16 STUDY MATERIAL C3

BASIC MATHEMATICS

Example 1.10.4
Solve the equation X2  50X  600  0

Solution
a  1; b 50; c  600

( 50) ± (( 50)2  4  1  600)

X 
2 1
50 ± 10 60 40
X   and
2 2 2
X  30 and 20

Notice that the equation has real roots only if b2  4ac is positive, since negative numbers do not have
square roots.

Example 1.10.5
Solve the following equations:

(a) Y2  16  0
(b) 2Y2  5Y  0
(c) Y2  20Y  800  0

Solution
(a) Y2  16 so Y   16  4.
(b) Y(2Y  5)  0, so either Y  0; or 2Y  5  0, i.e. Y  0 and 5 ÷ 2, so Y  2.5.
(c) a  1; b 20; c  800:

( 20)  (( 20)2  4  ( 800))

Y 
2 1
20 ± 60 80 40
Y   and
2 2 2
Y  40 and 2 0

1.10.3 Simultaneous linear equations

These are equations of the type:

3 X  4Y  18 (i)

5 X  2Y  16 (ii)
which must both be satisfied by the roots X and Y.
Provided you multiply both sides of an equation by the same amount, it continues to be
true. In the solution of these equations, one or both of the equations are multiplied by numbers
chosen so that either the X or the Y terms in the two equations become numerically identical.
We have labelled the equations (i) and (ii) for clarity. Suppose we were to multiply (i) by 5
and (ii) by 3. Both equations would contain a 15X-term that we could eliminate by subtrac-
tion, it being the case that you can add or subtract two equations and the result remains true.
In this case, however, the simplest method is to multiply equation (ii) by 2, so that both
equations will contain 4Y and we can subtract to eliminate Y. The full solution is shown below.
 FUNDAMENTALS OF BUSINESS MATHEMATICS 17

3 X  4Y  18

BASIC MATHEMATICS
(i)
5 X  2Y  16 (ii)
Multiply (ii) by 2:
10 X  4Y  32 (iii)
Subtract (iii)  (i):
7 X  0  14
X  14  7  2
Substitute X  2 into (i)
6  4Y  18
4Y  18  6  12
Y  12  4  3
Check the results in (ii):
5  2  2  3  16

The solution is X  2, Y  3.
Had we chosen to substitute X  2 into equation (ii) it would not have affected the
result but we would then have checked in the other equation (i).

Example 1.10.4
Solve the equations:

2X  3Y  23 (i)
7 X  4Y  8 (ii)

Solution
Multiply (i) by 4 and (ii) by 3:

8X  12Y  92 (iii)
21X  12Y  24 (iv)
Add the equations:
29X  116
X  116  29  4

Substitute X  4 in (ii):

28  4Y  8
4Y  8  28  20
Y  20  4  5
Check in (i):

2  4  3  ( 5)  8  15  23

The solution is X  4, Y  5
18 STUDY MATERIAL C3

1.11 Manipulating inequalities

BASIC MATHEMATICS

Inequalities are treated in almost exactly the same way as equations. In fact an inequality
says much the same thing as an equation, except that one side will be less than or greater
than the other, or less than and greater than the other.
Inequalities can be manipulated in the same way as equations, except that when multi-
plying or dividing by a negative number it is necessary to reverse the inequality sign.

Example 1.11.1
Solve for x 3x  10  40

Solution 3x  40  10
3x  30
x  10

Example 1.11.2
Solve for x 5x  20 60
5x 60  20
5x 40
x 8

Example 1.11.3
Solve for y 3y  10  40

Solution 3y  40  10
3y  30
y 10

Example 1.11.4
Solve for y 5y  20 50

Solution 5y 50  20
5y 30
y 6

Example 1.11.5
Solve for x x/2  20 30

Solution x/2 30  20
x/2 10
x 20

Example 1.10.6
Solve for y y  50 30

Solution y 30 – 50
y 20
 FUNDAMENTALS OF BUSINESS MATHEMATICS 19

Example 1.11.7

BASIC MATHEMATICS
Solve for y y/3  20 10

Solution y/3  10  20
y/3 30
y 90

1.12 Percentages and ratios

Percentages and ratios (or proportions) occur in many financial calculations. Basically,
a percentage (denoted ‘%’ or ‘per cent’) is expressed out of 100, whereas a ratio is one
number divided by another. A simple example will illustrate.

