1

THE COPPERBELT UNIVERSITY

SCHOOL OF BUSSINESS
BS/BF/BSP/BEC/HRM/BIS 140 Mathematical Analysis
-
ACADEMIC YEAR 2020 - 2021
WORKSHEET SIX

FINANCIAL MATHEMATICS
Arithmetic & Geometric series, Simple and Compound Interest

EXAMPLE ONE
(a) (i) Find the sum of the first 15 terms of the series:
20 + 17 + 14 + 11 + ⋯.
(ii) Find the sum of the series 2 + 6 + 10 + ⋯ + 398.
(b) (i) Find the sum of the first 12 terms of the series:
1 1 1
5+1+ + + + ⋯.
5 25 125

(ii) How many terms are there in the geometric progression

3,12,48, ⋯ ,12288.

Tailoka Frank Patson Mathematical Analysis Academic Year 2020 - 2021

 2

(c) Find the sum of the given series:

2 2 2
6+2+ + + +⋯
3 9 27

EXAMPLE TWO
K4 000 is invested for three years at an interest rate of 8%.
(a) Calculate the simple interest paid in any one year.
(b) Calculate the total value of savings at the end of one, two, and
three years. Show that the total value of savings at the end of
successive years is an arithmetic progression.
(c) Calculate the present value (principal) when the future value (total
value) K4 960 after three years.
EXAMPLE THREE
Calculate the amount owed on a loan of K8000 over three years at an
interest rate of 8% compounded annually.

EXAMPLE FOUR
K4 000 is invested at 8% compound interest per annum for three years.
(a) Calculate the value of the investment at the end of three years.
(b) Compare the answer in Example 2 (a) to that calculated using
simple interest.
(c) Compute the present value of receiving
(i) K5 038.85
(ii) K12 000.00, in three years’ time when the discount rate is
8%.
EXAMPLE FIVE
(a) Find the compound interest rate required for K80 000 to grow to
K160 000 in six years?
(b) A bank pays 7.5% interest, compounded annually. How long will it
take for K80 000 to grow to K160 000.

Tailoka Frank Patson Mathematical Analysis Academic Year 2020 - 2021

 3

EXAMPLE SIX
Calculate the value of the investment K40 000 for three years at 8%
compounded
(i) Semi – annually
(ii) Quarterly
(iii) Monthly
(iv) Daily (Assume 365 days)
(v) Continuously
EXAMPLE SEVEN
A machine costing K240 000 depreciates by 15% each year. Calculate the
value of the machine after five years. What is the total amount of
depreciation?
EXAMPLE EIGHT
Five years after purchase, a computer has a scrap value of K240 000. The
depreciation rate is 26%. Calculate the value of the computer when it was
bought five years ago.

EXAMPLE NINE
Calculate the net present value of the investment project as outlined in the
table below assuming 8% discount rate compounded annually.
Year Cash flows (in thousands)
0 - 400
1 120
2 130
3 140
4 150

Tailoka Frank Patson Mathematical Analysis Academic Year 2020 - 2021

 4

EXAMPLE TEN
A project involves an initial outlay of K550. The expected cash flow at the
end of the next five years is given as
Year 1 2 3 4 5
Cash flow 108.3 130.5 170.9 200 160

Determine IRR
(a) Graphically by plotting the 𝑁𝑃𝑉 against 𝑟 for
𝑟 = 0.05; 0.07; 0.09; 0.11; 0.13; 0.15; 0.17.
(b) By calculation. Show that the value of the 𝐼𝑅𝑅 is slightly different
when calculated from pairs of points.

Tailoka Frank Patson Mathematical Analysis Academic Year 2020 - 2021