MTH106

NATIONAL OPEN UNIVERSITY OF NIGERIA
COURSE CODE: MTH 106
COURSE TITLE: MATHEMATICS FOR MANAGEMENT

SCIENCES II
1
COURSE GUIDE
MTH 106
MATHEMATICS FOR MANAGEMENT SCIENCES II
Course Developer: Mr. SUFIAN JELILI BABATUNDE & BORO IRENE

O.
National Open University of Nigeria
Lagos.
Course Coordinator:
Lagos.
2
Headquarters
14/16 Ahmadu Bello Way
Victoria Island, Lagos
Abuja Annex
245 Samuel Adesujo Ademulegun Street
Central Business District
Opposite Arewa Suites
Abuja.
e-mail: [email protected]
URL: www.nou.edu.ng
National Open University of Nigeria 2006
First Printed
ISBN:
All Rights Reserved
Printed by ……………..
For
3
Table of Content Page
Introduction ……………………………………………………….
What you will learn in this course …………………………………
Course Aims ………………………………………………………
Course Objectives …………………………………………………
Working through this Course ……………………………………..
Course Materials …………………………………………………..
Study Units ………………………………………………………..
References ………………………………………………………..
Assignment File ……………………………………………………
Presentation Schedule ……………………………………………...
Assessment ………………………………………………………..
Tutor Marked Assignments ………………………………………..
Final Examination and Grading ……………………………………
Course Marking Scheme …………………………………………..
How to get the most from this course ……………………………..
Tutor and Tutorials ………………………………………………..
Summary …………………………………………………………..
Introduction
MTH 106 - Mahematics for Management Sciences II is designed to teach you
how mathematics could be used in solving problems in the contemporary
business world. Therefore, the course is structured to expose you to the skills
required in other to attain a level of proficiency in business management.
What you will learn in this course

You will be taught the basis of mathematics required in solving problems in
business.
4
Course Aims
There are ten study units in the course and each unit has its objectives. You
should read the objectives of each unit and bear them in mind as you go
through the unit. In addition to the objectives of each unit, the overall aims of
this course include:
(i) To introduce you to the words and concepts in business mathematics
(ii) To familiarize you with the peculiar characteristics in business
mathematics.
(iii) To expose you to the need for and the demands of mathematics in the
business world.
(iv) To prepare you for the contemporary business world.
Course Objectives
The objectives of this course are:
 To inculcate appropriate mathematical skills required in business
 Educate learners on how to use mathematical Techniques in solving
problems.
 Educate the learners on how to integrate mathematical models in
business.
Working through This Course

You have to work through all the study units in the course. There are two
modules and ten study units in all.
Course Materials
Major components of the course are:
1. Course Guide
2. Study Units
3. Textbooks
5
4. CDs
5. Assignments File
6. Presentation Schedule
Study Units
The breakdown of the two modules and ten study units are as follows:
MODULE ONE
Unit 1 Sets & Subsets
Unit 2 Basic Set Operations
Unit 3 Set of Numbers
Unit 4 Functions
MODULE TWO
Unit 1 Annuity
Unit 2 Cash Flow
Unit 3 Sinking Fund

Unit 4 Mathematical Programming (Linear Programming)
MODULE THREE
Unit 1: Computation of Areas by Calculus
Unit 2: Definite Integral
Unit 3: Indefinite Integral
Unit 4: Integration of Transcendental functions
Unit 5: Integration of Powers of Trigonometric functions
6
MODULE FOUR
Unit 1: Mathematical Tools I: Simultaneous Equations, Linear Functions, and

Linear Inequalities
Unit 2: Mathematical Tools II: Introduction to Matrix Algebra
Unit 3: Probability
References and Other Resources

Every unit contains a list of references and further reading. Try to get as many
as possible of those textbooks and materials listed. The textbooks and materials
are meant to deepen your knowledge of the course.
Assignment File
In this file, you will find all the details of the work you must submit to your
tutor for marking. The marks you obtain from these assignments will count
towards the final mark you obtain for this course. Further information on
assignments will be found in the Assignment File itself and later in this Course
Guide in the section on assessment.
Presentation Schedule
The Presentation Schedule included in your course materials gives you the
important dates for the completion of tutor-marked assignments and attending
tutorials. Remember, you are required to submit all your assignments by the
due date. You should guard against falling behind in your work.
Assessment
Your assessment will be based on tutor-marked assignments (TMAs) and a
final examination which you will write at the end of the course.
Tutor Marked Assignments (TMA)
Every unit contains at least one or two assignments. You are advised to work
through all the assignments and submit them for assessment. Your tutor will
7
assess the assignments and select four which will constitute the 30% of your
final grade. The tutor-marked assignments may be presented to you in a
separate file. Just know that for every unit there are some tutor-marked
assignments for you. It is important you do them and submit for assessment.
Final Examination and Grading
At the end of the course, you will write a final examination which will
constitute 70% of your final grade. In the examination which shall last for two
hours, you will be requested to answer three questions out of at least five
questions.
Course Marking Scheme

This table shows how the actual course marking is broken down.
Assessment Marks
Assignments Four assignments, best three marks of

the four count at 30% of course marks
Final Examination 70% of overall course marks
100% of course marks

Total
How to Get the Most from This Course
In distance learning, the study units replace the university lecture. This is one
of the great advantages of distance learning; you can read and work through
specially designed study materials at your own pace, and at a time and place
that suits you best. Think of it as reading the lecture instead of listening to the
lecturer. In the same way a lecturer might give you some reading to do, the
study units tell you when to read, and which are your text materials or set
books. You are provided exercises to do at appropriate points, just as a lecturer
might give you an in-class exercise. Each of the study units follows a common
8
format. The first item is an introduction to the subject matter of the unit, and
how a particular unit is integrated with the other units and the course as a
whole. Next to this is a set of learning objectives. These objectives let you
know what you should be able to do by the time you have completed the unit.
These learning objectives are meant to guide your study. The moment a unit is
finished, you must go back and check whether you have achieved the
objectives. If this is made a habit, then you will significantly improve your
chances of passing the course. The main body of the unit guides you through
the required reading from other sources. This will usually be either from your
set books or from a Reading section. The following is a practical strategy for
working through the course. If you run into any trouble, telephone your tutor.
Remember that your tutor‘s job is to help you. When you need assistance, do
not hesitate to call and ask your tutor to provide it.
In addition do the following:
1. Read this Course Guide thoroughly, it is your first assignment.
2. Organise a Study Schedule. Design a Course Overview ‟ to guide you
through the Course‖. Note the time you are expected to spend on each unit and
how the assignments relate to the units. Important information, e.g. details of
your tutorials, and the date of the first day of the Semester is available from the
study centre. You need to gather all the information into one place, such as
your diary or a wall calendar. Whatever method you choose to use, you should
decide on and write in your own dates and schedule of work for each unit.
3. Once you have created your own study schedule, do everything to stay
faithful to it. The major reason that students fail is that they get behind with
their course work. If you get into difficulties with your schedule, please, let
your tutor know before it is too late for help.
4. Turn to Unit 1, and read the introduction and the objectives for the unit.
5. Assemble the study materials. You will need your set books and the unit you
are studying at any point in time.
9
6. Work through the unit. As you work through the unit, you will know what
sources to consult for further information.
7. Keep in touch with your study centre. Up-to-date course information will be
continuously available there.
8. Well before the relevant due dates (about 4 weeks before due dates), keep in
mind that you will learn a lot by doing the assignment carefully. They have
been designed to help you meet the objectives of the course and, therefore, will
help you pass the examination. Submit all assignments not later than the due
date.
9. Review the objectives for each study unit to confirm that you have achieved
them. If you feel unsure about any of the objectives, review the study materials
or consult your tutor.
10. When you are confident that you have achieved a unit‘s objectives, you can
start on the next unit. Proceed unit by unit through the course and try to pace
your study so that you keep yourself on schedule.
11. When you have submitted an assignment to your tutor for marking, do not
wait for its return before starting on the next unit. Keep to your schedule.
When the Assignment is returned, pay particular attention to your tutor‘s
comments, both on the tutor-marked assignment form and also the written
comments on the ordinary assignments.
12. After completing the last unit, review the course and prepare yourself for
the final examination. Check that you have achieved the unit objectives (listed
at the beginning of each unit) and the course objectives (listed in the Course
Guide).
Tutors and Tutorials
The dates, times and locations of these tutorials will be made available to you,
together with the name, telephone number and the address of your tutor. Each
assignment will be marked by your tutor. Pay close attention to the comments
10
your tutor might make on your assignments as these will help in your progress.
Make sure that assignments reach your tutor on or before the due date.
Your tutorials are important therefore try not to skip any. It is an opportunity to
meet your tutor and your fellow students. It is also an opportunity to get the
help of your tutor and discuss any difficulties encountered on your reading.
Summary
This course would train you on the concept of multimedia, production and
utilization of it.
Wish you the best of luck as you read through this course
11
Course Code MTH 106
Course Title MATHEMATICS FOR MANAGEMENT SCIENCES II
Course Developer/Writer: Mr. SUFIAN JELILI B.

Lagos.
Programme Leader: Dr I.D Idrisu

Lagos.
Course Coordinator: Mrs. Adegbola Eunice

Lagos.
12
Headquarters: 14/16 Ahmadu Bello Way, PMB 80067
Victoria Island, Lagos
Abuja Office: NOUN Building

No.5, Dar es Sallam Street
Off Aminu Kano Crescent
Wuse II
Abuja.
e-mail: [email protected]
URL: www.nou.edu.ng
National Open University of Nigeria 2008
First Printed
ISBN:
All Rights Reserved
Printed by
For National Open University of Nigeria
13
MODULE ONE
Unit 4 Functions
MODULE TWO
Unit 1 Annuity
Unit 2 Cash Flow
Unit 3 Sinking Fund

Unit 4 Mathematical Programming (Linear Programming)
MODULE THREE
MODULE FOUR
Unit 1: Mathematical Tools I: Simultaneous Equations, Linear Functions, and

Linear Inequalities
Unit 3: Probability Theory and Applications
14
MODULE ONE
Unit 4 Functions
UNIT 1: SETS & SUBSETS

CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Body
3.1 Sets
3.1.1 Notation
3.1.2 Finite and Infinite sets
3.1.3 Equality of sets
3.1.4 Null Set
3.2 Subsets
3.2.1 Proper subsets
3.2.2 Comparability
3.2.3 Set of sets
3.2.4 Universal set
3.2.5 Power set
3.2.6 Disjoint sets
3.3 Venn-Euler diagrams
3.4 Axiomatic development of set theory
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked assignment
7.0 References and Further readings
15
1.0 INTRODUCTION
The theory of sets lies at the foundation of mathematics. It is a concept that

rears its head in almost all fields of mathematics; pure and applied.
This unit aims at introducing basic concepts that would be explained further in
subsequent units. There will be definition of terms and lots of examples and
exercises to help you as you go along.
2.0 OBJECTIVES
At the end of this unit, you should be able to:
 Identify sets from some given statements
 Rewrite sets in the different set notation
 Identify the different kinds of sets with examples
3.0 MAIN BODY
3.1 SETS
As mentioned in the introduction, a fundamental concept in all a branch of

mathematics is that of set. Here is a definition ―A set is any well-defined list,
collection or class of objects‖.
The objects in sets, as we shall see from examples, can be anything: But for
clarity, we now list ten particular examples of sets:
Example 1.1 The numbers 0, 2, 4, 6, 8
Example 1.2 The solutions of the equation x²+ 2x+1 = 0
Example 1.3 The vowels of the alphabet: a, e, i, o, u
Example 1.4 The people living on earth