Example 1.12.1
(a) Express 4.6 as:

(i) a ratio of 23.0;

(ii) a percentage of 23.0.

(b) Evaluate 30 per cent of 450.

(c) The ratio of the earnings from a certain share to its price is 18.5. If the price is £1.50, what are the
earnings?
(d) If a variable, A, increases by 8 per cent, what does it become?
(e) If a variable, B, changes to 0.945B, what percentage change has occurred?

Solution
(a) (i) A ratio is simply the two numbers expressed as a fraction

4.6
or 0 . 2
23 .0

(ii) In a basic example like this, the percentage is 100 times the ratio:

0 .2  100  20 %

(b) Thirty per cent is 30 out of 100. Thus, out of 450

30
 450  135
100

(c) We are told that the ratio

Earnings
 18 .5
Pr ice

If the price is £1.50

Earnings
 18 . 5
£1 . 50

Earnings  £1.50  18.5  £27.75

20 STUDY MATERIAL C3

(d) An increase of 8 per cent of A is

BASIC MATHEMATICS

8
 A or 0.08 A
100
The variable therefore becomes

A  0 . 08A  1 . 08A

(e) If a variable has decreased by

B  0 . 945B  0 . 055B

As a percentage, this is
0 .055B
 100  5 .5 %
B

The next example will demonstrate the use of percentages in financial calculations.

Example 1.12.2
(a) During a certain year, a company declares a profit of £15.8 m, whereas, in the previous year, the profit had
been £14.1 m. What percentage increase in profit does this represent?
(b) A consultant has forecast that the above company’s profit figure will fall by 5 per cent next year. What profit
figure is the consultant forecasting for the next year?
(c) If this year’s profit is £6.2 m, and if the increase from last year is known to have been 7.5 per cent, what
was last year’s profit?

Solution
(a) The increase in profit is £1.7 m, which as a percentage of the previous year’s profit is:
1.7m
 100 %  12 . 1 % to one d.p.
14 .1m

(b) The forecast decrease in profit is 5 per cent of £15.8 m

5
 15 . 8  £0 . 79 m
100
Hence, the forecast profit for the following year is £15.01 m.

(c) This year’s profit is 107.5 per cent of last year’s

107 .5
Last year’s profit   This year’s profit
100
Last year’s profit  £6.2m ÷ 1.075  £5.77 m to three s.f.

1.13 Accuracy and approximation

All business data are subject to errors or variations. Simple human error, the rounding of
a figure to the nearest hundred or thousand (or whatever), and the inevitable inaccuracies
that arise when forecasting the future value of some factor, are examples of why business
data may not be precise.
In certain circumstances, errors can accumulate, especially when two or more variables,
each subject to error, are combined. The simplest such forms of combination are addition
and subtraction.
 FUNDAMENTALS OF BUSINESS MATHEMATICS 21

1.14 Errors from rounding

BASIC MATHEMATICS
Suppose an actual value is 826 and you round it to 830 (two s.f.). Your rounded value con-
tains an error of 4. Someone else using the rounded figure does not know the true original
value but must be aware that any rounded figure is likely to be erroneous.
The rounded value 830 could represent a true value as low as 825, or one as high as 835
(or, strictly speaking, 834.9999). There is a possible error of 5.
In general, rounded values have a possible error given by substituting 5 in the position
of the first discarded digit. For example, with a value of 830, the first discarded digit is in
the position of the ‘0’, which is the units position. This gives a possible error of 5 units.
If the rounded figure were 82.391 (to three d.p.), the first discarded digit is immediately to
the right of the ‘1’ and the possible error is 0.0005.

Example 1.14.1
State the maximum possible errors in the following rounded figures:

(i) 67,000
(ii) 5.63
(iii) 10.095

Solution
(i) The first discarded digit is in the ‘0’ position immediately to the right of the ‘7’, so the maximum possible
error is 500.
(ii) The first discarded digit is immediately to the right of the ‘3’, so the maximum possible error is 0.005.
(iii) The first discarded digit is to the right of the ‘5’, so the maximum possible error is 0.0005.

1.15 Using Excel to produce graphs of Linear

and Quadratic Equations
Excel can be used to produce graphs of linear and quadratic equations. The first step is to
produce a single linear equation, from which a graph can be drawn.

