2011

EXERCISE GUIDE
PRACTICALS
FINANCIAL MATHEMATICS

1
 INDEX

INTRODUCTION 3
PART I: SIMPLE INTEREST
1.1 Theoretical foundation 5
Knowledge to reinforce, objective, strategy 10
proposed methodology and bibliography
1.3 Practical Exercises 12
PART II: COMPOUND INTEREST
2.1 Theoretical foundation 20
2.2 Knowledge to reinforce, objective, strategy 22
proposed methodology and bibliography
2.3 Practical exercises 24
PART III: ANNUITIES
3.1 Theoretical basis 30
Knowledge to reinforce, objective, strategy 32
proposed methodology and bibliography
3.3 Simple, certain, expired annuities and 33
immediate
3.3.1 Practical exercises 35
3.4 Simple, certain, advanced annuities 39
and immediate
3.4.1 Practical exercises 41
PART IV: EXERCISES
COMPLEMENTARY. PRACTICES IN
EXCEL
4.1 Theoretical foundation 44
4.2 Knowledge to reinforce, objective, strategy 44
proposed methodology and bibliography
4.3 Practical exercises 46

1
 INTRODUCTION

Financial Mathematics is a derivation of applied mathematics, currently in use.

frequent in the business world that demands skilled professionals in management of
techniques and procedures that allow understanding the behavior of the value of money in the
time.

This educational experience: Financial Mathematics aims for students of the Bachelor's degree
in Accounting, know and use the tools provided by Financial Mathematics to
that with the support of information and communication technologies, the use of methods of
research and through collaborative work be able to generate strategies aimed at making
optimal decisions in organizations. All with a sense of responsibility, honesty and
discretion; since the information that will generally be handled in the workplace is of a character
confidential.

The graduates of this degree obtain and apply economic resources in the entities.
business-related, so Financial Mathematics represents a very valuable tool
for the appropriate management of these resources that leads to proper decision-making in
areas such as: Accounting, Control, Treasury, Audit, Finance, Tax, etc.

Both the student taking the educational experience Financial Mathematics and the teacher
that the instructor will find in this Exercise Guide, an important aid that will
will allow the first one to understand more easily through practice the topics addressed in
the class; and secondly to verify that the students can apply the knowledge acquired.

This work consists of 4 sections: Simple Interest, Compound Interest, Annuities, and the last one
corresponds to complementary exercises. The only aspect that the program covers and that does not
was considered in this guide was that of amortization and amortization fund, due to the
the academy agreed that this unit be evaluated with a research project in which
will link learning with practice in the workplace.

In the first section called Simple Interest, the following points will be addressed: calculation of
Amount

In the Compound Interest section, the topics will cover: Amount, Principal, Rate, Nominal Rate.
Effective Rate and Equivalent Rates, as well as Equivalent Value Equations.

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Regarding the section on Annuities, the contents corresponding to two types will be covered.
these: Due Annuities and Advanced Annuities, each will cover the points: Amount,
Capital

In the last section corresponding to Complementary Exercises, a list of will be included

problems that will cover all the topics discussed: Simple Interest, Compound Interest and
Annuities that will be solved using the Excel spreadsheet.

This Exercise Guide contains 180 practical examples related to real situations that
they facilitate their understanding and application, each one accompanied by its response with the purpose of

that the student analyzes and strives to reach the solution.

The first three sections start with the corresponding theoretical foundation, followed by the
nomenclature and the formulas that will be used; the fourth section includes 25 exercises from all
Topics addressed that students must resolve using the Excel program.

Finally, it is worth noting that this Exercise Guide is a valuable support for the student.
that wishes to prepare for their exams.

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 SIMPLE INTEREST

1.1 THEORETICAL FOUNDATION

In all financial activities, it is customary to pay interest for the use of borrowed money.
Most of the income of banks and investment companies comes from interest on
loans or the return of profits from investments. In general, all commercial operations
are related to the returns on the capital at stake" (Lincoyán Portus, 2002).

The money that a capital produces when it is invested or when it is paid for the acquisition of goods and
credit operations services is known as Interest, that is to say, it is the price for the use of
money.

