6 STUDY MATERIAL C3

the previous retained digit (i.e. the ‘5’) is unchanged. So 86,531  86,500 to three signifi-
BASIC MATHEMATICS

cant figures (s.f.).

Suppose we want 86,531 to have only two significant digits. The ‘531’ will be discarded
and the first of these, ‘5’, is in the 5–9 range, so the previous digit (‘6’) is increased by 1.
So 86,531  87,000 to two s.f.
Zeros sometimes count as significant figures; sometimes they do not. Reading a number
from the right, any zeros encountered before you meet a non-zero number do not count
as significant figures. However, zeros sandwiched between non-zeros are significant. Hence,
87,000 has two s.f., while 80,700 has three.

1.4.3 Decimal places

The other widely used rounding technique is to discard digits so that the remaining
number only has a specified number of decimal places (d.p.).
For example, round 25.7842 to two d.p. The digits to be discarded are ‘42’, the first (‘4’) is in
the 0–4 range and so the next digit (‘8’) remains unchanged. So 25.7842  25.78 to two d.p.
Strings of ‘9’ can be confusing. For example, if we want to round 10.99 to one d.p.,
the first digit to be discarded is ‘9’ and so the next digit, also ‘9’, goes up to ‘10’. In conse-
quence, the rounded number is written as 11.0 to one d.p.

1.4.4 Rounding up or rounding down

A number to be rounded up will be changed into the next higher whole number so, for
example, 16.12 rounds up to 17.
A number to be rounded down will simply have its decimal element discarded (or
truncated).
Numbers can also be rounded up or down to, say, the next 100. Rounding up, 7,645
becomes 7,700 since 645 is increased to the next hundred which is 700. Rounding down,
7,645 becomes 7,600.

Example 1.4.1
This exercise covers all the topics of this chapter so far. Evaluate the following to the accuracy specified.

(a) 89.56  56.4/4.3 to two d.p.

(b) (5.9  8.2) ÷ (3.6  7.1) to one d.p.
(c) 8,539  349.1 ÷ (32.548  1) to three s.f.
(d) 56/5  28 to the nearest whole number.

Solution
In what follows, before rounding, we have not written out the full calculator display if it was plainly not going to be
needed. However, note that it is good practice to retain full calculator accuracy throughout your calculation, only
rounding at the final answer stage. Doing so avoids errors due to premature rounding at intermediate stages.

(a) 89.56  56.4/4.3  89.56  13.11627  89.56  13.12  76.44 to two d.p.
(b) (5.9  8.2) ÷ (3.6  7.1)  (2.3) ÷ (3.5)  0.65714  0.7 to one d.p.
(c) 8,539  349.1 ÷ (32.548  1)  8,539  349.1 ÷ 31.548  8,539  11.066  8527.934 
8,530 to three s.f.
(d) 56/5  28  11.2  28  16.8  17 to the nearest whole number.
Correct rounding is essential in computer-based assessments. Don’t move on to the next topic until you are quite
sure about this.
 FUNDAMENTALS OF BUSINESS MATHEMATICS 7

1.5 Powers and roots

BASIC MATHEMATICS
1.5.1 Definitions
1. The nth power of a number, a, is the number multiplied by itself n times in total, and
is denoted by an or a^n. For example,

25 or 2^5  2  2  2  2  2  32
2. Any number to the power of zero is defined to be 1. For example,

70  1

3. a n is the reciprocal of an, that is a n  1  an  1/an

1 1
32  
32 9

4. The nth root of a number, a, is denoted by a1/n and it is the number that, when multi-
plied by itself n times in total, results in a. For example,

81 3  3 8  2

Check: 2  2  2  8

The square root, a1/2, is generally written as a without the number 2.