1.15.1 Producing a single linear equation in Excel

The form of the equation that will be used is

y  mx  c

This equation will be drawn for a given value of c (in this example we will use 20) and a
range of 10 values of x (from 1 to 10), calculating corresponding values of y. Thus in this
example the formula will be represented as y  3x  20.
Figure 1.7 shows the data for x and the results of entering the formula in the adjacent
column.
22 STUDY MATERIAL C3
BASIC MATHEMATICS
Single linear equation
values for x y = 3x + 20
1 23
2 26
3 29
4 32
5 35
6 38
7 41
8 44
9 47
10 50

Figure 1.7 Data and formula for the equation

To show these results graphically in Excel, select the two columns and click on the
Chart icon on the Standard Toolbar. This will produce a choice of graph types. Select xy
and then choose the joined up line option. Click Finish to complete the chart. Figure 1.8
shows the resulting graph.

Single linear equation

60
50
40
30 y = 3x + 20
20
10
0
0 5 10 15
Values for x

Figure 1.8 Graph showing single linear equation

1.15.2 Drawing multiple equations on a single graph

It is possible to produce multiple equations and plot the results onto a single graph, which
can be useful for comparison purposes. Figure 1.9 uses the same set of data for x and the
results of two different equations are shown in the adjacent two columns.

values for x y = 3x + 20 y = 6x + 1
1 23 7
2 26 13
3 29 19
4 32 25
5 35 31
6 38 37
7 41 43
8 44 49
9 47 55
10 50 61

Figure 1.9 Data and two linear equations

 FUNDAMENTALS OF BUSINESS MATHEMATICS 23

BASIC MATHEMATICS
The graph is produced in the same way as the first example, by selecting the three col-
umns and clicking on the Chart icon. The results of plotting these two lines onto an xy
line graph can be seen in Figure 1.10.

2 linear equations on one graph

70
60
50
40 y = 3x + 20
30 y = 6x + 1
20
10
0
0 5 10 15

Values for x

Figure 1.10 Results of 2 linear equations on one graph

1.15.3 Single quadratic equation

The form of the equation that will be used is

y  ax 2  bx  c

This equation will be drawn for a given value of a, b and c, where in this example we will
use a  1, b  5 and c  10 and a range of 10 values of x (from 25 to 20), calculating
corresponding values of y.
Thus in this example the formula will be represented as y  x2  5x  10. Figure 1.11
shows the data and the formula calculated in the adjacent column.

values for x x^2 + 5x + 10

–25 510
–20 310
–15 160
–10 60
–5 10
0 10
5 60
10 160
15 310
20 510

Figure 1.11 Single quadratic equation

Using the same method as before a graph can be drawn to show these results and this is
shown in Figure 1.12.
24 STUDY MATERIAL C3
BASIC MATHEMATICS

x^2 + 5x + 10

600

500

400

300 x2 + 5x + 10

200

100

0
–30 –20 –10 0 10 20 30

Figure 1.12 Graph showing a single quadratic equation

1.15.4 Two quadratic equations on one graph

It is possible to produce multiple quadratic equations and plot the results onto a single
graph, which can be useful for comparison purposes. Figure 1.13 uses the same set of data
for x and the results of two different equations are shown in the adjacent two columns.

values for X x^2 + 5x + 10 –2x^2 –x + 100

–25 510 –1125
–20 310 –680
–15 160 –335
–10 60 –90
–5 10 55
0 10 100
5 60 45
10 160 –110
15 310 –365
20 510 –720

Figure 1.13 Two quadratic equations

The graph is produced in the same way as the previous example, by selecting the three
columns and clicking on the Chart icon. The results of plotting these two lines onto an xy
line graph can be seen in Figure 1.14.
 FUNDAMENTALS OF BUSINESS MATHEMATICS 25

BASIC MATHEMATICS
600
400
200
0
–30 –20 –10 0 10 20 30
–200
x2 + 5x + 10
–400
–2x2 –x + 100
–600
–800
–1000
–1200
–1400

Figure 1.14 Graph of two quadratic equations

1.16 Using Excel to produce the graph

of a hyperbola
The formula of a hyperbola takes the form of y  a(1/x)  n. In the example below val-
ues of x from 1 to 27 are used. The constant a is 10 and a value of 1 was used for n. The
results are shown in Figure 1.15.

Figure 1.15 Calculation of a hyperbola function