When the capital earns interest for the entire duration of the transaction, the interest accrued at
the end of the term is known as Simple Interest.

Nomenclature

C = represents the initial capital, that is, the amount that is invested.

M= represents the capital plus the interest, it is the final value of the amount deposited at the beginning of the
period.

I is the interest that is charged or paid for the use of money, it is the difference between the amount and the capital.

i= represents the interest rate that is paid or charged for each monetary unit and is always annual,
unless otherwise stated.

t= represents the time that the transaction lasts.

BASIC CONCEPTS FOR CALCULATING SIMPLE INTEREST.

Ordinary or commercial simple interest: it is calculated considering the year as 360 days.

Simple interest real or exact: it is calculated using a calendar year of 365 days or 366 if
deals with leap year.

Simple Interest is expressed with the letter I.

Formula:

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 I=Cit

Amount: it is the sum of the capital plus the interest generated over time, it is also referred to
known as: future value, amount, accrued value, nominal value. It is expressed with the letter M.

Formula: M=C (1+it)

Capital: The capital or present value represent the same thing, only in different contexts: The
capital is an amount that is invested now to obtain a larger amount later, and the value
the present is precisely the one that has at this moment, an amount whose value has been set at
a future date.

The value of the debt, on a date prior to its maturity, is known as present value or
present value of the debt on that date.

Some synonyms are: main, current value, present value. It is expressed with the letter C.

Formula:

C=M(1+it)−1

M
C=
(1+it)

Rate: The interest rate is expressed as a percentage and is the type of interest of the operation.
with the letter i.

The difference between rate and interest rate:

a) The interest rate is the one expressed in decimals.

b) The interest rate is expressed as a percentage.
Both are distinct expressions of the same thing; the first is the algebraic form of
to pose it and the second is the percentage expression.

Formula:

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Time: It is the number of days or other units of time that elapse between the start date and
end of the financial operation.

There are situations in which the term of an operation is specified by dates, instead of
mention number of months or years. In these situations we will calculate the time in a real way and in
approximate shape.

Real time also known as exact time: to calculate real or exact time is
it is necessary to determine the number of days that elapse between the two dates, as it is found
In the calendar, a year consists of 365 days or 366 if it is a leap year.

Approximate time: To calculate the approximate time, full months of 30 days are counted and
years of 360 days.

Although it causes differences in the obtained values, the approximate calculation of the
time because it is the simplest.

It is expressed with the letter t.

Formula:

Commercial or banking discount and real or fair discount

Discount: When a loan is obtained for a capital, the debtor commits to pay it back.
by signing promissory notes or bills of exchange whose nominal value (amount stipulated in the note or
The promissory note) is generally greater than the principal. It is common for the creditor (the owner of

(document) I negotiated it before the expiration date at a price lower than the stipulated one.
own document, that is to say a discount is made.

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The discount can be evaluated in two ways:

a) Trade discount
b) Real or fair discount

Commercial Discount: In the commercial discount, interest is calculated between the maturity of the
debt and the discount date at a certain rate, on the nominal value.
The discount that is carried out is a credit operation that takes place in institutions.
banking, whose nominal value discounts an amount equivalent to the interest that would accrue the
document between the date it is received and the due date, with this the value is anticipated.
current of the document.

Nomenclature

D= bank discount

M = nominal value, it is the value of the document at the due date

d = discount rate

t = time or period, understood between the discount date and the due date.

In some banking credit operations, it is customary to charge interest at the very moment.
the loan is made. Charge interest in advance, instead of charging it until the due date
The expiration is called bank discount or simply discount.

Real or Fair Discount: unlike the commercial discount, the fair discount is calculated on
the real value that is anticipated and not on the nominal value.

For the actual or fair discount, the same formulas are used as for calculating the amount.
capital, rate, and time at simple interest.

BASIC CONCEPTS FOR THE CALCULATION OF BANK DISCOUNT

Discount: this type of discount is common in operations, transactions, and loans.

banking and stock market (those that are conducted on the stock exchanges). It is an interest on the value
of the document or debt as of the due date or amount.