16
Example 1.5 The students Tom, Dick and Harry Example
1.6 The students who are absent from school Example 1.7
The countries England, France and Denmark Example 1.8
The capital cities of Nigeria
Example 1.9 The number 1, 3, 7, and 10
Example 1.10 The Rivers in Nigeria
Note that the sets in the odd numbered examples are defined, that is, presented,
by actually listing its members; and the sets in the even numbered examples
are defined by stating properties that is, rules, which decide whether or not a
particular object is a member of the set.
3.1.1 Notation
Sets will usually be denoted by capital letters;
A, B, X, Y,......
Lower case letters will usually represent the elements in our sets:
Lets take as an example; if we define a particular set by actually listing its

members, for example, let A consist of numbers 1,3,7, and 10, then we write
A={1,3,7,10}
That is, the elements are separated by commas and enclosed in brackets { }.
We call this the tabular form of a set
Now, try your hand on this
Exercise 1.1
State in words and then write in tabular form
1. A = {x}│x ² = 4²}
2. B = {x}│x – 2 = 5}
17
3. C = {x}│x is positive, x is negative}
4. D = {x}│x is a letter in the word ―correct‖}
Solution:
1. It reads ―A is the set of x such that x squared equals four‖. The only
numbers which when squared give four are 2 and -2. Hence A = {2, -2}
2. It reads ―B is the set of x such that x minus 2 equals 5‖. The only
solution is 7; hence B = {7}
3. It read ―C is the set of x such that x is positive and x is negative‖. There

is no number which is both positive and negative; hence C is empty, that
is, C=Ø
4. It reads ―D is the set of x such that x is letter in the work ‗correct‘. The
indicated letters a re c,o,r,e and t; thus D = {c,o,r,e,t}
But if we define a particular set by stating properties which its elements must
satisfy, for example, let B be the set of all even numbers, then we use a letter,
usually x, to represent an arbitrary element and we write:
B = {x│x is even}
Which reads ―B is the set of numbers x such that x is even‖. We call this the
set builders form of a set. Notice that the vertical line ―│‖ is read ―such as‖.
In order to illustrate the use of the above notations, we rewrite the sets in
examples 1.1-1.10. We denote the sets by A 1, A 2, ..... A10 respectively.
Example 2.1: A1 = {0, 2, 4, 6, 8}
Example 2.2: A2 = {x│x²+2x + 1 = 0}
Example 2.3: A3 = {a, e, i, o, u}
Example 2.4: A4 = {x │x is a person living on the earth}
Example 2.5: A5 = {Tom, Dick, Harry}
18
Example 2.6: A6 = {x │ x is a student and x is absent from school}
Example 2.7: A7 = {England, France, Denmark}
Example 2.8: A8 = {x│x is a capital city and x is in Nigeria}
Example 2.9: A9 = {1, 3, 7, 10}
Example 2.10: A10 = { x│x is a river and x is in Nigeria} It is easy as that!
Exercise 1.2
Write These Sets in a Set-Builder Form
1. Let A consist of the letters a, b, c, d and e
2. Let B = {2, 4, 6, 8........}
3. Let C consist of the countries in the United Nations
4. Let D = {3}
5. Let E be the Heads of State Obasanjo, Yaradua and Jonathan
Solution
1. A={x │x appears before f in the alphabet} = {xx is one of the first

letters in the alphabet}
2. B = {x │x is even and positive}
3. C = {x │x is a country, x is in the United Nations}
4. D = {x │x – 2 = 1} = {x│2x = 6}
5. E = {x │x was Head of state after Abacha}
If an object x is a member of a set A, i.e., A contains x as one of its\elements,

then we write: x∈A
Which can be read ―x belongs to A‖ or ‗x is in A‖. If, on the otherhand, an

object x is not a member of a set A, i.e A does not contain x as one of its
elements, then we write; x∉A
19
It is a common custom in mathematics to put a vertical line ―‖ or ― \ ‖
through a symbol to indicate the opposite or negative meaning of the symbol.
Example 3:1: Let A = {a, e, i o, u}. Then a∈A, b∉A, f∉A.
Example 3.2: Let B = {x< x is even}. Then 3∉B, 6∈B, 11∉B,14∈B
3.1.2 Finite & Infinite Sets
Sets can be finite or infinite. Intuitively, a set is finite if it consists of a specific

number of different elements, i.e. if in counting the different members of the
set the counting process can come to an end. Otherwise a set is infinite. Lets
look at some examples.
Example 4:1: Let M be the set of the days of the week. The M is finite
Example 4:2: Let N = {0,2,4,6,8........}. Then N is infinite
Example 4:3: Let P = {x< x is a river on the earth}. Although it maybe

difficult to count the number of rivers in the world, P is still a finite set.
Exercise 1.3: Which sets are finite?
1. The months of the year
2. {1, 2, 3, ......... 99, 100}
3. The people living on the earth
4. {x | x is even}
5. {1, 2, 3,........}
Solution:
The first three sets are finite. Although physically it might be impossible to
count the number of people on the earth, the set is still finite. The last two sets
are infinite. If we ever try to count the even numbers, we would never come to
the end.
20
3.1.3 Equality of Sets
Set A is equal to set B if they both have the same members, i.e if every
element which belongs to A also belongs to B and if every element which
belongs to B also belongs to A. We denote the equality of sets A and B by:
A=B
Example 5.1 Let A = {1, 2, 3, 4} and B = {3, 1, 4, 2}. Then A = B,
that is {1,2,3,4} = {3,1,4,2}, since each of the elements
1,2,3 and 4 of A belongs to B and each of the elements
3,1,4 and 2 of B belongs to A. Note therefore that a set does not change if its
elements are rearranged.
Example 5.3 Let E={x | x²–3x = -2}, F={2,1} and G ={1,2,2, 1},
Then E= F= G
3.1.4 Null Set
It is convenient to introduce the concept of the empty set, that is, a set which
contains no elements. This set is sometimes called the null set.
We say that such a set is void or empty, and we denote its symbol ∅
Example 6.1: Let A be the set of people in the world who are older than 200
years. According to known statistics A is the null set.
Example 6.2: Let B = {x | x²= 4, x is odd}, Then B is the empty set.
3.2 SUBSETS
If every element in a set A is also a member of a set B, then A is called subset

of B.
More specifically, A is a subset of B if x∈A implies x∈B. We denote this

relationship by writing; A⊂B, which can also be read ―A is contained in B‖.
21
Example 7.1
The set C = {1,3,5} is a subset of D = {5,4,3,2,1}, since each number 1, 3 and

5 belonging to C also belongs to D.
Example 7.2
The set E = {2,4,6} is a subset of F = {6,2,4}, since each number 2,4, and 6
belonging to E also belongs to F. Note, in particular, that E = F. In a similar
manner it can be shown that every set is a subset of itself.
Example 7.3
Let G = {x | x is even}, i.e. G = {2,4,6}, and let F = {x | x is a positive power

of 2}, i.e. let F = {2,4,8,16.....} Then F⊂G, i.e. F is contained in G.
With the above definition of a subset, we are able to restate the definition of
the equality of two sets.
Two set A and B are equal, i.e. A = B, if an only if A⊂B and B⊂A. If A is a
subset of B, then we can also write:
B⊃A
Which reads ―B is a superset of A‖ or ―B contains A‖. Furthermore, we write:
A⊄B
if A is not a subset of B.
Conclusively, we state:
1. The null set ∅ is considered to be a subset of every set
2. If A is not a subset of B, that is, if A⊄B, then there is at least one

element in A that is not a member of B.
22
3.2.1 Proper Subsets
Since every set A is a subset of itself, we call B a proper subset of A if, first, is
a subset of A and secondly, if B is not equal to A. More briefly, B is a proper
subset of A if:
B⊂A and B≠A
In some books ―B is a subset of A‖ is denoted by
B⊆A
and B‖ is a proper subset of A‖ is denoted by
B⊂A
We will continue to use the previous notation in which we do not distinguished

between a subset and a proper subset.
3.2.2 Comparability
Two sets A and B are said to be comparable if:
A⊂B or B⊂A;
That is, if one of the sets is a subset of the other set. Moreover, two sets A and
B are said to be not comparable if:
A⊄B and B⊄A
Note that if A is not comparable to B then there is an element in A.which is not

in B and ... also, there is an element in B which is not in A.
Example 8.1: Let A = {a,b} and B = {a,b,c}. The A is comparable to B, since

A is a subset of B.
Example 8.2: Let R – {a,b} and S = {b,c,d}. Then R and S are not
comparable, since a∈R and a∉S and c∉R
23
In mathematics, many statements can be proven to be true by the use of
previous assumptions and definitions. In fact, the essence of mathematics
consists of theorems and their proofs. We now proof our first
Theorem 1.1: If A is a subset of B and B is a subset of C then A is a subset of

C, that is,
A⊂B and B⊂C implies A⊂B
Proof: (Notice that we must show that any element in A is also an element in
C). Let x be an element of A, that is, let x∈A. Since A is a subset of B, x also
belongs to B, that is, x∈B. But by hypothesis, B⊂C; hence every element of B,
which includes x, is a number of C. We have shown that x∈A implies x∈C.
Accordingly, by definition, A⊂C.
3.2.3 Sets of Sets
It sometimes will happen that the object of a set are sets themselves; for
example, the set of all subsets of A. In order to avoid saying ―set of sets‖, it is
common practice to say ―family of sets‖ or ―class of sets‖. Under the
circumstances, and in order to avoid confusion, we sometimes will let script
letters A, B,..........
Denote families, or classes, of sets since capital letters already denote their
elements.
Example 9.1: In geometry we usually say ―a family of lines‖ or ―a family of

curves‖ since lines and curves are themselves sets of points.
Example 9.2: The set {{2,3}, {2}, {5,6}} is a family of sets. Its members are
the sets {2,3}, {2} and {5,6}.
Theoretically, it is possible that a set has some members, which are sets
themselves and some members which are not sets, although in any application
of the theory of sets this case arises infrequently.
24
Example 9.3: Let A = {2, {1,3}, 4, {2,5}}. Then A is not a family of sets; here
some elements of A are sets and some are not.
3.2.4 Universal Set
In any application of the theory of sets, all the sets under investigation will
likely be subsets of a fixed set. We call this set the universal set or universe of
discourse. We denote this set by U.
Example 10.1: In plane geometry, the universal set consists of all the points in
the plane.
Example 10.2: In human population studies, the universal set consists of all
the people in the world.
3.2.5 Power Set
The family of all the subsets of any set S is called the power set of S.
We denote the power set of S by: 2S
Example 11.1: Let M = {a,b} Then 2M = {{a, b}, {a}, {b}, ∅}
Example 11.2: Let T = {4,7,8} then 2T = {T, {4,7}, {4,8}, {7,8}, {4}, {7},
{8}, ∅}
If a set S is finite, say S has n elements, then the power set of S can be shown
to have 2n elements. This is one reason why the class of subsets of S is called
the power set of S and is denoted by 2S.
3.2.6 Disjoint Sets
If sets A and B have no elements in common, i.e if no element of A is in B and

no element of B is in A, then we say that A and B are disjoint
Example 12.1: Let A = {1,3,7,8} and B = {2,4,7,9}, Then A and B are not
disjoint since 7 is in both sets, i.e 7∈A and 7∈B
25
Example 12.2: Let A be the positive numbers and let B be the negative
numbers. Then A and B are disjoint since no number is both positive and
negative.
Example 12.3: Let E = {x, y, z} and F = {r, s, t}, Then E and F are disjoint.
3.3 VENN-EULER DIAGRAMS
A simple and instructive way of illustrating the relationships between sets is in

the use of the so-called Ven-Euler diagrams or, simply, Venn diagrams. Here
we represent a set by a simple plane area, usually bounded by a circle.
Example 13.1: Suppose A⊂B and, say, A≠B, then A and B can be described
by either diagram
A B
A
B
Example 13.2: Suppose A and B are not comparable. Then A and B can be
represented by the diagram on the right if they are disjoint, or the diagram on
the let if they are not disjoint.
B
A A B
A
26
Example 13.3: Let A = {a, b, c, d} and B= {c, d, e, f}. Then we illustrate these
sets a Venn diagram of the form:
A B
a c e
b d f
3.4 AXIOMATIC DEVELOPMENT OF SET THEORY
In an axiomatic development of a branch of mathematics, one begins with:
1. Undefined terms
2. Undefined relations
3. Axioms relating the undefined terms and undefined relations. Then, one
develops theorems based upon the axioms and definitions Example 14:1:
In an axiomatic development of Plane Euclidean geometry
1. ―Points‖ and ―lines‖ are undefined terms
2. ―Points on a line‖ or, equivalent, ―line contain a point‖ is an undefined

