BUSINESS MATHEMATICS & STATISTICS. LECTURE 6 Review Lecture 5 Discount Simple and compound interest Average due date, interest on drawings and calendar.

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Presentation transcript:

BUSINESS MATHEMATICS & STATISTICS

LECTURE 6 Review Lecture 5 Discount Simple and compound interest Average due date, interest on drawings and calendar

Revision Lecture 5 A chartered bank is lowering the interest rate on its loans from 9% to 7%. What will be the percent decrease in the interest rate on a given balance?

A chartered bank is increasing the interest rate on its loans from 7% to 9% What will be the percent increase in the interest rate on a given balance?

Investors Stock Quotation Calculations Earnings per share? PE Ratio? Stock Yield? Closing price per share Annual dividend per share = =.3% PE Ratio Stock Yield Closing price per share Annual earnings per share = = 37 Earnings per share Total # of shares outstanding Annual earnings = 100,000 1,000,000 = $0.10

BUYING SHARES If you buy 100 shares at Rs per share with a 2% commission, calculate your total cost

CALCULATION 100 * Rs = Rs. 6, * Rs. 6,250 = 125 Rs. 6,375

RETURN ON INVESTMENT Suppose you bought 100 shares at Rs and sold them 1 year later at Rs. 68. With a 1% commission rate buying and selling the stock and a current Rs 10 dividend per share in effect, what was your return on investment?

Bought 100 shares at Rs = 5, Commission at 1% = Total Costs = 5,277.25

Sold 100 shares at Rs. 68 = 6, Commission at 1% = Total Costs = 6,732.00

Gain Net receipts = 6, Total cost =- 5, Net Gain = 1, Dividends (100*1) = Total Gain = 1, Return on investment = 1,554.75/ *100 = %

Discount Rebate or reduction in price Expressed as %

Discount List price = 2200 Discount Rate = 155 Discount? = 2200 x 0.15= 330

Net Cost Price = List price - Discount List price = 4,500 Rs. Discount = 20 % Net cost price = 4,500 – 20 % of 4,500 = 4,500 – 0.2 x4,500 =4,500 – 900 = 3,600 Rs.

Simple Interest I = P. R. T / 100 P = Principal R = Rate percent per annum T = Time in years I = Simple interest

Find interest P = Rs. 500 T = 4 years R =11% I = P x T x R /100 = 500 x 4 x 11/100 = Rs. 220

Compound Interest Also attracts interest P = 800 Interest year 1= 0.1 x 800= 80 New P = = 880 Interest on 880 = 0.1 X 880 = 88 New P = = 968

Compound Interest Formula S= Money accrued after n years P= Principal R= Rate N= Number of years S = P(1 + r/100)^ n

Example Calculate interest on Rs. 750 invested at 12% per annum for 8 years. S= P(1+r/100)^8 = 750(1+12/100)^8 = 1957

BUSINESS MATHEMATICS & STATISTICS