Tomas Del Rosario College
Capitol Drive, San Jose, Balanga City, Bataan
Telefax No.: (047)791-6152; Tel. Nos.: (047) 237-3511, 237-0841
Syllabus for BM3
MATHEMATICS OF INVESTMENT
1st Semester AY 2014-2015
I.
Course Description:
This course covers the basic mathematical tools and operations met in investment problems. It includes topics such as simple interest, simple
discount, compound interest, annuities, present values, amortization, and perpetuities.
II.
Objectives:
At the end of this course, students are expected to:
1. Solve business problems related to simple interest, bank discount, compound amount or future value, present value, simple ordinary annuity, annuity due,
simple deferred annuity, and simple perpetuity.
2. Compute sinking fund and amortization, depreciation, and complex annuity.
3. Explain the difference between stocks and bonds as investment items and understand stocks and reading stock quotations.
III.
Required Textbook:
Investment Mathematics by Win Ballada and Susan Ballada, 2013 Edition, Domdane Publishers, Copyright 2013.
IV.
Grading System:
Grades are computed as follows: Preliminary Grade = (C.S. x 2) + Preliminary Exam / 3
Mid-term Grade = (C.S. x 2) + Mid-term Exam / 3
Final Grade = (C.S. x 2) + Final Exam / 3
V.
Course Requirement:
1. Examinations and Quizzes
Institutional (Regular, e.g. prelims, mid-terms, finals)
Final Ave: Prelim Grade + Midterm Grade + Final Grade
3
Quizzes – Quizzes will be given regularly and may be unannounced.
2. Other Course Requirements:
 Homework, Written Exercises
 The student’s responsibility is to come to each class prepared. He/She is also expected to take all examinations on the dates scheduled. He/She should
read the assigned materials and solve assigned problem materials prior to class. He/She is expected to attend each class and participate actively in the
discussions.
V.
Course Content:
LEARNING OBJECTIVES
PRELIMINARY PERIOD:
1.Distinguish a lender from a borrower.
2.Calculate simple and compound interest.
3.Calculate maturity value using exact interest
method and ordinary interest method.
4.Manipulate the simple interest formula when the
unknown is the principal, time or rate.
5.Apply computations to business problems.
Students must be able to:
1.analyze a firm’s basic financial statements using
basic financial ratios
2.explain limitation of ratio analysis
Students must be able to:
1.use the percent of sales method to forecast the
financing requirements of a firm
2.describe the limitations of the percent of sales
forecast method
3.calculate the firm’s sustainable rate of growth
4.prepare a cash budget and use it to evaluate the
amount and timing of a firm’s financing needs
TOPIC
NO. OF HRS.
3 hours
1.Definition of Terms
2.Finding the simple interest
3.Finding the maturity value
4.Exact Interest Method and Ordinary
Interest Method
5.Actual time and Approximate time
LEARNING ACTIVITIES


Lecture discussion
Boardwork
Oral and Written
Assessment
4 hours
Problem Solving
Seatwork
Recitation
Quiz
5 hours
Self-test problemspreparation of financial
forecasts
Recitation
Seatwork
Quiz
4 hours
Illustrations
Seatwork
Boardwork
Quiz
1.Financial Ratios
2.Limiations of financial ratio
1.Financial Forecasting
2.The Sustainable Rate of Growth
3.Financial Planning and Budgeting
4.Discretionary Financing Needs
Students must be able to:
1.define and measure the expected rate of return of an 1.Expected Return
individual investment
2.Risk
2.define and measure the riskiness of an individual
3.Risk and Diversification
investment
LEARNING
ASSESSMENT
3.explain how diversifying investments affects the
riskiness and expected rate of return of a portfolio or
combination of assets
PRELIM EXAMINATION
Students must be able to:
1.measure the market risk of an individual asset
2.calculate the market risk of an individual asset
3.explain recent criticisms of the capital asset pricing
model
4.explain the relationship between an investor’s
required rate of return on an investment and the
riskiness of the investment
Students must be able to:
1.distinguish between internal and external sources of
funds
2.discuss the different sources of long term capital
3.define and explain the key features and
characteristics of bonds
4.distinguish between different kinds of bonds
5.estimate the value of a bond
6.compute a bondholder’s expected rate of return
Students must be able to:
1.identify the basic characteristics and features of
stocks
2.distinguish between preferred stock and common
stock
3.distinguish between a stock and a bond
4.compute for the value of common stock
5.calculate a stock’s expected rate of return
Students must be able to:
1.Discuss the difficulty of finding profitable projects
in competitive markets
2.Determine whether a new project should be
4 hours
Illustrations
Seatwork
Boardwork
Quiz
BONDS
1.Definition
2.Characteristics and features
3.Different kinds of bonds
4.Current Yield
5.Yield to Maturity
6.Bondholder’s Expected rate of
Return
6 hours
Lecture-discussion
Quiz
Problem Solving
Recitation
STOCKS
1.Definition
2.Characteristics and features
3.Different kinds of stocks
4.Valuing stocks
5.Yield to Maturity
6.Stockholder’s Expected Rate of
Return
MIDTERM EXAMINATION
CAPITAL BUDGETING
1.Definition of capital budgeting
2.Finding profitable projects
3.Definition and computation,
5 hours
Lecture-discussion
Quiz
Problem Solving
Recitation
Sample Problem:
Initial outlay for a project –
P54,200.00
Expected life – 5 years
Quiz
Recitation
Boardwork
1.Measuring Market Risk
2.Measuring a Portfolio’s Beta
3.The Investor’s Required Rate of
Return
4.The CAPM
6 hours
accepted usinga.the payback period
b.NPV
c.Profitability index
d.IRR
Students must be able to:
1.determine relevant and irrelevant cash flows
2.calculate a project’s free cash flows
3.explain how the capital budgeting decision process
changes when a limit is placed on the peso size of the
capital budget, or there are mutually exclusive
projects
Students must be able to:
1.explain what the appropriate measure of risk is for
capital budgeting
2.determine the acceptability of a new project using
both the certainty equivalent and risk-adjusted
discount rate methods of adjusting of risk
3.explain the use of decision trees for imitating the
performance of a project under evaluation
advantages and disadvantages of
capital budgeting techniquesa.Payback period
b.Discounted payback period
c.Net present Value
d.Profitability index
e.IRR
6 hours
1.Using cash flows rather than
accounting
2.Annual free cash flows
3.Definition of Capital Rationing
4.Rationale for Capital Rationing
5.Mutually exclusive projects
RISK ANALYSIS
1.Definition of Risk
2.Project Standing alone Risk
3.Project’s contribution-to-firm Risk
4.Systematic Risk
5.Certainty equivalent approach
6.Risk-adjusted discount rates
7.Decision Trees
FINAL EXAMINATION
Prepared by:
MRS. MARICEL V. CANLAS
Recommending Approval:
Approved by:
MR. JEFFERSON L. TRIGUERO
Department Chair – BSA
DR. MARINA B. SANTOS
College Dean
4.5 hours
1.5 hours
After-tax cash flows at the
end of each year – P20,608
Salvage value at the end of
the 5th yr – P13,200
Required Rate f Return –
15%
Using the 4 capital
budgeting techniques,
ANALYZE whether this
project should be accepted.
OHP Presentation
OH Presentation
Problem solving
Self-test Problems
Quiz
Recitation
Quiz
Recitation
Seatwork