relation
3. Two of the axioms are:
Axiom 1: Two different points are on one and only one line
Axiom 2: Two different lines cannot contain more than one point in common
In an axiomatic development of set theory:
1. ―Element‘ and ―set‖ are undefined terms
2. ―Element belongs to a set‖ is undefined relation
3. Two of the axioms are
27
Axiom of Extension: Two sets A and B are equal if and only if every element
in A belongs to B and every element in B belongs to A.
Axiom of Specification: Let P(x) be any statement and let A be any set. Then
there exists a set:
B= {aa ∈ A, P (a) is true}
Here, P(x) is a sentence in one variable for which P(a) is true or false for any
a∈A. for example P(x) could be the sentence ―x² = 4‖ or ―x is a member of the
United Nations‖
4.0 CONCLUSION
You have been introduced to basic concepts of sets, set notation e.t.c that will
be built upon in other units. If you have not mastered them by now you will
notice you have to come back to this unit from time to time.
5.0 SUMMARY
A summary of the basic concept of set theory is as follows:
 A set is any well-defined list, collection, or class of objects.
 Given a set A with elements 1,3,5,7 the tabular form of representing this
set is A = {1, 3, 5, 7}.
 The set-builder form of the same set is A = {x| x = 2n + 1,0 ≤n≤3}
 Given the set N = {2,4,6,8,....} then N is said to be infinite, since the

counting process of its elements will never come to an end, otherwise it
is finite
 Two sets of A and B are said to be equal if they both have the same
elements, written A = B
28
 The null set,∅ , contains no elements and is a subset of every set
 The set A is a subset of another set B, written A⊂B, if every element of

A is also an element of B, i.e. for every x∈A then x∈B
 If B⊂A and B≠A, then B is a proper subset of A
 Two sets A and B are comparable if A⊂B and B⊂A
 The power set 2² of any set S is the family of all the subsets of S
 Two sets A and B are said to be disjoint if they do not have any element
in common, i.e their intersection is a null set.
6.0 TUTOR-MARKED ASSIGNMENTS
1. Rewrite the following statement using set notation:
1. x does not belong to A.
2. R is a superset of S
3. d is a member of E
4. F is not a subset of G
5. H does not included D
2. Which of these sets are equal: {r,t,s}, {s,t,r,s}, {t,s,t,r}, {s,r,s,t}?
3. Which sets are finite?
1. The months of the year
2. {1,2,3,......99, 100}
3. The people living on the earth
4. {x | x is even}
5. {1,2,3........)
29
The first three set are finite. Although physically it might be impossible to
count the number of people on the earth, the set is still finite. The last two set
are infinite. If we ever try to count the even numbers we would never come to
the end.
4. Which word is different from each other, and why: (1) empty, (2) void, (3)
zero, (4) null?
7.0 REFERENCE AND FURTHER READING
Seymour, L.S. (1964). Outline Series: Theory and Problems of Set Theory and
related topics, pp. 1 – 133.
Sunday, O.I. (1998). Introduction to Real Analysis (Real-valued functions of a

real variable, Vol. 1)
30
UNIT 2: BASIC SET OPERATIONS
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Body
3.1 Set Operations
3.1.1 Union
3.1.2 Intersection
3.1.3 Difference
3.1.4 Complement
3.2 Operations on Comparable Sets
4.0 Conclusion
5.0 Summary
6.0 Tutor Marked Assignments
7.0 References and Further Readings
1.0 INTRODUCTION
In this unit, we shall see operations performed on sets as in simple arithmetic.

This operations simply give sets a language of their own.
You will notice in subsequent units that you cannot talk of sets without
reference, sort of, to these operations.
31
2.0 OBJECTIVES
 Compare two sets and/or assign to them another set depending on their
comparability.
 Represent these relationships on the Venn diagram.
3.0 MAIN BODY
3.1 SET OPERATIONS
In arithmetic, we learn to add, subtract and multiply, that is, we assign to each
pair of numbers x and y a number x + y called the sum of x and y, a number x
– y called the difference of x and y, and a number xy called the product of x
and y. These assignments are called the operations of addition, subtraction and
multiplication of numbers. In this unit, we define the operation Union,
Intersection and difference of sets, that is, we will assign new pairs of sets A
and B. In a later unit, we will see that these set operations behave in a manner
some what similar to the above operations on numbers.
3.1.1 Union
The union of sets A and B is the set of all elements which belong to A or to B
or to both. We denote the union of A and B by;
A∪B
Which is usually read ―A union B‖
Example 1.1: In the Venn diagram in fig 2-1, we have shaded A∪B,
i.e. the area of A and the area of B.
32
A B
A∪B is shaded
Fig 2.1
Example 1.2: Let S = {a, b. c. d} and T = {f, b, d, g}.
Then S T = {a, b, c, d, f, g}.
Example 1.3: Let P be the set of positive real numbers and let Q be the set of
negative real numbers. The P∪Q, the union of P and Q, consist of all the real
numbers except zero. The union of A and B may also be defined concisely by:
A∪B = {xx∈A or x∈B}
Remark 2.1: It follows directly from the definition of the union of two sets
that A∪B and B∪A are the same set, i.e.,
A∪B = B∪A
Remark 2.2: Both A and B are always subsets of A and B that is,
A⊂ (A∪B) and B⊂ (A∪B)
In some books, the union of A and B is denoted by A + B and is called the set-
theoretic sum of A and B or, simply, A plus B
3.1.2 Intersection
The Intersection of sets A and B is the set of elements which are common to A
and B, that is, those elements which belong to A and which belong to B. We
denote the intersection of A and B by:
A∩B
Which is read ―A intersection B‖.
33
Example 2.1: In the Venn diagram in fig 2.2, we have shaded A∩B, the area
that is common to both A and B
A∩B is shaded
Fig 2.2
Example 2.2: Let S = {a, b, c, d} and T = {f, b, d, g}. Then S∩T = {b, d}
Example 2.3: Let V = 2, 3, 6, ......} i.e. the multiples of 2; and
Let W = {3, 6, 9,....} i.e. the multiples of 3. Then
V∩W = {6, 12, 18......}
The intersection of A and B may also be defined concisely by
A∩B = {x∈A, x∈B}
Here, the comma has the same meaning as ―and‖.
Remark 2.3: It follows directly from the definition of the intersection of two
sets that;
A∩B =B∩A
Remark 2.4:
Each of the sets A and B contains A∩B as a subset, i.e.,
(A∩B)⊂A and (A∩B) ⊂B
Remark 2.5: If sets A and B have no elements in common, i.e. if A and B are
disjoint, then the intersection of A and B is the null set, i.e. A∩B =∅
34
In some books, especially on probability, the intersection of A and B is
denoted by AB and is called the set-theoretic product of A and B or, simply, A
times B.
3.1.3 DIFFERENCE
The difference of sets A and B is the set of elements which belong to A but
which do not belong to B. We denote the difference of A and B by A – B
Which is read ―A difference B‖ or, simply, ―A minus B‖.
Example 3.1: In the Venn diagram in Fig 2.3, we have shaded A – B, the area
in A which is not part of B.
A – B is shaded
Fig 2.3
Example 3.2: Let R be the set of real numbers and let Q be the set of rational
numbers. Then R – Q consists of the irrational numbers.
The difference of A and B may also be defined concisely by
A – B = {xx∈A, x∉B}
Remark 2.6: Set A contains A – B as a subset, i.e.,
(A – B)⊂A
35
Remark 2.7: The sets (A – B), A∩B and (B – A) are mutually disjoint, that is,
the intersection of any two is the null set.
The difference of A and B is sometimes denoted by A/B or A ~ B
3.1.4 Complement
The complement of a set A is the set of elements that do not belong to A, that
is, the difference of the universal set U and A. We denote the complement of A
by A′
Example 4.1: In the Venn diagram in Fig 2.4, we shaded the complement of
A, i.e. the area outside A. Here we assume that the universal set U consists of
the area in the rectangle.
B
A
A‘ is shaded
Fig. 2.4
Example 4.2: Let the Universal set U be the English alphabet and let T = {a,
b, c}. Then;
T‘ = {d, e, f, ....., y, z}
Example 4.3:
Let E = {2, 4, 6, ...}, that is, the even numbers.
Then E′ = {1, 3, 5, ...}, the odd numbers. Here we assume that the universal set
is the natural numbers, 1, 2, 3,.....
36
The complement of A may also be defined concisely by;
A′= {xx∈U, x∉A} or, simply,
A′= {xx∉A}
We state some facts about sets, which follow directly from the definition of the
complement of a set.
Remark 2.8: The union of any set A and its complement A′ is the universal
set, i.e.,
A∪A‘ = U
Furthermore, set A and its complement A′ are disjoint, i.e.,
A∩A‘ = ∅
Remark 2.9: The complement of the universal set U is the null set ∅, and vice
versa, that is,
U‘ = ∅ and ∅‘ = U
Remark 2.10: The complement of the complement of set A is the set A itself.
More briefly,
(A′)′ = A
Our next remark shows how the difference of two sets can be defined in terms
of the complement of a set and the intersection of two sets. More specifically,
we have the following basic relationship:
Remark 2.11: The difference of A and B is equal to the intersection of A and

the complement of B, that is,
A – B = A∩B′
The proof of Remark 2.11 follows directly from definitions:
A – B = {xx∈A, x∉B} = {xx∈A, x∉B‘} = A∩B‘
37
3.2 OPERATIONS ON COMPARABLE SETS
The operations of union, intersection, difference and complement have simple

properties when the sets under investigation are comparable. The following
theorems can be proved.
Theorem 2.1: Let A be a subset of B. Then the union intersection of A and B

is precisely A, that is,
A⊂B implies A∩B = A
Theorem 2.2: Let A be a subset of B. Then the of A and B is precisely B, that

is,
A⊂B implies A∪B = B
Theorem 2.3: Let A be a subset of B. Then B‘ is a subset of A‘, that is,
A⊂B implies B‘⊂A‘
We illustrate Theorem 2.3 by the Venn diagrams in Fig 2-5 and 2-6. Notice
how the area of B‘ is included in the area of A‘.
B
A
B
A
B′ is shaded A′ is shaded
Fig 2.5 Fig 2.6
Theorem 2.4: Let A be a subset of B. Then the Union of A and (B – A) is

precisely B, that is,
A⊂B implies A∪(B – A) = B
Exercises
38
1. In the Venn diagram below, shade A Union B, that is, A∪B:
(a) (b) (c)
Solution:
The union of A and B is the set of all elements that belong to A and to B or to
both. We therefore shade the area in A and B as follows:
(a) (b) Cc)
2. Let A = {1,2,3,4}, B = {2,4,6,8} and C = {3,4,5,6}. Find
(a) A∪B, (b) A∪C, (c) B∪C, (d) B∪B
Solution:
To form the union of A and B we put all the elements from A together with the
elements of B Accordingly,
A∪B = {1,2,3,4,6,8}
A∪C = { 1,2,3,4,5,6}
B∪C = {2,4,6,8,3,5}
B∪B = {2,4,6,8}
Notice that B∪B is precisely B.
3. Let A, B and C be the sets in Problem 2. Find (1) (A∪B)∪C,(2) A∪(B∪C).
Solution:
1. We first find (A∪B) = {1,2,3,4,6,8}. Then the union of {A∪B} and C is
39
(A∪B)∪C = {1,2,3,4,6,8,5}
2. We first find (B∪C) = {2,4,6,8,3,5}. Then the union of A and
(B∪C) is A∪(B∪C) = {1,2,3,4,6,8,5}.
Notice that (A∪B)∪C = A∪(B∪C)
4.0 CONCLUSION
You have seen how the basic operations of Union, Intersection, Difference and
Complement on sets work like the operations on numbers. These are also the
basic symbols associated with set theory.
5.0 SUMMARY
The basic set operations are Union, Intersection, Difference and Complement
defined as:
 The Union of sets A and B, denoted by A∪B, is the set of all elements,
which belong to A or to B or to both.
 The intersection of sets A and B, denoted by A∩B, is the set of

elements, which are common to A and B. If A and B are disjoint then
their intersection is the Null set ∅
 The difference of sets A and B, denoted by A – B, is the set of elements

which belong to A but which do not belong to B.
 The complement of a set A, denoted by A‘, is the set of elements, which

do not belong to A, that is, the difference of the universal set U and A.
40
6.0 TUTOR – MARKED ASSIGNMENTS
1. Let X = {Tom, Dick, Harry}, Y = {Tom, Marc, Eric} and Z = {Marc,

Eric, Edward}. Find (a) X∪Y, (b) Y∪Z(c) X∪Z
2. Prove: A∩∅=∅.
3. Prove Remark 2.6: (A – B)⊂A.
4. Let U = {1,2,3,...,8,9}, A = {1,2,3,4}, B = {2,4,6,8} and C = {3,4,5,6}.

