Bangladesh University of Professionals (BUP)

Term Paper
1st Semester 2024
Business Mathematics (ALD-1103)
Topic
Topic: Understanding of Topics done in this semester

Submitted To:

Umma Hania
Assistant Professor
Department of Accounting & Information Systems (AIS)
Faculty of Business Studies (FBS)
Bangladesh University of Professionals (BUP)

Submitted By
Ekramuzzaman Fatin
ID: 24211409097
Section: A
AIS 2024
Date of Submission: June 30, 2024
 Acknowledgements
Before I begin this term paper to be more precise, I would like to thank Almighty Allah, for
giving me the strength and health to complete this term paper.

On the same token, I would personally want to thank the course instructor, Umma Hania
Miss, an Assistant Professor of the faculty of business studies at Bangladesh University of
Professionals for afforded me this chance in writing this term paper. Whether this type of
learning strategy has to do with classroom tutorials or term papers, it is a splendid idea to
introduce students to real life scenarios about the application of a particular mathematical
principle. As far as it is obvious, a mentor is rather crucial factor that greatly influences the
result of the show. I would also like to thank her again for the suggestions that she has given
and the support we were under, as these will help in enhancing my paper. Al these help that
we were provided with, I would like to thank…

Finally, I would also like to thank my friends and other family members; who provided me
addition assistance.

Sincerely,
Ekramuzzaman Fatin.
 Abstract
In this term paper, I am going to delve into my understanding of the topics: relation ratio,
setting and mathematics which is related to the finance. These chapters are really important
for mathematics that will be necessary at the further stages in universities. While progressing
with this term paper I will endeavor to specify whether and how these topics are crucial and
in what circumstances some of the material pertains to it is relevant. When I switch through
this paper, it becomes a record what I know and have learnt this remarkable semester proving
my development.
 Introduction
Algebra is a branch of mathematics that deals with symbols and the rules for manipulating
those symbols. The foundation of algebra is built on understanding the relationships between
quantities and the ability to manipulate these relationships to solve problems.

Equations and inequalities are fundamental components of algebra. They provide a way to
represent real-world problems and abstract mathematical concepts. Equations are statements
of equality between two expressions, while inequalities express a relationship where one
expression is greater than or less than another. These concepts are not only pivotal in pure
mathematics but also in various applied fields such as physics, engineering, economics, and
computer science.

This paper aims to provide a comprehensive overview of algebraic equations and inequalities.
It will explore the different types of equations and inequalities, discuss the methods used to
solve them, and highlight their applications in various fields. The study begins with a review
of linear equations, the simplest form of algebraic equations.
Ratio, Proportion, Percentage, Profit, Loss, Discount
Ratios
Ratios are incredibly useful in accounting and finance because they allow us to compare and
simplify various figures. By breaking down larger values into smaller, more manageable
ones, ratios help us maintain proportionality, manage performance, make decisions, and
benchmark against standards.

Definition: A ratio compares two quantities, showing the size of one relative to the other. It
is expressed as a:b or a/b.

Properties: Just like fractions, ratios can be simplified by dividing both terms by their
greatest common divisor.

Applications: Ratios are used in scale models, maps, recipes, and probability to express the
likelihood of events.

Percentages
Percentages are essential for comparing different quantities and understanding proportions.
They help us make informed decisions by interpreting data and understanding growth rates
in economic indicators like GDP growth, inflation rates, and interest rates.

Definition: A percentage is a ratio expressed as a fraction of 100, denoted by the percent

symbol (%). For example, 45% is equivalent to 45/100.

Properties: Percentages can be easily converted to and from decimals and fractions.

Applications: Percentages are used in calculating interest rates, discounts, statistics, and
expressing changes in values over time.

Profit and Loss

Understanding profit and loss is crucial for evaluating financial performance, influencing
investment decisions, and planning finances.

Definition: Profit is the financial gain when revenue exceeds costs and expenses. A loss
occurs when costs and expenses exceed revenue.

Formula:

Profit = Revenue - Cost

Loss = Cost - Revenue

Profit Margin: This is the ratio of profit to revenue, typically expressed as a percentage.