5. an/m can be interpreted either as the mth root of an or as the mth root of a multiplied by
itself n times. For example,

95 2  ( 9 )5  35  243

6. The rules for arithmetic with powers are as follows:

(i) Multiplication: am  an  amn. For example,

23  2 4  (2  2  2 )  (2  2  2  2)  23  2 4  234  27  128

(ii) Division: am  an  amn. For example:

35  32  (3  3  3  3  3)/(3  3)  352  33  27

(iii) Powers of powers: (am)n  amn. For example,

( 42 )3  423  46  4, 096
 8 STUDY MATERIAL C3
BASIC MATHEMATICS

Example 1.5.1
Simplify the following:

23
(a) (m )
m5
(b) m3/m 2
(c) (m4)1/2

(d) 1
m3

Solution
23 6
(a) (m )  m  m
m5 m5
(b) m3/m 2  m(3  (2))  m5

(c) (m4)1/2  m4  1/2  m2

(d) 1 1
  m3
m3 1  m3

1.6 Mathematical operations in Excel

When performing calculations in Excel the same mathematical rules that have been dis-
cussed in this chapter apply. The following examples use the data from Examples 1.2.1 and
1.2.2 and show how formulae in Excel would be created to arrive at the same results.

Figure 1.1 Creating basic formulae in Excel

Notice from Figure 1.1 that most of the values have been addressed by the cell
reference – but it is also possible to incorporate numbers into the formulae.

1.6.1 Rounding numbers in Excel

To accurately round numbers in Excel a built-in function called  round() is used. This can
be used to set any degree of accuracy required and once the function is incorporated into
a formula any future references to the cell containing the round function will use a value
 FUNDAMENTALS OF BUSINESS MATHEMATICS 9

BASIC MATHEMATICS
rounded to the specified number of decimal places. The following example (Figure 1.2)
illustrates this and uses the data from Example 1.4.1.

Figure 1.2 Rounding numbers in Excel

Notice that the third example requested the result be rounded to three significant figures,
the formula is a little more complex and has been done here in two steps.
In the first step in cell f6 the arithmetic has been performed and the result rounded to
three decimal places. Then in g6 the len and the int functions have been applied to fur-
ther round the result to three significant figures.
It is sometimes preferable to take the integer value of a number as opposed to rounding
it to the nearest whole number. The difference is that the integer value is a number with-
out any decimal places. Therefore the integer value of 9.99 is 9 and not 10 as it would be
if the number had been rounded to the nearest whole number.
Figure 1.3 shows the table used in the rounding exercise but with the Excel int function
in place of the round function

Figure 1.3 Using the Excel INT function

Figure 1.4 shows the results of the rounding and the integer formulae used in figures 1.2
and 1.3.

Figure 1.4 The results of using ROUND and INT

10 STUDY MATERIAL C3
BASIC MATHEMATICS
Looking at Figure 1.4, the different result produced through the use of the int function
as opposed to the round function can be seen. In each case the result has been rounded
down to the integer value.

1.7 Variables and functions

A variable is something which can take different values. Variables are often denoted by
letters. Thus, the set of positive whole numbers can be considered as a variable. If we
denote it by x, then this variable can have many values.

x 1
or x  2
or x  3, and so on.

Another example is the set of the major points of a compass. If this variable is denoted by c,
then it can have more than one value, but only a limited number.

c  north
c  south
c  north-west, and so on.

These examples show that variables can take on non-numerical ‘values’ as well as numeri-
cal ones. In this text we shall concentrate on numerical variables, that is, those whose values
are numbers, like the first case above.
A mathematical function is a rule or method of determining the value of one numeri-
cal variable from the values of other numerical variables. We shall concentrate on the case
where one variable is determined by or depends on just one other variable. The first vari-
able is called the dependent variable, and is usually denoted by y, while the second is called
the independent variable, denoted by x. The relationship between them is a function of one
variable, often referred to as a function, for brevity. Note that whilst functions are similar
to formulae (see Section 1.8) there are specific conditions relating to the definition of a
function, but these are outside the scope of this book.
A very useful way of stating a function is in terms of an equation, which is an expression
containing an ‘equals’ sign. The equation of a function will thus take the typical form:

y  a mathematical expression containing x

If we know the value of the independent variable x, then the expression will completely
determine the corresponding value of the dependent variable, y.

Example 1.7.1
The following equations represent functions with one independent variable. Evaluate the dependent variable
when the independent variable has the value 2.

(a) y  3  2x
(b) y  x
(c) y  1  x  3x2
 FUNDAMENTALS OF BUSINESS MATHEMATICS 11

Solution

BASIC MATHEMATICS
To find the value of y, we write the known value of x (2 in this case) in place of x in the mathematical expres-
sion and perform the necessary arithmetical calculations. This is known as the substitution of the x-value into the
equation.

(a) Substituting x  2 gives:

y  322  3 4  7

so the dependent variable has the value 7 in this case.

(b) Clearly, this dependent variable has the value 2, the same as x.
(c) Substituting x  2:

y  1 2  3  22  1 2  12  15

so the dependent variable has the value 15 here.

1.8 Formulae
A formula is a statement that is given in terms of mathematical symbols: it is a mathemati-
cal expression that enables you to calculate the value of one variable from the value(s) of
one or more others. Many formulae arise in financial and business calculations, and we
shall encounter several during the course of this text. In this chapter, we shall concentrate
on some of the more complicated calculations that arise from the application of formulae.

Example 1.8.1
Calculate the value of A from the formula
B(C  1)(3  D )
A
(2E  3F )

when B  2, C  3, D  1.6, E  1 and F  2.5

Solution

(C  1)  (3  1)  4
(3  D )  (3  (  1 . 6))  3  1 .6  4 .6
(2E  3F )  2  (  1)  (3  ( 2 . 5))  2  7 . 5  5 . 5
2  4  4.6
Hence A   6 . 69 to two d.p.
5.5

Example 1.8.2
The following formula occurs in calculations of interest and depreciation:

V  P  (1 r )n

(a) Calculate the value of V when P  10,000, r  0.06 and n  4.

(b) Calculate the value of P when V  1,000, r  0.04 and n  3.
12 STUDY MATERIAL C3

Solution
BASIC MATHEMATICS

(a) We shall compute the powers from this basic definition, but you may have a calculator with an xy or a yx button,
which will make the calculations easier.
In the first case:

V  10, 000  (1 ( 0 .06))4

 10, 000  (1 0 . 06)4
 10, 000  0 .944
 10, 000  0 . 94  0 . 94  0 . 94  0 . 94
 7807 . 49 (to two d.p.)

(b) In the same way as above, we first calculate the expression in the bracket then the power:

1, 000  P  (1 0 .04)3

 P  1 . 043
 P  1 . 04  1 . 04  1 . 04
 P  1 . 124864
Hence P  1, 000/1.124864
 889 . 00 (to two d.p.)

The example above required us to change the subject of the formula from V to P, that is, to end up
with P  some expression. There are various rules and techniques which help this process.

1. If something is added or subtracted at one side of an equation, then it changes its sign when you take it to
the other side. For example: P  5  9, so P  9  5  4
2. If something multiplies one side of an equation, then it divides when taken to the other side. Similarly,
divisions turn into multiplications. For example: 5R  210, so R  210 ÷ 5  42; T ÷ 20  7, so
T  7  20  140
3. If the variable you want as the subject is inside a square root, manipulate the equation into the form ‘square-
rooted expression  something’ and then square both sides of the equation

Example 1.8.3
Rearrange the following equations to change X into the subject:

(a) Y  a  bX
(b) Y  X ÷ (2  X )

(c) Y  2 (abX  c )

Solution
(a) If Y  a  bX

so Y  a  bX (rule 1)
Y a
thus X  (rule 2)
b

(b) If Y  X ÷ (2  X)

Y (2  X )  X (rule 2)
2Y  XY  X (multiplying out the brackets)

Gathering the X terms together:

2Y  X  XY
 X (1 Y )
 FUNDAMENTALS OF BUSINESS MATHEMATICS 13

Finally, dividing down by (1  Y) gives:

BASIC MATHEMATICS
2Y
X 
1 Y

(c) If Y  2 (abX  c )

Y abX

2 c
Squaring both sides gives:

Y2 abX

4 c
All that remains now is to take the a, b and c across to the other side:
cY 2
X 
4ab

1.9 Exponential numbers

In Excel a number is raised to a power by using the symbol referred to as a carat (∧). Some
practitioners refer to this symbol as being the exponential operator. Thus, for example, to
cube 4 the formula required would be  4∧3. To find the square of 4, the formula required
is  4∧2. The carat can also used to find the square root. In this case the formula would
be  4∧(1/2), or to find the cube root the formula would be  4∧(1/3). The method
is used to find the 4th root, 5th root and so on. Some examples are demonstrated in
Figures 1.5 and 1.6.

Figure 1.5 Examples of the use of the carat (∧) symbol

Figure 1.6 Formulae used to produce the results

14 STUDY MATERIAL C3

1.10 Solving equations

BASIC MATHEMATICS

1.10.1 Linear equations with only one variable

An equation is linear if it has no term with powers greater than 1, that is, no squared or
cubed terms, etc. The method is to use the same techniques as in changing the subject of a
formula, so that the equation ends up in the form variable  something.

Example 1.10.1

(a) Solve 6  3X  0
6  3X
X  63 2

(b) Solve 200  5(X  2)  80

200  5X  1080  5X  70
200  70  5X  130
X  130  5  26

50 24
(c) Solve  
X X 3

Multiply up by the two denominators:

50(X  3)  24X
50X  150  24X
50X  24X  150  26X
X  150  26  5 .77 to two d .p.

Example 1.10.2
Solve the following equations:

(a) 10  3Y  8Y  7

(b) 6 . 1  4 . 9
Y 10  Y

Solution
(a) 10  3Y  8Y  7

10  7  8Y 3Y

17  5Y

Y  17 ÷ 5  3:4
 FUNDAMENTALS OF BUSINESS MATHEMATICS 15

BASIC MATHEMATICS
(b) 6 . 1  4 . 9
Y 10  Y

6.1(10  Y)  4.9Y

61  6.1Y  4.9Y

61  4.9Y  6.1Y  11Y

Y  61 ÷ 11  5.55 to two d.p.

1.10.2 Quadratic equations with only one variable

A quadratic equation has the form aX2  bX  c  0 where a, b and c are constants. The
equation can be solved using a formula but if either the bX or c terms or both are missing
the formula is not necessary. Examples will be used to illustrate the methods.

Example 1.10.3
Solve the following simple quadratic equations (note that the variable used is Y, but as there is only one variable
used, this is fine.):

(a) 4Y2  100

(b) Y2  9  0
(c) Y2  2Y  0
(d) (Y  5)2  0

Solution
(a) Y2  100 ÷ 4  25

Y   25 and  25  5

(b) Y2  9
Y   9  3

(c) Y(Y  2)  0
Either Y  0; or Y  2  0, so Y  2

(d) The only solution is that Y  5  0, so Y  5

You may have noticed that most quadratic equations have two roots, that is, two values for which the two
sides of the equation are equal, but occasionally, as in (d) above, they appear to have only one. It is, in fact, a
repeated (or double) root. For example, Y2  9 has no real roots. We shall consider this again when we look
at quadratic graphs in the next chapter.
For quadratic equations all of whose coefficients are non-zero, the easiest method of solution is the formula. If
the equation is aX2  bX  c  0, then the roots are given by:

b  (b 2  4 ac )
X 
2a

This formula is given in your exam so you don’t need to learn it.