Find (a) A‘, (b) B‘, (c) (A∩C)‘, (d) (A∪B)‘, (e) (A‘)‘, (f) (B – C)‘
5. Prove: B – A is a subset of A‘
7.0 REFERENCES AND FURTHER READINGS
Sunday, O.I. (1998). Introduction to Real Analysis (Real – valued functions of
a real variable), Vol. 1
41
UNIT 3: SET OF NUMBERS
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Body
3.1 Set Operations
3.1.1 Integers, Z
3.1.2 Rational numbers, Q
3.1.3 Natural Numbers, N
3.1.4 Irrational Numbers, Q’
3.1.5 Line diagram of the Number systems
3.2 Decimals and Real Numbers
3.3 Inequalities
3.4 Absolute Value
3.5 Intervals
3.5.1 Properties of intervals
3.5.2 Infinite Intervals
3.6 Bounded and Unbounded Sets
4.0 Conclusion
5.0 Summary
6.0 Tutor – Marked Assignments
42
1.0 INTRODUCTION
Although, the theory of sets is very general, important sets, which we meet in
elementary mathematics, are sets of numbers. Of particular importance,
especially in analysis, is the set of real numbers, which we denote by R
In fact, we assume in this unit, unless otherwise stated, that the set of real
numbers R is out universal set. We first review some elementary properties of
real numbers before applying our elementary principles of set theory to sets of
numbers. The set of real numbers and its properties is called the real number
system.
2.0 OBJECTIVES
After studying this unit, you should be able to do the following:
 Represent the set of numbers on the real line

 Perform the basic set operations on intervals
3.0 MAIN BODY
3.1 REAL NUMBERS, R
One of the most important properties of the real numbers is that points on a
straight line that can represent them. As in Fig 3.1, we choose a point, called
the origin, to represent 0 and another point, usually to the right, to represent 1.
Then there is a natural way to pair off the points on the line and the real
numbers, that is, each point will represent a unique real number and each real
number will be represented by a unique point. We refer to this line as the real
line. Accordingly, we can use the words point and number interchangeably.
Those numbers to the right of 0, i.e. on the same side as 1, are called the
positive numbers and those numbers to the left of 0 are called the negative
numbers. The number 0 itself is neither positive nor negative.
43
E=2.71
‐ ½ 2 



-5 -4 -3 -2 -1 0 1 2 3 4 5
Fig 3.1
3.1.2 Integers, Z
The integers are those real numbers
…, -3, -2, -1, 0, 1, 2, 3,…
We denote the integers by Z; hence we can write
Z = { …, -2, - 1, 0, 1, 2,…}
The integers are also referred to as the ―whole‖ numbers.
One important property of the integers is that they are ―closed‖ under the
operations of addition, multiplication and subtraction; that is, the sum, product
and difference of two integers is again in integer. Notice that the quotient of
two integers, e.g. 3 and 7, need not be an integer; hence the integers are not
closed under the operation of division.
3.1.3 Rational Numbers, Q
The rational numbers are those real numbers, which can be expressed as the
ratio of two integers. We denote the set of rational numbers by Q. Accordingly,
Q = {xx = p q where p z, qz}
Notice that each integer is also a rational number since, for example, 5 = 5/1;
hence Z is a subset of Q.
The rational numbers are closed not only under the operations of addition,
multiplication and subtraction but also under the operation of division (except
by 0). In other words, the sum, product, difference and quotient (except by 0)
of two rational numbers is again a rational number.
44
3.1.4 Natural Numbers, N
The natural numbers are the positive integers. We denote the set of natural
numbers by N; hence N = {1,2,3…..}
The natural numbers were the first number system developed and were used
primarily, at one time, for counting. Notice the following relationship between
the above numbers systems:
NZQR
The natural numbers are closed only under the operation of addition and
multiplication. The difference and quotient of two natural numbers needed not
be a natural number.
The prime numbers are those natural numbers p, excluding 1, which are only
divisible 1 and p itself. We list the first few prime numbers:
2,3,5,7,11,13,17,19…
3.1.5 Irrational Numbers, Q’
The irrational numbers are those real numbers which are not rational, that is,
the set of irrational numbers is the complement of the set of rational numbers
Q in the real numbers R; hence Q‘ denote the irrational numbers. Examples of
irrational numbers are 3, , 2, etc.
3.1.6 Line Diagram of the Number Systems
Fig 3.2 below is a line diagram of the various sets of number, which we have
investigated. (For completeness, the diagram include the sets of complex
numbers, number of the form a + bi where a and b are real. Notice that the set
of complex numbers is superset of the set of real numbers.)
45
Complex Numbers
Real Numbers
Rational Numbers Irrational Numbers
Integers
Negative Integers Zero Natural Numbers
Prime Numbers
Fig 3.2
3.2 DECIMALS AND REAL NUMBERS
Every real number can be represented by a ―non-terminating decimal‖. The

decimal representation of a rational number p/q can be found by ―dividing the
denominator q into the numerator p‖. If the indicated division terminates, as
for
3/8 = .375
We write 3/8 = .375000
Or 3/8 = .374999…
If we indicated division of q into p does not terminate, then it is known that a

block of digits will continually be repeated; for example, 2/11 = .181818…
We now state the basic fact connecting decimals and real numbers. The
rational numbers correspond precisely to those decimals in which a block of
46
digits is continually repeated, and the irrational numbers correspond to the
other non-terminating decimals.
3.3 INEQUALITIES
The concept of ―order‖ is introduced in the real number system by the
Definition: The real number a is less than the real number b,
written a < b
If b – a is a positive number.
The following properties of the relation a < b can be proven. Let a, b and c be
real numbers; then:
P1: Either a < b, a = b or b < a.
P2: If a < b and b < c, then a < c.
P3: If a < b, then a + c < b + c
P4: If a < b and c is positive, then ac < bc
P5: If a < b and c is negative, then bc < ac.
Geometrically, if a < b then the point a on the real line lies to the left of the
point b.
We also denote a < b by b > a
Which reads ―b is greater then a‖. Furthermore, we write
a < b or b > a
if a < b or a = b, that is, if a is not greater than b.
Example 1.1: 2 < 5; -6 < -3 and 4 < 4; 5 > -8
Example 1.2: The notation x < 5 means that x is a real number which is less
than 5; hence x lies to the left of 5 on the real line.
47
The notation 2 < x < 7; means 2 < x and also x < 7; hence x will lie between 2
and 7 on the real line.
Remark 3.1: Notice that the concept of order, i.e. the relation a < b, is defined
in terms of the concept of positive numbers. The fundamental property of the
positive numbers which is used to prove properties of the relation a < b is that
the positive numbers are closed under the operations of addition and
multiplication. Moreover, this fact is intimately connected with the fact that the
natural numbers are also closed under the operations of addition and
multiplication.
Remark 3.2: The following statements are true when a, b, c are any real
numbers:
1. a < a
2. if a < b and b < a then a = b.
3. if a < b and b < c then a < c.
3.4 ABSOLUTE VALUE
The absolute value of a real number x, denoted by ÷ x÷ is defined by the

formula
x = x if x > 0
-x if x < 0
that is, if x is positive or zero then xequals x, and if x is negative then

xequals – x. Consequently, the absolute value of any number is always non-
negative, i.e. x> 0 for every x  R.
Geometrically speaking, the absolute value of x is the distance between the

point x on the real line and the origin, i.e. the point 0. Moreover, the distance
between any two points, i.e. real numbers, a and b is a - b= b - a.
48
Example 2.1: -2 = 2, 7 = 7. -p = p
Example 2.2: The statement x < 5 can be interpreted to mean that the
distance between x and the origin is less than 5, i.e. x must lies between -5 and
5 on the real line. In other words,
x< 5 and -5 < x < 5
have identical meaning. Similarly,
x< 5 and -5 < x < 5
have identical meaning.
3.5 INTERVALS
Consider the following set of numbers;
A1 = {x 2 < x < 5}
A2 = {x 2 < x < 5}
A3 = {x 2 < x < 5}
A4 = {x2 < x < 5}
Notice, that the four sets contain only the points that lie between 2 and 5 with
the possible exceptions of 2 and/or 5. We call these sets intervals, the numbers
2 and 5 being the endpoints of each interval. Moreover, A1 is an open interval
as it does not contain either end point: A2 is a closed interval as it contains
bother endpoints; A3 and A4 are open-closed and closed-open respectively.
49
We display, i.e. graph, these sets on the real line as follows.
- - - - - 0 1 2 3 4 5 6
A1
- - - - - 0 1 2 3 4 5 6
A2
- - - - - 0 1 2 3 4 5 6
A3
- - - - - 0 1 2 3 4 5 6
A4
Notice that in each diagram we circle the endpoints 2 and 5 and thicken (or
shade) the line segment between the points. If an interval includes an endpoint,
then this is denoted by shading the circle about the endpoint.
Since intervals appear very often in mathematics, a shorter notation is

frequently used to designated intervals, Specifically, the above intervals are
sometimes denoted by;
A1 = (2, 5)
A2 = [2, 5]
A3 = (2, 5)
A4 = [2, 5)
Notice that a parenthesis is used to designate an open endpoint, i.e. an endpoint

that is not in the interval, and a bracket is used to designate a closed endpoint.
50
3.5.1 Properties of Intervals
Let  be the family of all intervals on the real line. We include in  the null
set  and single points a = [a, a]. Then the intervals have the following
properties:
1. The intersection of two intervals is an interval, that is, A , B   implies

A  B  

2.The union of two non-disjoint intervals is an interval, that is, A  , B  ,
A  B   ipmlies A  B  

3. The difference of two non-comparable intervals is an interval, that is, A 


, B  , A  B, B  A implies A - B  




Example 3.1: Let A = {2, 4), B = (3, 8). Then
A Ç B = (3, 4), A È B = [2, 8)
A – B = [2, 3], B – A = [4, 8)
3.5.2 Infinite Intervals
Sets of the form
A = {xx > 1}
B = {x x > 2
C = {x x < 3}
D = {x x < 4}
E = {x  x  }
Are called infinite intervals and are also denoted by
A = (1, ∞), B = [2, ∞), C = ( - ∞, 3), D = (-∞, 4], E = (-∞,∞)

51
We plot these intervals on the real line as follows:
-4 -3 -2 -1 0 1 2 3 4
A is Shaded
-4 -3 -2 -1 0 1 2 3 4
B is Shaded
-4 -3 -2 -1 0 1 2 3 4
C is Shaded
-4 -3 -2 -1 0 1 2 3 4
D is Shaded
-4 -3 -2 -1 0 1 2 3 4
E is Shaded
3.6 BOUNDED AND UNBOUNDED SETS
Let A be a set of numbers, then A is called bounded set if A is the subset of a

finite interval. An equivalent definition of boundedness is;
Definition 3.1: Set A is bounded if there exists a positive number M such that
x < M.
for all x  A. A set is called unbounded if it is not bounded
Notice then, that A is a subset of the finite interval [-M, M].