Applications: Profits are used to evaluate business performance, investment returns, and
financial planning. Analyzing losses helps identify inefficiencies, reduce costs, and improve
strategies.

Discounts
Discounts are price reductions that benefit customers but represent an expense for businesses.
They are often used to boost sales or reduce inventory.

Calculation: We'll also explore how to calculate discounts accurately.

Weighted Averages
Weighted averages are a type of average where different values contribute differently to the
final result based on their importance or frequency. Unlike simple averages, where all values
are equally significant, weighted averages give more weight to more significant or relevant
values.

Applications: Weighted averages are useful when dealing with datasets where some values
are more significant than others.
Practical Exercises

Next, we'll delve into some practice exercises to see how these concepts are applied in real-
life scenarios. This hands-on approach will help us understand how to solve these problems
effectively.

1. Three numbers are in the ratio 2: 3:5 and the sum of their squares is 950.

Find the numbers.

2. A table costs a carpenter Rs. 720 to make. He sells it for Rs. 920.

What percentage of profit does he earn?

3. A garrison is provided with food for 80 soldiers to last for 60 days. Find

how long would the food last if 20 additional soldiers join them after 15 days.
 SETS
The mathematical field that is also known as the axiomatic set theory addresses problems
related to sets that are collections of distinct objects Set theory forms the basis of many
branches of mathematics and provides foundations for other advanced concepts in
mathematics. Sets are often represented by capital letters and the elements in a set are put
within curly brackets. For example, A={1,2,3}.

 Definition - A collection of distinct objects, considered as an object in its own

right. From a set we can say whether a given object belongs to a set or not.
 Elements - An object that belongs to a set. If x is an element of set A, it is written
as x∈A.

There are 2 methods of displaying sets;

1) Roster form – which just lists out the elements of a set between two set brackets.

For example, S = {January, June, July}

2) Set builder notation - Set builder notation is a concise way of describing a set by
specifying the properties that its members must satisfy. Instead of listing all elements
of the set, set builder notation provides a rule or condition that elements of the set
must meet. This is especially useful for describing large or infinite sets. For example,
S = {x | x is a month that begins with J}, which means x can be any from January,
June, July.

Now, let’s understand the different types of sets. Here are various types of sets, each with
specific properties and applications. Although there are many different types, we will only
look at the 10 most important ones in this term paper.

1) Finite Set - A finite set is a set with a limited number of elements. The number
of elements in a finite set is a non-negative integer. For eg. A={1,2,3,4,5}

2) Infinite set - An infinite set is a set with an unlimited number of elements.

The elements continue indefinitely. For eg. N={1,2,3,4,5,…}
3) Null set - A null set or empty set is a set that contains no elements. It is
denoted by ∅∅ or {}{}. For eg. A=∅

4) Singleton set - A singleton set is a set containing exactly one element. For eg. A={5}

5) Equivalent set - if two sets have the equal number of elements, they are said be
equivalent sets. For eg. A = {a, b, c} , B = {1, 2, 3}.

6) Disjoint set - Two sets are disjoint if they have no elements in common. For eg,
A={1,2,3} and B={4,5,6}B={4,5,6} are disjoint sets because they share no elements.

7) Universal set - The universal set is the set that contains all the elements under
consideration, usually denoted by U. For eg. If A = {1,2,3} and B = {4,5,6}, U will
be
= {1,2,3,4,5,6}

8) Subset - set A is a subset of set B if all elements of A are also elements of B. It is

denoted as A⊆B. For eg. A={1,2} is a subset of B={1,2,3,4}B={1,2,3,4}.

9) Proper subset - set A is considered a proper subset of set B (written as A⊂B,

sometimes A⊊B) if every element of A is also an element of B, and A is not equal
to B. This means that A must contain some but not all of the elements of B. For
example, if B={1,2,3}, then the sets {1,2}and {2}are proper subsets of, but {1,2,3} is
not a proper subset of B because it is equal to B.

