The Fundamentals of Financial Mathematics – Level 1

Training Description

The Fundamentals of Financial Mathematics – Level 1

This training program offers a comprehensive introduction to the essential concepts of financial mathematics, enabling participants to understand and apply fundamental financial management tools.

It explores the principles of the time value of money and discounting mechanisms, as well as the different types of interest rates and their applications in evaluating financial cash flows.

Training Objectives

• Understand the fundamental principles of financial mathematics and their application in finance.
• Apply the concept of the time value of money to evaluate future cash flows.
• Master simple and compound interest calculations as well as interest rate equivalences.
• Evaluate investment profitability using tools such as Net Present Value (NPV) and Internal Rate of Return (IRR).
• Analyze different loan amortization methods and construct an amortization schedule.
• Understand the cost of capital, its impact on financial decision-making, and the basics of the Capital Asset Pricing Model (CAPM).
• Interpret probability concepts applied to finance, including expectation, variance, and correlation.
• Study the term structure of interest rates and its implications for the valuation of financial products.
• Apply fundamental concepts to the calculation of bond yield to maturity.

Target Audience

• Finance professionals (bankers, financial analysts, wealth managers).
• Entrepreneurs and business owners looking to better understand investment valuation and debt management.
• Accountants and auditors seeking to deepen their knowledge of discounting, interest rate calculations, and financial flow evaluation.
• Treasury managers involved in cash flow management and financing optimization.
• Financial consultants looking to strengthen their expertise in investment evaluation and cost of capital management.
• Anyone interested in understanding financial valuation mechanisms and investment decision-making.

Training Duration

• 2 days (14 hours)

Training Program

The Fundamentals of Financial Mathematics – Level 1

I. Basic Principles of Financial Mathematics

• Time value of money and discounting
• Simple and compound interest rates
• Interest rate equivalences (nominal/effective/proportional)

Case Study:

Calculation of the effective rate of a financial investment

II. Annuity and Loan Calculations

• Present and future value of an annuity
• Loan repayment: constant amortization vs fixed annuities
• Amortization schedules and interest rate impact

Case Study:

Analysis of a mortgage loan and construction of an amortization schedule

III. Investment Evaluation Metrics and Criteria

• Net Present Value (NPV) and Internal Rate of Return (IRR)
• Investment payback period
• Application in investment decision-making

Quiz

IV. Cost of Capital Calculation

• Weighted Average Cost of Capital (WACC)
• Link between risk and cost of capital
• Introduction to the Capital Asset Pricing Model (CAPM)

Case Study:

Calculation of the cost of capital for a listed company

V. Probability Concepts Applied to Financial Mathematics

• Expectation and variance of returns
• Introduction to risk and diversification
• Correlation and covariance in finance

Quiz

VI. Introduction to Financial Products and Interest Rates

• Term structure of interest rates
• Spot rates and forward rates
• Introduction to bonds and yield-to-maturity calculation

Case Study:

Evaluation of a bond's yield and actuarial rate calculation