Week 4: Functions in Python

Learn how to create reusable functions for financial calculations and analysis. Functions are essential for organizing code and building complex financial models.

Learning Objectives:

1. Defining and Calling Functions

Learn how to create and use functions in your Python programs.

2. Function Parameters and Arguments

Understanding how to pass data to functions and handle different types of parameters.

def calculate_roi(initial_investment, final_value):
    return (final_value - initial_investment) / initial_investment * 100

3. Return Values

Learn how functions can return calculated values for use in your program.

def calculate_monthly_payment(principal, rate, years):
    r = rate / 12 / 100  # Monthly rate
    n = years * 12       # Total months
    return principal * (r * (1 + r)**n) / ((1 + r)**n - 1)

Exercises:

Create a function library for financial calculations:
- Present Value (PV)
- Future Value (FV)
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
Write a function that calculates stock metrics:
- Daily returns
- Volatility
- Sharpe ratio
Create a bond pricing function that:
- Takes face value, coupon rate, years to maturity, and market rate
- Returns the current bond price
Write a portfolio analysis function that:
- Takes a list of stock prices and weights
- Calculates portfolio return and risk
- Returns a summary dictionary
Create a loan amortization function that generates a payment schedule
Write a function to calculate various risk metrics (Beta, Standard Deviation, etc.)

💡 ChatGPT Learning Tips

Use these prompts to enhance your learning:

"Show me how to write a function that calculates the Present Value (PV) with detailed explanation"
"What are the best practices for organizing financial functions in Python?"
"Help me understand how to handle errors in financial calculation functions"
"Explain how to write a function that calculates portfolio statistics with multiple return values"