52
Example 4.1: Let A = {1, ½, 1/3…}. Then A is bounded since A is certainly a
subset of the closed interval [0, 1].
Example 4.2: Let A = {2, 4, 6,…..}. Then A is an unbounded set.
Example 4.3: Let A = {7, 350, -473, 2322, 42}. Then A is bounded
Remark 3.3: If a set A is finite then, it is necessarily bounded.
If a set is infinite then it can be either bounded as in example 4.1 or unbounded

as in example 4.2
4.0 CONCLUSION
The set of real numbers is of utmost importance in analysis. All (except the set
of complex numbers) other sets of numbers are subsets of the set of real
numbers as can be seen from the line diagram of the number system.
5.0 SUMMARY
In this unit, you have been introduced to the sets of numbers. The set of real
numbers, , contains the set of integers, Z, Rational numbers, Q, Natural
numbers, N, and Irrational numbers, Q‘.
Intervals on the real line are open, closed, open-closed or closed-open

depending on the nature of the endpoints.
6.0 TUTOR-MARKED ASSIGNMENTS
1. Prove: If a < b and B < c, then a < c
2. Under what conditions will the union of two disjoint interval be an interval?
3. If two sets R and S are bounded, what can be said about the union and
Intersection of these sets?
53

a real variable), Vol. 1
54
UNIT 4: FUNCTIONS
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main body
3.1 Definition
3.2 Mappings, Operators, Transformations
3.3 Equal functions
3.4 Range of a function
3.5 One – One functions
3.6 Onto functions
3.7 Identity function
3.8 Constant Functions
3.9 Product Function
3.9.1 Associativity of Products of Functions
3.10 Inverse of a function
3.11 Inverse Function
3.11.1 Theorems on the Inverse Function
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignments
55
1.0 INTRODUCTION
In this unit, you will be introduced to the concept of functions, mappings and
transformations. You will also be given instructive and typical examples of
functions.
2.0 OBJECTIVES
 Identify functions from statements or diagrams
 State whether a function is one-one or onto
 Find composition function of two or more functions
3.0 MAIN BODY
3.1 DEFINITION
Suppose that to each element in a set A there is assigned by some manner or

other, a unique element of a set. We call such assignment of function. If we
let ¦ denote these assignments, we write;
f: A B
which reads ―f is a function of A onto B‖. The set A is called the domain of
the function f, and B is called the co-domain of f. Further, if a  A the element
in B which is assigned to a is called the image of a and is denoted by; f(a)
which reads ―f of a‖.
We list a number of instructive examples of functions.
Example 1.1: Let f assign to each real number its square, that is, for every real
number x let f(x) = x2. The domain and co-domain of f are both the real
numbers, so we can write: f: > 
56
The image of -3 is 9; hence we can also write f (-3) = 9
or f : 3 9
Example 1.2: Let f assign to each country in the world its capital city. Here,
the domain of f is the set of countries in the world; the co-domain of f is the list
of capital cities in the world. The image of France is Paris, that is, f(France) =
Paris
Example 1.3: Let A = {a, b, c, d} and B = {a, b, c}. Define a function f of A

into B by the correspondence f(a) = b, f(b) = c, f(c) = c and f(d) = b. By this
definition, the image, for example, of b is c.
Example 1.4: Let A = {-1, 1}. Let f assign to each rational number in  the
number 1, and to each irrational number in  the number -1. Then f: A,
and f can be defined concisely by
f(x) = 1 if x is rational
-1 if a is irrational
Example 1.5: Let A = {a, b, c, d} and B = {x, y, z}. Let f:
A  B be defined by the diagram:
x
a
y
b
z
c
Notice that the functions in examples 1.1 and 1.4 are defined by specific
formulas. But this need not always be the case, as is indicated by the other
57
examples. The rules of correspondence which define functions can be
diagrams as in example 1.5, can be geographical as in example 1.2, or, when
the domain is finite, the correspondence can be listed for each element in the
domain as in example 1.4.
3.2 MAPPINGS, OPERATORS, TRANSFORMATIONS
If A and B are sets in general, not necessarily sets of numbers, then a function f
of A into B is frequently called a mapping of A into B; and the notation
f: A ---> B is then read ―f maps A into B‖. We can also denote a mapping, or
function, f of A into B by
A >B
Or by the diagram
f B
A
If the domain and co-domain of a function are both the same set, say
f: A ---> A then f is frequently called an operator or transformation on A. As

we will see later operators are important special cases of functions.
3.3 EQUAL FUNCTIONS
If f and g are functions defined on the same domain D and if f (a) = g (a) for
every a  D, then the functions f and g are equal and we write f = g
58
Example 2.1: Let f (x) = x2 where x is a real number. Let g(x) = x2 where x is
a complex number. Then the function f is not equal to g since they have
different domains.
Example 2.2: Let the function f be defined by the diagram
1
1
2
2
3
Let a function g be defined by the formula g(x) = x2 where the domain of g is

the set {1, 2}. Then f = g since they both have the same domain and since f and
g assign the same image to each element in the domain.
Example 2.3: Let f:  and g:. Suppose f is defined by f(x) = x2 and
g by g(y) = y2. Then f and g are equal functions, that is, f = g. Notice that x and
y are merely dummy variable in the formulas defining the functions.
3.4 RANGE OF A FUNCTION
Let f be the mapping of A into B, that is, let f: A B. Each element in B need
not appear as the image of an element in A. We define the range of f to consist
precisely of those elements in B which appear and the image of at least one
element in A. We denote the range of f: A 

By f(A)
f(A)
Notice that f(A) is a subset of B. i.e. f(A)
59
Example 3.1: Let the function f:  be defined by the formula f(x) = x2.
Then the range of f consists of the positive real numbers and zero.
Example 3.2: Let f: A B be the function in Example 1.3. Then f(A) = {b, c}
3.5 ONE – ONE (INJECTIVE) FUNCTIONS
Let f map A into B. Then f is called a one-one or Injective function if

different elements in B are assigned to different elements in A, that is, if no
two different elements in A have the same image. More briefly, f: A  B is
one-one if f(a) = f(a‘) implies a = a` or, equivalently, a = a` implies f(a)  f(a`)
Then f is not a one-one function since f(2) = f(-2) = 4, that is, since the image
of two different real numbers, 2 and -2, is the same number, 4.
Then f is a one-one mapping since the cubes of the different real numbers are
themselves different.
Example 4.3: The function f which assigns to each country in the world, its
capital city is one-one since different countries have a different capital that is
no city is the capital of two different countries.
3.6 ONTO (SUBJECTIVE) FUNCTION
Let f be a function of A into B. Then the range f(A) of the function f is a subset
of B, that is, f(A)  B. If f(A) = B, that is, if every member of B appears as the
image of at least one element of A, then we say ―f is a function of A onto B‖,
or ―f maps A onto B‖, of ―f is an onto or Subjective function”.
60
Then f is not an onto function since the negative numbers do not appear in the
range of f, that is no negative number is the square of a real number.
Example 5.2: Let f: A B be the function in Example 1.3. Notice that f(A) =
{b, c}. Since B = {a, b, c} the range of f does not equal co-domain, i.e. is not
onto.
Example 5.3: Let f: A  B be the function in example 1.5: Notice that
f(A) = {x, y, z} = B that is, the range of f is equal to the co-domain B. Thus f
maps A onto B, i.e. f is an onto mapping.
3.7 IDENTITY FUNCTION
Let A be any set. Let the function f: A A be defined b y the formula f(x) = x,
that is, let f assign to each element in A the element itself. Then f is called the
identity function or the identity transformation on A. We denote this function
by 1 or by 1A.
3.8 CONSTANT FUNCTIONS
A function f of A onto B is called a constant function if the same element of

b B is assigned to every element in A. In other words, f: A  B is a constant
function if the range of f consists of only one element.
3.9 PRODUCT FUNCTION
Let F: A  B and g: BC be two functions then the product of functions f

and g is denoted
(g o f) : A  C defined by
61
(g o f)(a) = g (f(a))
We can now complete our diagram:

f g
A B C
(g 0 f)
Example 7.1: Let f: A  B and g: B  C be defined by the diagrams
A B C
a x r
b y s
c z t
We compute (g o f): A  C by its definition:
(g o f)(a) = g(f(a)) = g(y) = t
(g o f)(b) = g(f(a)) = g(z) = r
(g o f)(c) = g(f(a)) = g(y) = t
Notice that the function (g o f) is equivalent to ―following the arrows‖ from A

to C in the diagrams of the functions f and g.
Example 7.2: To each real number let f assign its square, i.e. let f(x) = x2. To
each real number let g assign the number plus 3, i.e. let g(x) = x + 3. Then
(g o f)(x) = f(g(x)) = f(x+3) = (x+3)2 = x2 + 6x + 9
(g o f)(x) = g(f(x)) = g(x2) = x2 + 3

62
Remark 4.1: Let f: A  B. Then
I
B o f = f and f o 1A = f
that is, the product of any function and identity is the function itself.
3.9.1 Associativity of Products of Functions
Let f: A  B, g: B  C and h: c  D. Then, as illustrated in Figure 4-1, we

can form the production function g o f: A  C, and then the function ho (g o f):
A  D.
f g h
A B C D
(g 0 f)
(ho (g o f)
Fig. 4.1
Similarly, as illustrated in Figure 4-2, we can form the product function h o g:
B  D and then the function (h o g) o f: A  D.
A B C D
(h 0 g)
(ho (g o f)
Fig 4.2
63
o o o
Both h (g f) and (h g) o f are function of A into D. A basic theorem on
functions states that these functions are equal. Specifically,
Theorem 4.1: Let f: A B, B  C and h: C D. Then
(h o g) o f = h o (g o f)
In view of Theorem 4.1, we can write

o o
h g f: A  D without any parenthesis.
3.10 INVERSE OF A FUNCTION
Let f be a function of A into B, and let b  B. Then the inverse of b, denoted

by f -1 (b)
Consist of those elements in A which are mapped onto b, that is, those element
in A which have m as their image. More briefly, if f: A B then
f -1 (b) = {x} x  A; f(x) = b}
Notice that f -1 (b) is always a subset of A. We read f -1 as ―f inverse‖.
Example 8.1: Let the function f: A  B be defined by the diagram
x
a
y
b
z
c
Then f -1 (x) = {b, c}, since both b and c have x as their image point.
-1 -1
Also, f (y) = {a}, as only a is mapped into y. The inverse of z, f (z), is the
null set , since no element of A is mapped into z.
64
Example 8.2: Let f:   , the real numbers, be defined by the formula f(x)
= x2. Then f -1
(4) = {2, -2}, since 4 is the image of both 2 and -2 and there is
no other real number whose square is four. Notice that f -1
(-3) = , since there
is no element in  whose square is -3.
Example 8.3: Let f be a function of the complex numbers into the complex
numbers, where f is defined by the formula f(x) = x2. Then f -1

(3) = { 3i, -
3i},
as the square of each of these numbers is -3.
Notice that the function in Example 8.2 and 8.3 are different although they are
defined by the same formula.
We now extend the definition of the inverse of a function. Let f: A  B and let
D be a subset of B, that is, D  B. Then the inverse of D under the mapping f,
–1
denoted by f (D), consists of those elements in A which are mapped onto
some element in D. More briefly,
f -1 (D) = {xx  A, f(x)  D}
x r
y s
z t
Then f -1 ({r, s}) = {y}, since only y is mapped into r or s. Also
f -1 ({r, t}) = {x, y, z} = A, since each element in A as its image r or t.
Example 9.2: Let f:    be defined by f(x) = x2, and let
D = [4, 9] = {x4 < x < 9}
65
Then f -1 (D) = {x-3 < x < -2 or 2 < x < 3}
-1
Example 9.3: Let f: A  B be any function. Then f (B) = A, since every
element in A has its image in B. If f(A) denote the range of the function f, then
f -1 (f(A)) = A
Further, if b  B, then f -1(b) = f -1({b})
Here f -1 has two meanings, as the inverse of an element of B and as the inverse
of a subset of B.
3.11 INVERSE FUNCTION
Let f be a function of A into B. In general, f -1(b) could consist of more than

one element or might even be empty set . Now if f: A  B is a one-one
function and an onto function, then for each b  B the inverse f -1
(b) will
consist of a single element in A. We therefore have a rule that assigns to each b
 B a unique element f -1(b) in A. Accordingly, f -1
is a function of B into A
and we can write f -1 : B  A
-1
In this situation, when f: A ® B is one-one and onto, we call f the inverse
function of f.
a f x
b y
c z
Notice that f is one-one and onto. Therefore f -1, the inverse function exists.
We describe f -1: B  A by the diagram

