2.206
The annual payment necessary is Tk. 523.19

Query session

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