10) Power set - The power set of a set A is the set of all possible subsets of A,
including A itself and the empty set. It is denoted as P(A). for eg. If
A={1,2}, then P(A)={∅,{1},{2},{1,2}}.
 Operations on sets
Operations on sets are fundamental actions that can be performed on sets to produce other
sets. The most common set operations include union, intersection, difference, and
complement. Here’s a detailed overview of these operations:

Intersection: The intersection of two sets A and B is a set that contains all elements that are in
both A and B. For example, if the number 2 is found in both sets A and B, it will create an
intersection. Notation: A∩B. Intersection can be found using the De Morgan’s laws for sets
or using the venn diagram. The De Morgan’s laws for sets for intersection is:

n(A∩B)=n(A)+n(B)-n(A∪B).

Union of sets - The union of two sets A and B is a set that contains all elements that are in A,

in B, or in both. Its mathematical notation is A∪B. For example, Let A={1,2,3},

Let B={3,4,5}, Then, A∪B={1,2,3,4,5}. Application using formula and venn diagram is
shown below.

Difference - The difference of two sets A and B (also known as the relative complement) is a
set that contains all elements that are in A but not in B. Notation: A−B or A∖B. For
example, if Let A={1,2,3}, Let B={3,4,5} Then, A−B={1,2}.

Cartesian product: The Cartesian product of two sets is a fundamental concept in set theory
and is used to define the set of all ordered pairs formed by taking an element from each
set. Given two sets A and B, the Cartesian product A×B is defined as:
A×B={(a,b)∣a∈A and b∈B}. This means that A×B is the set of all ordered pairs (a,b) where
the first element aa comes from the set A and the second element b comes from the set B. for
eg. A={1,2}, and B={3,4}. Cartesian product A×B={(1,3),(1,4),(2,3),(2,4)}.
 Mathematics of Finance

Simple interest
Simple interest is one of the most basic knowledge areas in the mathematics of fund. The
simple interest is therefore a technique of arriving at the interest charge where for the loan
granted, or the interest earned where one had invested on a particular sum of money where
the amount of interest charged or earned equals the principal amount multiplied by the
interest rate by the time period in question. In this paper, the writer will discuss classification
of simple interest, uses of simple interest which will also be followed by analyzing the
importance of simple interest in the wide calssification of financial mathematics.

Formula – I = Pin
I= interest
P=principal
I= interest rate
n= number of years
When we do the math, we must realize when finding the value of interest rates, the values
obtained must be in percentage form. Now let us see an example of finding interest rate and
interest both Will have you ever tried This formula is most useful when one knows either the
nominal interest rate, no matter how it is compounded, and the number of compounding
periods, or n, or both.

1. find the interest rate if $1,000 earns $45 interest in 6 months.

When calculating simple interest, there are two common methods to determine the time
period involved: two kinds of methods, the exact method and the ordinary method. The two
methods vary concerning the day basis adopted for the annual calculations of interest, and
hence they slightly vary.

The first one has a name of the 365-day method, which imply a precise calculation of
interest by the really existent number of days in one year, equal to 365. This method is
regarded as more accurate since duration of the time period necessary for grinding is
considered.

The second is the ordinary method, also recognized as the 360 Day method or the bankers’
method, where interest charges are provided on a 360 day basis. This is easier to use and is
typically applicable when doing bank and finance calculations, though less precise in
comparison with the exact method.

1. Find the interest on $1460 for 72 days at 10% interest using (i) the exact method (ii)
the ordinary method.

The future value

The future value (FV) in finance refers to the value of an investment or a loan at a specific
point in the future, taking into account interest earned or paid over time. For simple interest,
the future value is straightforward to calculate using the interest formula. In simpler words, it
helps to show the total amount that must be repaid on a loan, at a specified point in the future.

Formula: F=P+Pin or P(1+in)

1. find the future value if $20000 is invested at 6% for 12 months.

Present value

Present value is the current worth of a future sum of money or cash flows, discounted at a
specific interest rate. It helps in determining how much one would need to invest today to
achieve a desired future amount. For eg. If I want 600$ receivable at 6% interest after 6
months, the amount I need to invest today is the present value.

Formula: P=F/(1+in)
1. How much will Fran have to invest now in the employees' 8 percent savings account
in order to have $600 a year from now?