66
x f ‐1 a
y b
z c
Example 6.1: Let the function f be defined by the diagram:
a 1
b 2
c 3
Then f is a constant function since 3 is assigned to every element in A.
Example 6.3: Let f:  be defined by the formula f(x) = 5. Then f is a

constant Function since 5 is assigned to every element.
3.12 PRODUCT FUNCTION
Let f be a function of A and B and let g be a function of B, the co-domain of f,

into C. We illustrate the function below.
f g
A B C
67
Let a  A; then its image f (x) is in B which is the domain of g. Accordingly,
we can find the image of f (a) under the mapping of g, that is, we can find g
(f(a)). Thus, we have a rule which assigns to each element a A a
corresponding element (f(a))  C. In other words, we have a function of A into
C. This new function is called the product function or composition function
of f and g and it is denoted by (g o f) or (gf)
More briefly, if f: A  B and g: B  C then we define a function
Notice further, that if we send the arrows in the opposite direction in the first
diagram of f we essentially have the diagram of f -1.
Since f(a) = y and f(c) = y, the function f is not one-one. Therefore, the inverse
function f -1 does not exist. As f -1 (y) = {a, c}, we cannot assign both a and c to
the element y  B.
a x
b y
c z
Example 10.3: Let f:  , the real numbers, be defined by f(x) = x3. Notice
that f is one-one and onto.
Hence f -1:   exists. In fact, we have a formula which defines the inverse
function, f -1 (x) = 3x.
3.12.1 Theorems on the inverse Function
Let a function f: A  B have an inverse function f -1: B  A. Then we see by

the diagram
68
‐1
f f
A B C
(f‐1 0 f)
That we can form the product (f -1 o f) which maps A into A, and we see by the diagram
f ‐1 f
B A B
(f‐1 0 f)
That we can form the product function (f o f -1) which maps B into B. We now
state the basic theorems on the inverse function:
Theorem 4.2: Let the function f: A  B be one-one and onto; i.e. the inverse
function f -1: B  A exists. Then the product function
(f -1 o f): A  A
o
is the identity function on A, and the product function (f f -1): B  B is the
identity function on B.
Theorem 4.3: Let f: A  B and g: B  A. Then g is the inverse function of f,

i.e. g = f – 1, if the product functions (g o f): A  A is the identity function on
A and (f o g): B  B is the identity function on B.
Both conditions are necessary in Theorem 4.3 as we shall see from the
example below;
69
X a a x
b b
y c c y
(a) (b)
Now define a function g: B  A by the diagram (b) above.
We compute (g o f): A  A, (g o f)(x) = g (f(x)) = g(c) = x and (g o f)(y) = g

(f(y)) = g(a) = y
Therefore the product function (g o f) is the identity function on A. But g is not

the inverse function of f because the product function (f o G) is not the identity
function on B, f not being an auto function.
4.0 CONCLUSION
I believe that by now you fully grasp the idea of functions, mappings and
transformations. This knowledge will be built upon in subsequent units.
5.0 SUMMARY
Recall that in this unit we have studied concepts such as mappings and
functions. We have also examined the concepts of one-to-one and onto
functions. This concept has allowed us to explain equality between two sets.
We also established in the unit that the inverse of f: A – B usually denoted f-1,
exit, if f is a one-to-one and onto function.
It is instructive to note that Inverse function is not studied in isolation but more
importantly a useful and powerful tool in understanding calculus.
70
6.0 TUTOR – MARKED ASSIGNMENTS
1. Let the function f: R#  R# be defined by f (X) = {1 if x is rational] {-1 if x

is irrational.
a. Express f in words
b. Suppose the ordered pairs (x + y, 1) and (3, x – y) are equal.
Find x and y.
2. Let M = {1, 2, 3, 4, 5} and let the function f: M   be defined by f(x) = x2

+ 2x -1 Find the graph of f.
3. Prove: A x (B  C) = (A x B)  (A x C)
4. Prove A  B and C  D implies (A x C)  (B x D).
Seymour L.S. (1964). Outline Series: Theory and Problems of Set Theory and

a real variable), Vol. 1.
71
MODULE TWO
Unit 1 Annuity
Unit 2 Cash Flow
Unit 3 Sinking Fund
Unit 4 Functions
UNIT 1: ANNUITY
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Body
3.1 Annuity
3.1.1 Ordinary Annuity
3.1.2 Annuity Due
3.2 Valuation
3.3 Types of Annuity
4.0 Conclusion
5.0 Summary
72
1.0 INTRODUCTION
At some point in life, one may have had to make a series of fixed payments
over a period of time, such as rent or car payment or have received a series of
payments over a period of time, such as bond coupons. These are called
annuities. If you understand the time value of money, you are ready to learn
about annuities and how their present and future values are calculated.
2.0 OBJECTIVES
• Define annuity and future values
• Calculate the future value of an ordinary annuity
• Calculate the present value of an ordinary annuity
3.0 MAIN BODY
3.1 MEANING OF ANNUITY
Annuities are essentially a series or fixed payments required from you or paid
to you at a specified frequency over the course of a fixed time period. The
most common payment frequencies are yearly, semi-annually (twice a year),
quarterly and monthly. There are two types of annuities and annuities due.
A financial product sold by financial institutions that is designed to accept and

grow funds from an individual and then, upon annuitization, pay out a stream
of payments to the individual at a later point in time. Annuities are primarily
used as a means of securing a steady cash flow for an individual during their
retirement years.
Annuities can be structured according to a wide array of details and factors,

such as the duration of time that payments from the annuity can be guaranteed
73
to continue. Annuities can be created so that, upon annuitization, payments
will continue so long as either the annuitant or their spouse is alive.
Alternatively, annuities can be structured to pay out funds for a fixed amount
of time, such as 20 years, regardless of how long the annuitant lives.
Annuities can be structured to provide fixed periodic payments to the annuitant

or variable payments. The intent of variable annuities is to allow the annuitant
to receive greater payments if investments of the annuity fund do well and
smaller payments if its investments do poorly. This provides for a less stable
cash flow than a fixed annuity, but allows the annuitant to reap the benefits of
strong returns from their fund's investments.
The different ways in which annuities can be structured provide individuals

seeking annuities the flexibility to construct an annuity contract that will best
meet their needs.
3.1.1 Ordinary Annuity
Ordinary Annuity: Payments are required at the end of each period. For
example, straight bonds usually pay coupon payments at the end of every six
months until the bonds maturity date.
Calculating the Present and Future Value of Annuities
At some point in your life, you may have had to make a series of fixed
payments over a period of time - such as rent or car payments - or have
received a series of payments over a period of time, such as bond coupons.
These are called annuities. If you understand the time value of money, you're
ready to learn about annuities and how their present and future values are
calculated.
Calculating the Future Value of an Ordinary Annuity
If you know how much you can invest per period for a certain time period, the
future value of an ordinary annuity formula is useful for finding out how much
74
you would have in the future by investing at your given interest rate. If you are
making payments on a loan, the future value is useful in determining the total
cost of the loan.
Lets now run through Example 1. Consider the following annuity cash flow
Schedule:
o , 1 3
• s
I I I I I I
SIOOO 51000 $l()OC) 51000 S'1OOO
To calculate the future value of the annuity, we have to calculate the future
value of each cash flow. Let's assume that you are receiving $1,000 every year
for the next five years, and you invested each payment at 5%. The following
diagram shows how much you would have at the end of the five-year period:
o 1 1 J .. 5
I I I I I I
$1000 SlCXlO $1000 5U)OO ~tQOO
I ~ _$1000"(1.051°. s.,ooo~oa
I'-----------+ ...
' - $'000"(•.051'- $10$0.00
I'--------------+
II'-.-------
-
"UWf".
•• - SI000"'(1.0"Slf - $"02:.50
~:
S\000"(1.0S)· ....$1' SP.'"
$1000"('.05,'. :$12.....
value Of an Otdlnaf')! Annuity. SS5:l.S.,.
Since we have to add the future value of each payment, you may have noticed
that if you have an ordinary annuity with many cash flows, it would take a long
time to calculate all the future values and then add them together. Fortunately,
mathematics provides a formula that serves as a shortcut for finding the
accumulated value of all cash flows received from an ordinary annuity:
75
C = Cash flow per period
i = interest rate
n = number of payments
Using the above formula for Example 1 above, this is the result:
= $1000*[5.53]
= $ 5525.63
Note that the 1 cent difference between $5,525.64 and $5,525.63 is due to a
rounding error in the first calculation. Each value of the first calculation must
be rounded to the nearest penny - the more you have to round numbers in a
calculation, the more likely rounding errors will occur. So, the above formula
not only provides a shortcut to finding FV of an ordinary annuity but also gives
a more accurate result.
Calculating the Present Value of an Ordinary Annuity
If you would like to determine today's value of a future payment series, you
need to use the formula that calculates the present value of an ordinary annuity.
This is the formula you would use as part of a bond pricing calculation. The
PV of an ordinary annuity calculates the present value of the coupon payments
that you will receive in the future. More than 50% of retirement age
individuals to not have enough savings
For Example 2, we'll use the same annuity cash flow schedule as we did in
Example 1. To obtain the total discounted value, we need to take the present
76
value of each future payment and, as we did in Example 1, add the cash flows.
o I :z. ) .. ,
I I I I I I
11000
~r -s....,.
~.sm.o)
-f,~ -I'll."
~ - sm.lO _------_j
~.Iml)
~t"-li.llltor an
o..Il_"-.t..I'I.ftU'i\y ~ , .. u .....
Again, calculating and adding all these values will take a considerable amount
of time, especially if we expect many future payments. As such, we can use a
mathematical shortcut for PV of an ordinary annuity.
C = Cash flow per period
i = interest rate
n = number of payments
The formula provides us with the PV in a few easy steps. Here is the
calculation of the annuity represented in the diagram for Example 2:
PV-.., -... • $1000' [I- (I + M5)-$]

0.05
= $1000*[4.33]
= $4329.4
77
3.1.2 Annuity Due:
Annuity Due: Payments are required at the beginning of each period. Rent is
an example of annuity due. You are usually required to pay rent when you first
move in at the beginning of the month, and then on the first of each month
thereafter.
Calculating the Future Value of an Annuity Due
When you are receiving or paying cash flows for an annuity due, your cash
flow schedule would appear as follows:
84:jfrtn{ni o( each pctiod
0 I 2 3 ~ s
I ~,ooo
5 ....
I 1 1
~1000
-I
<I_
1
$1000
\, .I
V
Payment p",(d or fccetvcd at
the bejinnil\g 01 •• ch porlod
Since each payment in the series is made one period sooner, we need to
discount the formula one period back. A slight modification to the FV-of-an-
ordinary-annuity formula accounts for payments occurring at the beginning of
each period. In Example 3, let's illustrate why this modification is needed when
each $1,000 payment is made at the beginning of the period rather than at the
end (interest rate is still 5%):
o 1 1 1 4 5
I I I I I I
$1000 $1000 $1000 $1(00 $1()()(1
I I !::::::::::~:~:::
L.
1 '_'~:' :
-->__ ~tcoo,r\.05)) - $,,$7.4)
I '----------+
'------------+ .
..
$'000'{1.0S),I .. !.'ltS.Sl
s,oocr(1.0S)' • SI21e. l$
Notice that when payments are made at the beginning of the period, each
amount is held longer at the end of the period. For example, if the $1,000 was
invested on January 1 rather than December 31 each year, the last payment
78
before we value our investment at the end of five years (on December 31)
would have been made a year prior (January 1) rather than the same day on
which it is valued. The future value of annuity formula would then read:
Therefore:
= $1000*5.53*1.05
= $5801.91
Calculating the Present Value of an Annuity Due
For the present value of an annuity due formula, we need to discount the
formula one period forward as the payments are held for a lesser amount of
time. When calculating the present value, we assume that the first payment was
made today.
We could use this formula for calculating the present value of your future rent
payments as specified in a lease you sign with your landlord. Let's say for
Example 4 that you make your first rent payment at the beginning of the month
and are evaluating the present value of your five-month lease on that same day.
Your present value calculation would work as follows:
o • , • •
I I I I I
~."-.~- T "j
11000 11000
J_\~
(I.OS)
- S'51."
-S~ .m1.(l
-w:r -
(I.OS,
SIOU' +- -1
~ -san." <- J
('.O$r __
"tMnl YtilUll'or
an Annuh,y0... - S4S~S."
79
Of course, we can use a formula shortcut to calculate the present value of an
annuity due:
Therefore:
nv ....,'" 1'1"•• $1000 •[1- (h0.050,05)"']• (1 + O,OS)
= $1000*4.33*1.05
= $4545.95
Recall that the present value of an ordinary annuity returned a value of

