Financial Mathematics — Flashcards
CBSE · Class 12 · Applied Mathematics
25 flashcards for Financial Mathematics (CBSE Class 12 Applied Mathematics) to test yourself on key terms and facts.
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What is a perpetuity and how is its present value calculated?
Answer
A perpetuity is an annuity where payments continue forever. The present value of a perpetuity of ₹R payable at the end of each period is: P = R/i, where R = size of each payment and i = rate per perio…
Calculate the present value of a perpetuity of ₹500 payable at the end of each quarter, if money is worth 8% compounded quarterly.
Answer
Given: R = ₹500, i = 0.08/4 = 0.02 Present value P = R/i = 500/0.02 = ₹25,000…
What is a sinking fund and how does it differ from a savings account?
Answer
A sinking fund is a fund established by setting aside revenue over time to fund a future capital expense or repay long-term debt. It differs from a savings account as it's set up for a particular purp…
State the formula for calculating periodic payments in a sinking fund.
Answer
R = A/S_{n|i}, where S_{n|i} = [(1 + i)ⁿ - 1]/i Where: R = Size of each payment, A = Amount to be accumulated, i = rate per period, n = number of payments…
What are the key characteristics of a bond?
Answer
A bond is characterized by: (1) Face Value/Par Value - price at issue and redemption, (2) Redemption Price - amount paid at maturity, (3) Discount/Premium - market price relative to face value, (4) No…
Write the present value formula for bond valuation.
Answer
Bond Value (V) = R[1-(1+i)⁻ⁿ]/i + C(1+i)⁻ⁿ Where: V = bond value/purchase price, R = periodic dividend payment, C = redemption price, i = yield rate per period, n = number of periods…
A ₹1,000, 10% bond is redeemable in 5 years at par. Find the purchase price to yield 8% effective rate.
Answer
Given: Face value = ₹1,000, Coupon rate = 10%, Yield = 8%, n = 5 years R = 1000 × 0.10 = ₹100 V = 100[1-(1.08)⁻⁵]/0.08 + 1000(1.08)⁻⁵ V = 100(3.9927) + 1000(0.6806) = 399.27 + 680.58 = ₹1,079.85…
What is EMI and what are the two methods to calculate it?
Answer
EMI (Equated Monthly Instalment) is a monthly payment towards a loan at a fixed date every month. Two calculation methods: (1) Flat Rate Method: EMI = (P+I)/n, where interest is calculated on original…
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Sources & Official References
- NCERT Official — ncert.nic.in
- CBSE Academic — cbseacademic.nic.in
- CBSE Official — cbse.gov.in
- National Education Policy 2020 — education.gov.in
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