Formula: D=Mdt

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Amount: it is the nominal value of the document or the value at maturity.

M=C+D

Current value: it is the effective value that is received at the time of the bank discount of a
document, before the due date. The current or present value with bank discount is
identify how the distance between the face value of the document and the bank discount.

C = M (1 - d t)

Time: it is the period that elapses between the date on which a document is discounted and the date of
expiration.

Discount rate: it is the rate applied when discounting a document in a financial operation.

Equations of equivalent values: it is common that in financial operations there are two or more
different transactions that need to be rethought to express them in a single operation, through
equations that are equivalent and are known as equations of equivalent values.

An equation of equivalent values is an equality between two sets of obligations.

valued all on the same date called focal date or valuation date.

It is important to mention that the focal date must be determined in each case, as the amounts of
The obligations, in simple interest problems, vary according to time, but when the
interest is compounded, the solution is the same for any location of the focal date.

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To facilitate the calculations of a value equation, it is convenient to graph one-dimensionally the
two sets of obligations through a diagram of time and value with displacement
Of all the amounts of money involved in the problem at the focal date, those that are separated are
correspond to the debts of those who correspond to the payments, an equality is established that is what
what is known as equations of equivalent values. After this equation is solved
clearing the unknown or unknowns that appear in it to achieve the solution to the problem. It is
It is important to note that the amounts of money may be before or after the focal date.

1.2 KNOWLEDGE TO REINFORCE

Interés Simple:Monto o valor futuro, capital o valor presente, tasa de interés, tiempo, descuento
commercial, real or fair discount and equivalent value equations.

OBJECTIVE

The student will analyze and understand the theory of Simple Interest; will correctly apply the
formulas in the solution of exercises that will allow you to calculate: amount, capital, rate, time,
discount and equations of equivalent values, in order to evaluate the results that it
They will serve as a basis for a correct decision-making process.

PROPOSED METHODOLOGICAL STRATEGY

The following strategies are proposed:

1.- Research in books and in the database of the Universidad Veracruzana on the concepts:
Interés Simple

2.- Team analysis of each of the concepts and the formulas to determine which one is
it will apply in each case that is presented in simple interest.

3.- Resolution of the exercises offered in this guide individually and in teams.

4.- Socialization of the results with the rest of the classmates, with the purpose of
that the teacher detects and dispels any doubts that may arise.

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BIBLIOGRAPHY

Cantú Treviño, J. (2005). Financial Mathematics (Third ed.). Mexico, Mexico: Banking
and commerce.

Díaz Mata, A., & Aguilera Gómez, V. M. (2008). Financial Mathematics. Mexico,
Mexico: Mc Graw Hill.

Hernández Hernández, A., Hernández Villalobos, A., & Hernández Suárez, A. (2006).
Financial Mathematics Problems. (A. A. Gómez Ruiz, Ed.) Mexico, Mexico:
Thomson.

Lincoyán Portus, G. (2002). Financial Mathematics (Fourth edition ed.). (E. A. Herrera,
Ed.) Santafé, Bogotá, Colombia: McGraw Hill.

Mora Zambrano, A. (2010). Financial Mathematics (Third Edition ed.). (L. J. Buitrago
D., Ed.) Mexico, Mexico: Alfaomega.

Villalobos, J. L. (2001). Financial Mathematics (Second ed.). (G. Trujano Mendoza,

Mexico, Mexico: Prentice Hall.

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1.3 PRACTICAL EXERCISES

1.- From an investment of $750.00 with an annual rate of 17.5% over 90 days, calculate the interest.
simple ordinary total produced.

R= $32.81

2.- Calculate the ordinary simple interest produced by an investment of $10,500.00 in 56 days at the rate
of 16.7%.

R = $272.76

3.- Calculate the exact and ordinary interest on a capital of $20,000.00 at an annual interest rate of 9%, from
from April 10 to September 15 of the same year.

R= $779.17 ; $764.38 ; $790.00; $775.

4.- Calculate the interest earned on a capital of $15,000 at 12% per annum for 180 days.

