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 tutorial, 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 tutorial 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.
On completion of this tutorial, 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
Topic 1: Basic Rules of Indices
Topic 2: The Natural Exponential Function
Topic 3: Logarithms
Topic 4: Geometric Series