$4,329.48. The present value of an ordinary annuity is less than that of an
annuity due because the further back we discount a future payment, the lower
its present value: each payment or cash flow in an ordinary annuity occurs one
period further into the future.
3.2 VALUATION
The valuation of an annuity entails concepts such as time value of money,

interest rate, and future value.
Annuity-immediate
If the number of payments is known in advance, the annuity is an annuity-

certain. If the payments are made at the end of the time periods, so that interest
is accumulated before the payment, the annuity is called an annuity-immediate,
or ordinary annuity. Mortgage payments are annuity-immediate, interest is
earned before being paid.
80
↓ ↓ ... ↓ payments
——— ——— ——— ——— —
0 1 2 ... n periods
The present value of an annuity is the value of a stream of payments,

discounted by the interest rate to account for the fact that payments are being
made at various moments in the future. The present value is given in actuarial
notation by:
Where n is the number of terms and i is the per period interest rate. Present
value is linear in the amount of payments, therefore the present value for
payments, or rent R is:
PV(i,n,R) = R x anti
In practice, often loans are stated per annum while interest is compounded and
payments are made monthly. In this case, the interest I is stated as a nominal
interest rate, and i=I/12.
The future value of an annuity is the accumulated amount, including payments

and interest, of a stream of payments made to an interest-bearing account. For
an annuity-immediate, it is the value immediately after the n-th payment. The
future value is given by:
81
Where n is the number of terms and i is the per period interest rate. Future
value is linear in the amount of payments, therefore the future value for
payments, or rent R is:
FV(i, n, R) = R x Snli
Example 1: The present value of a 5 year annuity with nominal annual interest
rate 12% and monthly payments of $100 is:
PV(O.l2/12,5 x 12,$100) = $100 x a£OIO.01 = $4,495.50
The rent is understood as either the amount paid at the end of each period in
return for an amount PV borrowed at time zero, the principal of the loan, or the
amount paid out by an interest-bearing account at the end of each period when
the amount PV is invested at time zero, and the account becomes zero with the
n-th withdrawal.
Future and present values are related as:
')n
Sn!i = ( 1 +~, x ani;
and
11.
---=1,
anii Sn!i
Annuity-due
An annuity-due is an annuity whose payments are made at the beginning of

each period. Deposits in savings, rent or lease payments, and insurance
premiums are examples of annuities due.
82
↓ ↓ ... ↓ payments
——— ——— ——— ——— —
0 1 ... n-1 n periods
Because each annuity payment is allowed to compound for one extra period.
Thus, the present and future values of an annuity-due can be calculated
through the formula:
.. _ (1 1 - (1 + i)-n
and a-I'
nt
- + ~') x a-I'
n
_
-
1
_ _;___=----
d
8-. = (1 + i.) x S-. = .,:_(1_+_2..;;_'__)n l

nit nli d
where n are the number of terms, i is the per term interest rate, and d is the
effective rate of discount given by d=i/(i+1).
Future and present values for annuities due are related as:
and
1 1
---=cl
... ..
anli S:n:li
Example 2: The final value of a 7 year annuity-due with nominal annual

interest rate 9% and monthly payments of $100:
F\ldue(0.09/1217 X 12,$100) = $100 x a84to,OO75 = $11,730,01.
Note that in Excel, the PV and FV functions take on optional fifth argument
which selects from annuity-immediate or annuity-due.
83
An annuity-due with n payments is the sum of one annuity payment now and
an ordinary annuity with one payment less, and also equal, with a time shift, to
an ordinary annuity. Thus we have:
(value at the time of the first of n payments of

1)
( (value one period after the time of the last of n

payments of 1)
Perpetuity
A perpetuity is an annuity for which the payments continue forever. Since:
lim PV(i,n, R) = ~
n-+oo 'It
even a perpetuity has a finite present value when there is a non-zero discount
rate. The formula for a perpetuity are:
UOOli = 1[i ; iiOOji = 1/d.
where i is the interest rate and d=i/(1+i) is the effective discount rate.
Proof of annuity formula
To calculate present value, the k-th payment must be discounted to the present
by dividing by the interest, compounded by k terms. Hence the contribution of
the k-th payment R would be R/(1+i)^k. Just considering R to be one, then:
n
Clnji = {; (1
1(
+i)k =
1
1 +i - (1 +
1)
i)n+l
00
{; (1
1+i)k
84
We notice that the second factor is an infinite geometric progression of the
form, therefore, I>£.k
k;Q
= _1_
1- 1\,
_.=
0;;111
((1+i)n-1)
(1 +1, ')n+l
( 1
1- 1/(1+1,')
) = (l-(l+i)-n).
l'
. +1,
(l+i),
1, ..
= l-(l+i)-ll
l"
Similarly, we can prove the formula for the future value. The payment made at
the end of the last year would accumulate no interest and the payment made at
the end of the first year would accumulate interest for a total of (n−1) years.
Therefore,
Stili = 1 + (1 + i) + (1 + i)2 + ... + (1 + iyn-l = (1 + itanli = (1+ it -

i
1
Amortization calculations
If an annuity is for repaying a debt P with interest, the amount owed after n
payments is:
R
-:--
~
(1 +~')"Il (R-:-- p)
1,
because the scheme is equivalent with borrowin g the amount R/i to create a
perpetuity with coupon R, and putting R/i-P of that borrowed amount in the
bank to grow with interest i.
Also, this can be thought of as the present value of the remaining payments:
1 (i + l)n-Nj_
R [-i - i - R x a.~I·
.'v-n 1
.
3.3 WHAT ARE THE DIFFERENT TYPES OF ANNUITIES?
The large number of annuity products on the market today can make
understanding them difficult. But in fact, there are only a handful of different
85
types of annuities, and we will help you find the best types to suit your needs.
First, let‘s discuss the three primary considerations when thinking about
annuities:
Timing of payout — immediate or deferred:
The first thing to determine is if you need an immediate or deferred annuity.

Read on to learn the difference.
Immediate Annuities
In an immediate annuity, the investor begins to receive payments immediately

upon investing. This is for investors that need immediate income from their
annuity. When you purchase an immediate annuity you can choose between
payments for a certain period of time (typically five to twenty years - ―period
certain‖), payments for the rest of your life and/or your spouse‘s life, or any
combination of the two. You can even choose between a fixed payment that
doesn‘t vary or a variable payment that is based on market performance.
Deferred Annuities
In a deferred annuity, you typically receive payments starting at some future

date, usually at retirement. However, most deferred annuities allow for
systematic withdrawal payments beginning thirty days after the purchase of
your annuity, up to 10% per year, in most cases. With a deferred annuity you
can invest either a lump sum all at once, or make periodic payments, either
fixed or variable. Those funds grow tax-deferred until you‘re ready to begin
receiving payments. Deferred annuities make up a large majority of all annuity
sales in the United States, and are the type of annuity that Annuity FYI
generally recommends if you do not need immediate income from your
annuity.
86
Investment type — fixed or variable:
The next decision to make is the investment type best suited to your needs:
fixed or variable.
Fixed Annuities
Fixed annuities are invested primarily in government securities and high-grade

corporate bonds. They offer a guaranteed rate of return, typically over a period
of one to fifteen years. There are two basic types of fixed annuities: the
Guaranteed Return Annuities (GRA) is a fixed annuity that offers a guarantee
that you can never receive less than 100% of your investment — no penalties
or fluctuations in the interest rate market can impact your principal should you
surrender. The Market Value Adjustment annuity (MVA) works much like the
GRA, but there is no guarantee of your principal if rates rise and you surrender
your contract. MVAs work like a bond and often pay more than a GRA due to
the increased short-term risk of rising rates. It is important to note that, unlike a
variable annuity, where your funds are held separately from the insurance
company, with a fixed annuity your assets are part of the general accounts of
the insurer, and are subject to the claims-paying ability of the issuing company.
For this reason it is important to understand the financial strength of the
issuing insurance company before you buy a fixed annuity. See our section on
financial strength ratings for more information.
Variable Annuities
A variable annuity is a contract between you and an issuer whereby you agree
to give the issuer principal and in return the issuer guarantees you variable
payments over time. While annuities are not insurance policies, they are issued
by insurance companies. Variable annuities are different than their fixed
annuity cousins, which are invested primarily in government securities and
high-grade corporate bonds, and offer exclusively a guaranteed rate, typically
over a period of one to ten years.
87
There are several distinctive features of variable annuities:
Invest Unlimited Funds, Tax-Deferred
A variable annuity is similar to a retirement plan in that you can fund it in a

lump sum or a little at a time, and all capital in an annuity grows and
compounds tax-deferred until you begin making withdrawals. Unlike
retirement plans, however, there is no limit as to how much you can invest in
annuities! With a variable annuity you can invest unlimited funds, tax deferred
(unlike IRA, 401ks, and other retirement vehicles, which have annual
maximum contributions). Variable annuities can grow tax deferred until
withdrawn.
Wide Variety of Investment Options to Permit Stock Market Gains
Variable annuities enable you to invest in a selection of portfolios, called sub-

accounts. These sub-accounts are tied to market performance, and often have a
corresponding managed investment after which they are modeled. Available
choices range from the most conservative, such as money market, guaranteed
fixed accounts, and government bond funds, to more aggressive such as
growth, small cap, mid cap, large cap, capital appreciation, aggressive growth,
and emerging markets investments. You can invest in fixed accounts, money
market, domestic, international, specialty, sector funds and small, medium and
large cap funds. Some have as many as forty or more investment choices with
ten or more managers, and allow you to switch between them at no cost and
without taxes (although excessive changes to your contract could result in the
imposition of a small fee, so be sure to consult your financial planner or
prospectus if you are making regular changes). Variable annuities typically
allow a wide variety of investment options including . Many variable annuities
allow for transferring among sub-accounts free of charge.
88
Living Benefits
Unlike mutual funds, variable annuity products come with optional living
benefits and death benefits. One special type of variable annuity benefit is the
GMIB (Guaranteed Minimum Income Benefit). The most competitive GMIBs
guarantee at least a 5% return over seven years, or the highest attained value
on each anniversary during the surrender period, whichever is greater. In
exchange for this living guarantee, the living benefit annuity has a surrender
charge / penalty for early withdrawal (typically 7 years), no up-front bonus,
and a slightly higher annual fee (.25% to .50% per year). Lifetime Income
Benefit annuities are also very popular. The concept behind a Lifetime Income
Benefit is simple. If you purchase a Lifetime Income Benefit Rider with your
variable annuity, the insurance company guarantees a regular monthly,
quarterly, or annual payment for your lifetime, even if your account balance
goes to zero -- income you can never outlive.
Death Benefits
Another important feature of some annuities is the death benefit provision. The
annuity issuer guarantees at a minimum that upon your death your total
premiums invested are paid to your beneficiaries. Many annuities ―step-up‖ on
the anniversary of the date the annuity was purchased, to the highest value at
any preceding anniversary; or guarantee a minimum 5% to 7% interest
compounded annually, whichever is greater. Some variable annuities now even
offer a combination of the aforementioned benefits, i.e. the greater of 5% or
7% compounded annually, the highest contract anniversary or the actual
account value on death to the heirs (see death benefits under compare annuities
for more detailed information). For example, assume you invest $10,000 in a
variable annuity with an annual step-up, and over the next several years your
contract grows to $40,000 on its anniversary. Now assume that the market goes
down and your value drops to $25,000, and just as you thought things couldn‘t
89
get any worse, you die. In this hypothetical scenario your heirs would receive
the highest contract anniversary of $40,000. The enhanced death benefit
options offered by insurance companies come at an additional expense,
typically ranging from 0.05% to 0.50% on top of the regular annual expenses.
Furthermore unlike a death benefit from a life insurance policy, the death
benefit associated with an annuity does not transfer to the beneficiaries income
tax free. That said, you don‘t have to qualify for the annuity death benefit
either.
Liquidity options:
Finally, you will need to determine which liquidity option best suits your
needs: those with or without withdrawal penalties.
Annuities with Withdrawal Penalties
―No-surrender‖ annuities allow you to withdraw either your interest earnings