R= $900

5.- Calculate the interest earned on a capital of $42,000 at 1.5% per year, from June 15 to July 15.
of December of the same year, according to the following options: a) with the approximate time and the year
commercial; b) with the exact time and the commercial year; c) with the approximate time and the year
calendar and d) with the exact time and the calendar year.

R= a) $315.00; b) $320.25;c) $310.68; d) $315.86

6.- Find the simple interest and the amount of $1000

at 4 ½ %, for one year b) at 5 ¼ %, for 2 years

c) at 3 ½ %, for ½ year d) at 4% for 15 months

R= a) $45.00, $1045.00; b) $105.00, $1105.00; c) $17.5, $1017.5; d) $50.00, $1050.00

7.- A loan of $180,000 is obtained for 160 days at 30% simple interest. What amount must be paid?
overcome his debt?

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$204,000.00

8.- What amount in terms of monthly simple interest is produced by a capital of $40,000 at 33%?
simple annual?

$1100.00

9.- A person acquires machinery on this date that costs $220,000. If we assume it increases
its value at a constant rate of 2% per month, what will its value be after 2 months?

R= $228,800.00

10.- What amount should be paid for a debt of $20,000 on June 22, 2011 if the promissory note was
signed on January 30 of the same year, at 8% simple interest? Perform the calculation a) with time
exact and exact interest, b) with exact time and commercial interest.

R= a) $20,626.84; b) $20,635.55

11.- María wants to purchase a property in 2 years. She assumes that the down payment she will need to
paying around that time will be $60,000. If you want to have that amount in 2 years, what amount
Should I invest in a fixed income deposit that yields 3% simple monthly interest?

$34883.72

12.- How much should be invested today at a 1.8% monthly simple interest to have $20,000 in the future?
of 2 months?

R= $19,305.01

13.- Find the present value, at 6% simple interest, of $1500 maturing in 9 months.

$1435.40

14.- Calculate the interest produced by a capital of $6200.00 invested from December 8 to the 10th.
February of the following year, at an annual rate of 16.75%. Perform the calculation with exact time and interest.
commercial.

R= $184.62

15.- What amount should we pay for capital and interest over a period of 140 days if we
They lent $5600.00 at an annual rate of 19.5%?

13
R= $6024.66

16.- Mr. Jaimez lent Mr. Moreno $40,000.00, charging him a simple interest rate of 24%, to
a period of 9 months, for which Mr. Jaimez signed a promissory note. How much did Mr. Jaimez collect at maturity?

$47,200.00

17.- In what time will a capital of $45,000 earn an interest of $1350 at 0.5% per month?

R= 6 months

18.- How long does it take for an investment at 49% annual simple interest to double?

R = 2.040816 years; or 2 years 14 days

19.- Mr. Martínez doubles his investment in 16 months, what has been the annual simple interest rate?

R = 75% annual

20.- At what simple interest rate does a capital double in 11 months?

R = 9.09% monthly; or 109.09% annually

21.- How long would it take to accumulate $5000.00 if $3000 is deposited today in a fund that pays
4% simple monthly?

R= 16 months and 20 days.

22.- Determine the value of the following obligations today, assuming a rate of 4%.
simple interest: $1000.00 due today, $2000.00 due in 6 months with
5% interest and $3000.00 maturing in one year with 6% interest. Use today's date.
as the focal date.

$6067.49

23.- X owes $500 due in two months, $1000 due in five months and $1500 with
due in 8 months. It is desired to settle the debts with two equal payments, one with
maturity in 6 months and another with maturity in 10 months. Determine the amount of these.
payments assuming an interest of 6%, taking as the reference date the date at the end of 10 months.

$1514.85

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24.- X owes Y $1000 payable within 6 months, without interest, and $2000 with an interest of 4% for
1 ½ years, maturing in 9 months. And he agrees to receive 3 equal payments, one
immediate, another in 6 months and the third in one year. Determine the amount of each
payment using the date one year from now as the focal date, assuming that Y expects a
5% yield in the operation.

$1031.38

25.- Person 'X' owes $2000 due in 2 months, $1000 due in 5 months and
$1800 due in 9 months. He wishes to settle his debts with two equal payments.
maturity in 6 months and 12 months respectively. Determine the amount of each payment
assuming a yield of 6% and taking the date one year later as the focal date.