Bank discount
In many loans, the interest charge is computed not on the amount the borrower receives, but
on the amount that is repaid later. A charge for a loan computed in this manner is called the
bank discount, and the amount the borrower receives is called the proceeds of a loan. For
example, if someone repays $5000 dollar loan, out of which, he get $3500 and the rest $1500
is bank charge, $3500 is the proceeds of the loan, $1500 is the bank discount.
Formula: P= F(1-dn)
1. if $1000 is borrowed for 6 months and 12%, what will be the proceeds?

Effective rate of simple interest

The effective interest rate (EIR) is a measure of the actual interest earned or paid on an
investment or loan over a specific period. For simple interest, the effective rate helps to
understand the true cost or yield of a financial instrument, taking into account the effect of
time. By the effective rate, we understand the actual true simple interest of the year

Formula –

Although the formula above remains constant, the derivation from this formula differ when
interest is charged using simple method ie. On the present value and when interest is charged
using the future value. With the formula, the answers are also supposed to be different.
Moreover in the case where interest is charged against actual value, (P), it will always be
equal to effective interest rate.
1. having the same value being applied for Q2, except with interest being charged on
future value this time.

Compound interest

Compound interest is the interest on a loan or deposit calculated based on both the initial
principal and the accumulated interest from previous periods. This concept of "interest on
interest" can cause wealth to grow exponentially over time, making it a powerful tool for both
investments and loans.

Formula:

 A = the future value of the investment/loan, including interest

 P = the principal investment/loan amount
 r = the annual interest rate (decimal)
 n = the number of times interest is compounded per year

 t = the number of years the money is invested or borrowed

1. Find the future value of $1000 at 7% per year for 10years.

 Ordinary Annuities: Future Value

Annuities are financial products that provide a series of payments

made at equal intervals. They are commonly used as a tool for retirement planning, offering
a
way to convert a lump sum of money into a steady income stream. Annuities can be tailored
to meet various financial needs, providing flexibility in terms of payment duration, amount,
and timing. There are different types and different calculations of doing annuities. Lets
understand them.

Annuity certain: An annuity certain, also known as a certain and period annuity, is a type of
annuity that guarantees payments for a specific period, regardless of whether the annuitant is
alive for the entire period. This type of annuity provides a fixed number of payments over a
predetermined time frame, offering a reliable income stream for a set duration. In easier
words, Annuity that begins and ends on designated dates is called an annuity certain.
Examples: loan transactions and rent payments.

Simple annuity: A simple annuity, also known as an ordinary annuity or regular annuity, is
a financial product that provides a series of equal payments made at regular intervals over a
specified period of time. These payments are typically made at the end of each period, which
can be monthly, quarterly, semi-annually, or annually. Simple annuities are widely used in
various financial contexts, including loans, mortgages, and investments, due to their
straightforward structure and predictability.

Ordinary Annuity: An ordinary annuity, also known as an annuity in arrears, is a type of

annuity where equal payments are made at the end of each period over a specified term.
This structure is commonly used in various financial products such as mortgages, car loans,
and bond interest payments.

Here n=Number of periods

i=interest per period

R= Payment per period

F= Future value of the annuity

1. If $100 is deposited in an account at the end of every quarter for the next 5 years,
how much will be in the account at the time of the final deposit if interest is 8%
compounded quarterly?

Ordinary annuities: sinking fund

An ordinary annuity can also be used to establish a sinking fund. A sinking fund is a
strategic financial tool that involves setting aside money at regular intervals to pay off a
future debt or expense. This concept is widely used by corporations, municipalities, and
individuals to ensure that funds are available to meet future obligations without requiring a
large lump sum payment at the end.
1. How much should be deposited in a sinking fund at the end of each quarter for 5 years to
accumulate $10,000 if the fund earns 8% compounded quarterly?

Present Value in the Ordinary annuity

For present value, the new equation will be:

1. What sum deposited now in an account earning 8% interest compounded quarterly will
provide quarterly payments of $1000 for 10 years, the first payment to be made?
Mortgage payments
Mortgages are amortizations secured by a piece of property

1. A $70000 condominium is to be purchased by paying $10000 in cash and a $60000

mortgage for 30 years at 9.75% compounded monthly. A) Find the monthly payment on the
mortgage b) What will be the total amount of interest paid?
 Matrix

A matrix is a rectangular array of numbers arranged in rows and columns. For example: