An Introduction to the Mathematics of Finance: A Deterministic Approach, 2e, offers a highly illustrated introduction to mathematical finance, with a special emphasis on interest rates. This revision of the McCutcheon-Scott classic follows the core subjects covered by the first professional exam required of UK actuaries, the CT1 exam. It realigns the table of contents with the CT1 exam and includes sample questions from past exams of both The Actuarial Profession and the CFA Institute. With a wealth of solved problems and interesting applications, An Introduction to the Mathematics of Finance stands alone in its ability to address the needs of its primary target audience, the actuarial student.

Key Features

  • Closely follows the syllabus for the CT1 exam of The Institute and Faculty of Actuaries
  • Features new content and more examples
  • Online supplements available:
  • Includes past exam questions from The Institute and Faculty of Actuaries and the CFA Institute


The primary audience is upper-division undergraduates and graduate students in the UK studying financial mathematics. They will typically be taking courses such as "Principles of Finance" and "Actuarial Finance." The secondary audience is upper-division undergraduates and graduate students studying financial mathematics.

Table of Contents



Chapter 1. Introduction

1.1 The Concept of Interest

1.2 Simple Interest

1.3 Compound Interest

1.4 Some Practical Illustrations


Chapter 2. Theory of Interest Rates

2.1 The Rate of Interest

2.2 Nominal Rates of Interest

2.3 Accumulation Factors

2.4 The Force of Interest

2.5 Present Values

2.6 Present Values of Cash Flows

2.7 Valuing Cash Flows

2.8 Interest Income

2.9 Capital Gains and Losses, and Taxation



Chapter 3. The Basic Compound Interest Functions

3.1 Interest Rate Quantities

3.2 The Equation of Value

3.3 Annuities-certain: Present Values and Accumulations

3.4 Deferred Annuities

3.5 Continuously Payable Annuities

3.6 Varying Annuities

3.7 Uncertain Payments



Chapter 4. Further Compound Interest Functions

4.1 Interest Payable pthly

4.2 Annuities Payable pthly: Present Values and Accumulations

4.3 Annuities Payable at Intervals of Time r, Where r > 1

4.4 Definition of image for Non-integer Values of n



Chapter 5. Loan Repayment Schedules

5.1 The General Loan Schedule

5.2 The Loan Schedule for a Level Annuity

5.3 The Loan Schedule for a pthly Annuity

5.4 Consumer Credit Legislation



Chapter 6. Project Appraisal and Investment Performance

6.1 Net Cash Flows

6.2 Net Present Values and Yields

6.3 The Comparison of Two Investment Projects

6.4 Different Interest Rates for Lending and Borrowing

6.5 Payback Periods

6.6 The Effects of Inflation



No. of pages:
© 2013
Print ISBN:
Electronic ISBN:

About the author

Stephen Garrett

Prof. Stephen Garrett is Professor of Mathematical Sciences at the University of Leicester in the UK. He is currently Head of Actuarial Science in the Department of Mathematics, and also Head of the Thermofluids Research Group in the Department of Engineering. These two distinct responsibilities reflect his background and achievements in both actuarial science education and fluid mechanics research. Stephen is a Fellow of the Royal Aeronautical Society, the highest grade attainable in the world's foremost aerospace institution.


"The main focus is the theory of compound interest, which is called deterministic  financial mathematics by the author...well written and the materials therein are well organized." --Zentralblatt MATH, An Introduction to the Mathematics of Finance

"…it offers some very clear explanations of the fundamental building blocks of actuarial work, such as compound interest functions, term structures and discounting…The use of examples and exam questions from the IFoA and the CFA Institute makes this a very valuable study aide…as a primer, it is certainly a success and one which I hope is used by a great many students in the future." --Annals of Actuarial Science, 2014

"Stephen Garrett’s new edition of Introduction to the Mathematics of Finance gives an excellent, concise, and thorough treatment of the fundamentals of financial mathematics. By updating the original edition with more emphasis on derivative pricing, this book has become an up-to-date first class textbook on this topic." --P.M. Barrieu, London School of Economics

"This 2nd edition will give students excellent support when tackling the Actuarial Profession’s examination in Subject CT1. It is written in a clear and concise way, and a wide range of realistic and relevant examples are provided which make the subject come alive. I will be recommending it to my students." --Ben Rickayzen, Cass Business School 

"This edition is a timely update to a textbook that for many years was essential reading for actuarial students.  It  should prove to be a  valuable resource for current students taking the CT1 exam." --John Millett, University of Kent 

"This book contains a set of subjects that will be very close to most actuaries' hearts, being a text book aimed at covering the CT1 syllabus.  As an update to McCutcheon and Scott