R= 2444.33

26.- Assuming that Nacional Monte de Piedad charges 5.5% monthly for the loans it provides
Regarding pledged goods, how much would a person who pawned have to pay in 3 months?
a month ago a television for which they lent him $800.00, and today he pawns a watch for it
who lends you $750.00?

R= 1849.75

27.- Find the simple interest and the amount of $45,000.00

a) at 5.7% simple annual interest for 5 years

b) at 2.5% monthly for 27 days

c) at 15% quarterly for 6 years
d) at 36% semester rate for 3 years
$12,825 and $57,825.00
$97,200.00 y $142,200.00

28.- A person purchases a computer worth $15,000.00 on credit and makes a payment.
immediate payment of $3,000.00 and a final payment 8 months later. Agrees to pay 34% annual interest
Simple about the balance. How much will he/she have to pay at the end of the term? How much will they charge him/her in interest?

$14,720.00

29.- A loan of $26,500.00 is obtained for 150 days at an annual simple interest rate of 35%. What
how much should be paid when the debt matures?

15
R= $30,364.58

30.- How much should a person with a debt of $12,000.00 pay in interest?
If it is settled 6 months later and they charge interest at a rate of 60% simple annual interest?

$3,600.00

31.- Determine the interest and the amount produced by a capital of $75,000.00, which guarantees a
2.5% monthly yield, if the withdrawal is made 24 days later.

$1,500.00 and $76,500.00

32.- What is the amount that a person will pay who obtains a loan of $8,000.00 at a rate of
4.2% annual for 2 years?

$8,672.00

33.- What is the interest produced by a capital of $25,523.55 in 4 months at an annual rate of 12%?

$1,020.94

34.- A person participates in a "tanda" and it is their turn to collect in the sixteenth month.
In 16 months, you will receive $45,000.00. What is the present value of your installment, with simple interest?

18% annually?

R=$36,290.32

35.- A promissory note of $12,000.00 due in 8 months with an interest rate of 5% is sold to Mr.
"X" 140 days before its maturity with a yield of 6%. Determine the value it pays.
Mr. "X" by this document

R= $12,117.26

36.- At what simple interest rate will the amount of $90,000.00 become $98,100.00 in one year?

R= 9% annual

37.- For how long is a capital of $85,237.00 imposed at a rate of 5% per semester for
produce $52,312.00?

R= 6 years 1 month 20 days

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38.- What is the current value of a series of bonds totaling $120,000.00 and whose maturity is
within a month, assuming a rate of 6%?

R= $119,402.99

39.- A person owes $500,000.00, an amount that must be paid within 4 years, if this person
decide to pay off your debt 3 years before its due date, assuming an interest rate of 70%
How much would you pay?

$161,290.32

Mr. López promised his daughter that when she turned 15, he would give her as a gift.
$150,000.00 for her 15th birthday party. If your daughter is currently 10 years old and assuming a
25% interest rate. How much should Mr. López deposit today in order to fulfill
his promise?

R= $66,666.67

41.- In what time (months and days) was a document with a nominal value of $35,000.00 discounted if the
The commercial discount period was 32% and the discount was $3500?

R= 3 months, 22 days

42.- Determine the exact real time and the approximate (ordinary) time for the following items:

a) From March 15 to August 20 of the same year

b) From May 12 to July 30 of the same year
c) From March 25 to October 15 of the same year
d) From November 15, 1982, to February 20, 1983
R= a) real time: 158 days approximate time: 155 days

real-time: 79 days approximate time: 78 days

c) real time: 204 days estimated time: 200 days

real time: 97 days 95 days

43.- Calculate the interest produced by a capital of $1,500,000.00 that was loaned on March 15 and
It will be settled on August 20 of the same year, at a rate of 85%.

with real time

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b) with approximate time

R= a) $551,917.81; b) $548,958.33

44.- What is the current value of a promissory note for $50,000.00 that matures on December 15, if it is
consider a simple annual interest of 25% and today is July 11?

