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FINANCIAL MARKET PROGRAMMES

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Indices, Exponents, Logarithms & Geometric Series

An understanding of some basic mathematical tools is crucial in order to have a solid grasp of financial concepts. Indices, exponents, logarithms, and geometric series, which are explained in this course, are some of the most basic and important tools employed in finance.

These mathematical concepts are particularly important in the context of calculating the price of capital market and derivative products. Among other things, this course will also help you to understand the logic behind calculating compound interest and present value, as well as showing how to compute the price of bonds and annuities.

OBJECTIVES

On completion of this course, you will be able to:

• Ascertain the basic rules of indices

• Define the natural exponential function

• Calculate a logarithm using some basic rules, and understand that a logarithm is the reverse of an exponential function

• Describe geometric series, and calculate the sum of finite and infinite geometric series

COURSE OUTLINE

Topic 1: Basic Rules of Indices

• What are Indices?

• Negative Indices

• Basic Rules

• Inverse & Reciprocal

• Indices in Practice

Topic 2: The Natural Exponential Function

• What is the Natural Exponential Function?

• Normal Density Function

• Natural Exponential Function in Practice

Topic 3: Logarithms

• What are Logarithms?

• Laws of Logarithms

• The Natural Logarithmic Function vs. the Exponential Function

• Logarithmic Functions

Topic 4: Geometric Series

• What is a Geometric Series?

• The Sum of a Geometric Series

• The Sum of a Geometric Series - Applications to Bonds

• The Sum to Infinity of a Geometric Series

• The Sum to Infinity of a Geometric Series – Application to Annuities

PREREQUISITE KNOWLEDGE

No prior knowledge is assumed for this course.

ESTIMATED COMPLETED TIME

75 minutes

Previous Course

Calculus

This course introduces the concept of differentiation and its counterpart, integration. Simple economic applications of the two concepts are also described.

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