The Theory of Interest, 2nd Edition [Hardcover]

Stephen G. Kellison (Author)

Book Description

Publication Date: May 1, 1991 | ISBN-10: 0256091501 | ISBN-13: 978-0256091502 | Edition: 2nd

The book is a thorough treatment of the mathematical theory and practical applications of compound interest, or mathematics of finance.

Product Details

• Hardcover: 448 pages
• Publisher: Richard D. Irwin; 2nd edition (May 1, 1991)
• Language: English
• ISBN-10: 0256091501
• ISBN-13: 978-0256091502
• Product Dimensions: 9.7 x 6.7 x 0.9 inches
• Shipping Weight: 1.6 pounds
• Average Customer Review: 3.3 out of 5 stars  See all reviews (23 customer reviews)
• Amazon Best Sellers Rank: #96,801 in Books (See Top 100 in Books)
  • #14 in Books > Business & Investing > Industries & Professions > Insurance > Business

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Customer Reviews

Most Helpful Customer Reviews

36 of 37 people found the following review helpful:

4.0 out of 5 stars There may be better options., May 31, 2006

By 

Aaron Rutledge - See all my reviews
(REAL NAME)   

This review is from: The Theory of Interest, 2nd Edition (Hardcover)

In order to save the reader some time I have condensed the information contained in the twenty previous reviews to the bare essentials. For those of you who are taking the SOA/CAS Exam F/2, there are some things you should be aware of before you dedicate yourself to studying from this book.

1. The book is poorly written. Almost everyone, including me, agrees. The author does not have a way with words, he does not know how to motivate the material and he often chooses the most confusing and roundabout way of explaining the concepts (if he explains them at all). Furthermore, the notation can be quite confusing. He is not consistent with his variables.

2. The book focuses on theory. Expect to spend your time following proofs and derivations of formulas. The problem sets in the book focus on proofs and derivations. Have a firm grasp on Calc 1, Calc 2 and all the algebra that is entialed because Kellison will not spend the time to spell out his proofs and derivations step by step.

3. You need a supplement for working example problems. There are not enough computational problems in this book. Get a good manual that will prepare you specifically for the exams you are taking. Manuals will give you pointers about managing your time and can help you avoid common traps and pitfalls that arise during computations. I recommend getting an Atex or ASM manual. For instance, Harold Cherry's ASM Manual covers all of the topics found in Kellison, at greater depth, in the same order, and in plain english.

4. Many people have passed the exams using only manuals. Other's have passed using manuals and other texts such as "Schaum's Outline of Mathematics for Finance" or "Mathematics of Finance" by Cissell. Very few people pass without doing lots of practice problems

5. Others have passed the exam by using only this book. So it seems that this book is sufficient, but not necessary for preparing for the exam. Ultimately, you must be the judge. WHile it is certainly true that if you master this book you will be rewarded by a rich understanding of the theory of interest my personal recommendation for those studying for the exams is to devote most of your time and energy to practice problems. I would recommend using this book to flesh out your understanding as you go.

29 of 32 people found the following review helpful:

2.0 out of 5 stars 10 pages of notations... when you only need 1., November 8, 2002

By 

Lap (Seattle, USA) - See all my reviews

This review is from: The Theory of Interest, 2nd Edition (Hardcover)

I believe most of the readers of this book are studying for the actuarial course 2 exam. I am pretty strong in math myself, and I was truly amazed how poorly the author presented the ideas. 10+ pages of notations introduced in the book and an innumerable number of formulas derived based on those notations defined. Ended up I checked out another book called "Mathematics of Finance" by Cissell published in 1973 (thank Eduardo for his suggestion). The fact is, only 3 basic techniques and a handful of 10 formulas or so are sufficient to tackle the exam. The rest is to work on more practice questions.

I am writing this review to warn those of you who are having a hard time studying this book. There is a much better choice out there, even it is a 30-year-old book. Just skipped those irrevelant sections such as calculating without a calculator etc, and you will save 100+ bucks from buying this book.

I am giving it a 2-star instead of 1 for the "accuracy" presented in the book.

20 of 22 people found the following review helpful:

3.0 out of 5 stars Got me through exam 2, but book is not user-friendly, September 21, 2005

By 

Murel (USA) - See all my reviews

This review is from: The Theory of Interest, 2nd Edition (Hardcover)

Background: As I was studying for exam 2, I was at the same time completing my master's in math. I say this not because the math in Kellison is difficult at all -- it's not -- but I am very accustomed to reading textbooks on my own and digesting them.

This book, the sample test on the website, and my BA II Plus calculator got me through (the new) exam 2 with a 9. If that's what you want to do, then this book will help you do it. The material is there. I just worked through all of the exercises in the book for the sections that were in the exam syllabus. If I couldn't get through an exercise, I circled it and came back later. Sometimes I could do the exercise the second time through. Sometimes I just gave up. Close to exam time, I put Kellison aside and worked through the sample exam on the SOA website over and over until I had the problems almost memorized.

You definitely need the sample exam, or sample problems, or something besides just this book though. This book has the material in it, but the feel for the problems and test-taking strategies have got to come from somewhere else. The problems in Kellison are relatively tough and theoretical compared to the exam. When you do problems from Kellison, you won't have time pressure, whereas on the test you will. Also, the sample exam helps you learn how to eliminate wrong answers, which is a very useful skill but something you can't find in Kellison at all.

While Kellison can present the material to do well on the exam, he is not really so good at helping you understand it. For example, the concept of discount is still something of a mystery to me on a gut level. I eventually decided to learn it purely as a function of interest, a concept I grasp very well, but some friendly hints from Kellison would have been helpful. In fact a more friendly, warm tone from Kellison in general would have been helpful. It is not user-friendly.

The advanced stuff in chapter 9 is pretty much a waste, especially immunization. I still don't understand it. Fortunately, if I remember correctly, it didn't show up much on the exam, except maybe duration, which is easy to memorize. I would suggest ignoring chapter 9 totally, except for what you need to do the sample exam, and just make sure you really understand the other stuff.