R= $45,169.39

45.- What will be the amount on November 26 of a capital of $240,000.00 deposited on April 10
of the same year, in an account that pays 27% simple annual interest?

R= $280,680.00

46.- Mr. Smith signed two documents: one for $50,000.00 to be paid in a year, and another for
$100,000.00 to be paid in three years. In a new arrangement, I agreed to pay $75,000.00 now and the rest
in 4 years. What amount does it have to pay at the end of the fourth year assuming a return
5% annual? Focus date: the fourth year

R= $72,500.00

47.- What is the nominal value of a promissory note if it is paid for 5 months before its maturity?
$6500.00 with a 48% commercial discount?

$8,125.00

Mr. Pérez owes $45,000.00 due in 4 months and $60,000.00 with

maturity in 6 months. If you wish to settle your account with an immediate one-time payment.

What will be the amount of that payment assuming a return of 5%? Use as the reference date
today.

$102,798.88

49.- Mr. López owes $5,000.00 due in two months, and he also has another debt of
$10,000.00 due in 5 months and $15,000.00 due in 8 months. If you wish to settle
debts through equal payments, one due in 6 months and the other due in 10
months. Determine the amount of these payments. Assuming an interest of 6%, taking as the date
focus on the date of 10 months.

R= $15,148.51 the amount of each payment.

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50.- What real discount rate was applied to a document with a nominal value of $70,000.00, if it
It was discounted on March 15 and its due date was May 15, and $66,000.00 net was received?

R = 36.36% annual

51.- On June 1st, 2008, José requested a loan of $50,000.00, he made the
subsequent payments: $20,000.00 on July 15 of the same year, $4,000.00 on October 20, 2008 and
$25,000.00 on January 25, 2009. What is the overdue balance on March 15, 2009, assuming
a 6% return Target date: March 15, 2009?

R= $2,261.67

52.- What semiannual interest rate should be used to invest a capital of $490 so that it produces $80.85?
in 270 days?

R= 11% Semiannual

53.- There is a debt of $15,000.00 due in 6 months with an interest rate of 5%

annually. $5,000.00 will be paid now and the balance will be settled in a year and a half; assuming that...
3% annual yield. What is the payment that must be made considering the focal date?
18-month cable?

$10,611.25

54.- What is the proportional simple interest rate for two months equivalent to an annual rate of 36%?

R = 6% bimonthly

A promissory note valued at $68,000 matures on September 18, discounted on June 20 at 10%.
Calculate the net value of the promissory note. Calculate the time precisely.

R= $66,300.00

R= $4,850.

19.- Let's calculate the value of the monthly deposit that a person must make to an institution.
financial institution that pays 14.4% annual interest, compounded monthly, in order to obtain $64,000 in 6 years.

$56.45

19
20.- What will be the annual interest rate, compounded quarterly, at which a series of deposits
Will contributions of $30,000 made at the end of each quarter be able to form a fund of $800,000 in 5 years?

R = 11.68% annual compounded quarterly

21.- A blender can be purchased for $449.50 in cash or $49.50 as a down payment and $27.50
monthly for 18 months. a) What nominal interest rate is being charged? b) what rate
Is the interest rate being charged?

28.14% annual convertible monthly

22.- What is more convenient for buying a car?

a) Pay $130,000.00 in cash or

b) Give $65,000.00 as a down payment and $6,000.00 at the end of each of the following 12 months, if the
Interest is calculated at a rate of 18% per year, compounded monthly. Justify your answer.

It is advisable to buy for cash

23.- Calculate the cash price of a condominium for which the following payments are made:
$1,500,000.00
20 semiannual payments of $400,000.00 each.
18% semiannual rate
R= Cash Price $3,641,098.60

24.- How many payments of $12,000.00 must a company make each month to settle a debt of
$690,000.00 considering an interest rate of 18% compounded monthly?

R= 133.26 monthly payments.

25.- Three months before entering school, a student receives $10,000.00 which are
invested at 4% convertible quarterly. What is the amount of each of the withdrawals?
quarterly ones that you will be able to do over 4 years, starting the first one after 3 months?
R= $679.44

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