## Student Solution Manual for Mathematical Interest TheoryThis manual is written to accompany Mathematical Interest Theory by Leslie Jane Federer Vaaler and James W. Daniel. . It includes detailed solutions to the odd-numbered problems. There are solutions to 239 problems, and sometimes more than one way to reach the answer is presented . In keeping with the presentation of the text, calculator discussion for the Texas Instruments BAII Plus or BAII Plus Professional calculators is typeset in a different font from the rest of the text. |

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### Contents

An introduction to the Texas Instruments BA II Plus | 1 |

The growth of money | 3 |

Equations of value and yield rates | 13 |

Annuities annuities certain | 21 |

Annuities with different payment and conversion periods | 37 |

Loan repayment | 49 |

Bonds | 59 |

Stocks and financial markets | 75 |

Arbitrage the term structure of interest rates and derivatives | 79 |

Interest rate sensitivity | 95 |

### Common terms and phrases

accumulated value accumulation function annual effective interest annual effective rate annual yield rate annuity symbol annuity with payments basic price formula buyer calculate call option Cash Flow worksheet compute coupon amount coupon bond coupon period effective interest rate equal equation of value follows futures contract given guess and check integer number interest period investment January last payment level payments liability loan amount Macaulay duration margin account monthly effective interest monthly interest rate monthly yield rate Moreover Newton's method no-arbitrage price Note number of cents number of coupons obtain outstanding loan balance paid payment amount payments occur pays perpetuity portfolio present value purchase put option quadratic formula quarter quarterly rate of interest receives redemption amount redemption payment risk-free interest rate risk-neutral probability shares simple interest sinking fund account sinking fund deposit solution subtree TVM worksheet two-year underlier price zero-coupon bond