or up to 15% per year without a penalty (although any withdrawal from an
annuity may be subject to taxes and a 10% federal penalty if taken prior to 59?
years of age). Beyond that, most annuities have a surrender charge — a penalty
for making an early withdrawal above the free withdrawal amount. Typically
this surrender charge decreases over a seven-year period.
Why would you choose an annuity with a withdrawal penalty? Well, some
annuities with surrender charges reward the investor by offering a ―bonus‖: the
insurance company adds on average 3% to 5% to the amount of your principal.
For example, if you invest $10,000 in a bonus annuity the insurance company
will add $300 to $500 to your annuity immediately. The trade-off is that with a
bonus annuity the surrender period is usually longer (eight to nine years in
most cases versus the typical seven-year surrender). Be aware, some insurance
companies charge higher fees on their bonus annuities, as compared with their
standard products. Be certain to compare the annual fees of a bonus annuity to
the standard or traditional (no-bonus with 7 years of surrender) annuity.
90
Sometimes the life insurance company will raise their fees to pay for the
bonus.
Annuities without Withdrawal Penalties
For investors who may need spur-the-moment access to their money, there are
annuities without surrender charges (no-surrender or level load annuities) —
these annuities have no penalty or charge for early withdrawal. (That said,
even with a no-surrender annuity investors under the age of 59 ? are subject to
a 10% federal excise tax as well as ordinary income taxes on any gains. You
can avoid any taxes or penalties, however, by making a 1035 Tax-Free
Exchange to another annuity, regardless of age.) No-surrender annuities do not
come with bonuses, and some insurance companies charge higher fees for their
no-surrender charge products, so be sure to compare all fees before you invest.
Most companies now offer no-surrender annuities. However, if you are asking
a local broker or agent for their recommendation they may not share with you
the no-surrender annuity, as these annuities pay the broker a much lower fee.
Some agents will even try to steer the investor to annuities with surrender
charges but without bonuses.
4.0 CONCLUSION
Now you can see how annuity affects how you calculate the present and future
value of any amount of money. Remember that the payment frequencies, or
number of payments, and the time at which these payments are made (whether
at the beginning or end of each payment period) are all variables you need to
account for in your calculations.
91
5.0 SUMMARY
Annuities offer tax-sheltered growth, which can result in significant long-term

returns for you if you contribute to the annuity for a long period and wait to
withdraw funds until retirement. You get peace of mind from an annuity's
guaranteed income stream, and the tax benefits of deferred annuities can
amount to substantial savings.
6.0 TUTOR-MARKED ASSIGNMENT
1. Find the periodic payment of an annuity due of $70000, payable annually

for 3 years at 15% compounded annually.
2. Find the periodic payment of an annuity due of $250700, payable quarterly

for 8 years at 5% compounded quarterly.
3. Find the periodic payment of an accumulated value of $55000, payable

monthly for 3 years at 15% compounded monthly.
4. Find the periodic payment of an accumulated value of $1600000, payable

annually for 3 years at 9% compounded annually.
Laser, W. (2008). Practical financial management. Mason, Ohio: Thompson

South-Western.
Jordan, B.D., Ross, S.D., & Westerfield, R. (2000). Fundamentals of corporate

finance. Boston: Irwin/McGraw-Hill.
Samuel, A.B. (2010). Mathematics of Investment and Credit, 5th Edition.

ACTEX Academic Series. ACTEX Publications.
Stephen, K. (2000). Theory of Interest, 3rd Edition. McGraw-Hill/Irwin.
92
UNIT 2 CASH FLOW
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Body
3.1 Cash Flow
3.1.1 Operating Cash Flows
3.1.2 Investment Cash Flows
3.1.3 Financial Cash Flows
3.2 How to Manage Cash Flow
3.3 Calculating total cash flows
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Cash flow is the movement of money into or out of a business, project, or

financial product. It is usually measured during a specified, limited period of
time. Measurement of cash flow can be used for calculating other parameters
that give information on a company's value and situation.
93
2.0 OBJECTIVES
• Define cash flows
• Discuss classification of cash flow
• Discuss how cash flow could be manage
3.0 MAIN BODY
3.1 DEFINITION OF CASH FLOW
Cash flow can be used, for example, for calculating parameters: it discloses
cash movements over the period.
• To determine a project's rate of return or value. The time of cash flows into
and out of projects are used as inputs in financial models such as internal rate
of return and net present value.
• To determine problems with a business's liquidity. Being profitable does not

necessarily mean being liquid. A company can fail because of a shortage of
cash even while profitable.
• As an alternative measure of a business's profits when it is believed that

accrual accounting concepts do not represent economic realities. For instance,
a company may be notionally profitable but generating little operational cash
(as may be the case for a company that barters its products rather than selling
for cash). In such a case, the company may be deriving additional operating
cash by issuing shares or raising additional debt finance.
• Cash flow can be used to evaluate the 'quality' of income generated by

accrual accounting. When net income is composed of large non-cash items it is
considered low quality.
94
• To evaluate the risks within a financial product, e.g., matching cash
requirements, evaluating default risk, re-investment requirements, etc.
Cash flow notion is based loosely on cash flow statement accounting

standards. It's flexible as it can refer to time intervals spanning over past-
future. It can refer to the total of all flows involved or a subset of those flows.
Subset terms include net cash flow, operating cash flow and free cash flow.
1. A revenue or expense stream that changes a cash account over a given

period. Cash inflows usually arise from one of three activities - financing,
operations or investing - although this also occurs as a result of donations or
gifts in the case of personal finance. Cash outflows result from expenses or
investments. This holds true for both business and personal finance.
2. An accounting statement called the "statement of cash flows", which shows

the amount of cash generated and used by a company in a given period. It is
calculated by adding noncash charges (such as depreciation) to net income
after taxes. Cash flow can be attributed to a specific project, or to a business as
a whole. Cash flow can be used as an indication of a company's financial
strength.
3.1.1 Business financials
The (total) net cash flow of a company over a period (typically a quarter, half
year, or a full year) is equal to the change in cash balance over this period:
positive if the cash balance increases (more cash becomes available), negative
if the cash balance decreases. The total net cash flow is the sum of cash flows
that are classified in three areas:
1. Operational cash flows
In accounting, a measure of the amount of cash generated by a company's

normal business operations. Operating cash flow is important because it
indicates whether a company is able to generate sufficient positive cash flow to
95
maintain and grow its operations, or whether it may require external financing.
OCF is calculated by adjusting net income for items such as depreciation,
changes to accounts receivable and changes in inventory.
Financial analysts sometimes prefer to look at cash flow metrics because it

strips away certain accounting effects and is thought to provide a clearer
picture of the current reality of the business operations. For example, booking
a large sale provides a big boost to revenue, but if the company is having a
hard time collecting the cash, then it is not a true economic benefit to the
company. On the other hand, a company may be highly profitable on a cash
flow basis, but may not have a low net income if it has a lot of fixed assets and
uses accelerated depreciation calculations.
Example: Hammett, Inc. has sales of #19,570, cost of #9460, depreciation

expense of #2,130, and interest expense of #1620. If the tax rate is 35 percent,
what is the operating cash flow:
How to Calculate Operating Cash Flow.
The formula is:
EBIT (earnings before interest and taxes) + Depreciation - Taxes
Therefore:
19,570 Sales
(9,460) COS
(1,620) Interest
(2,130) Depreciation
6,360 Net Income B4 Tax
(2,226) Tax @ 35%
4,134 Net Income
2,130 Depreciation (Add Back)

96
1,620 Interest (Add Back)
7,884 Operating Cash Flow
Cash Flow Indicator Ratios: Free Cash Flow/Operating Cash Flow Ratio
The free cash flow/operating cash flow ratio measures the relationship between
free cash flow and operating cash flow.
Free cash flow is most often defined as operating cash flow minus capital
expenditures, which, in analytical terms, are considered to be an essential
outflow of funds to maintain a company's competitiveness and efficiency.
The cash flow remaining after this deduction is considered "free" cash flow,
which becomes available to a company to use for expansion, acquisitions,
and/or financial stability to weather difficult market conditions. The higher the
percentage of free cash flow embedded in a company's operating cash flow, the
greater the financial strength of the company.
Formula:
FCF/OCF Ratio _ Free Cash Flow (Ollerating Cash Flow. Cal)ital EXI)enditlll'e)
Ollerating Cash Flow
Free Cash Flow/Operating Cash Flow Ratio = ::~!

..:= 70.9%
As of December 31, 2010, with amounts expressed in millions, Zimmer

Holdings had free cash flow of $622.9. We calculated this figure by classifying
"additions to instruments" and "additions to property, plant and equipment
(PP&E)" as capital expenditures (numerator). Operating cash flow, or "net
cash provided by operating activities" (denominator), is recorded at $878.2. All
the numbers used in the formula are in the cash flow statement. By dividing,
the equation gives us a free cash flow/operating cash flow ratio of 70.9%,
which is a very high, beneficial relationship for the company.
97
2. Investment cash flows
An item on the cash flow statement that reports the aggregate change in a
company's cash position resulting from any gains (or losses) from investments
in the financial markets and operating subsidiaries, and changes resulting from
amounts spent on investments in capital assets such as plant and equipment.
When analyzing a company's cash flow statement, it is important to consider

each of the various sections which contribute to the overall change in cash
position. In many cases, a firm may have negative overall cash flow for a given
quarter, but if the company can generate positive cash flow from its business
operations, the negative overall cash flow may be a result of heavy investment
expenditures, which is not necessarily a bad thing.
Cash Flow Statement: Analyzing Cash Flow from Investing Activities
The cash flow statement is one of the most revealing documents of a firm‘s
financial statements, but it is often overlooked. It shows the sources and uses
of a firm‘s cash as it moves both in and out. When analyzing a company's cash
flow statement, it is important to consider each of the various sections that
contribute to the overall change in cash position. In many cases, a firm may
have negative overall cash flow for a given quarter, but if the company can
generate positive cash flow from its business operations, the negative overall
cash flow is not necessarily a bad thing. Below we will cover cash flow from
investing activities, one of three primary categories in the statement of cash
flows.
Introduction to Cash Flow from Investing Activities
An item on the cash flow statement belongs in the investing activities section if
it results from any gains (or losses) from investments in financial markets and
operating subsidiaries. An investing activity refers to cash spent on
investments in capital assets such as plant and equipment, which is collectively
referred to as capital expenditure, or capex.
98
Here is a simple cash flow (of investing activities) for restaurant chain Texas
Roadhouse
r TexasRoadhouse
I 2012 2011 2010
$ in thousands
cash flows from investing activities:
Capital expenditures-property
(84,879) (81,758) (45,051)
and equipment
Acquisition of franchise
restaurants, net of cashacquired
(4,297) - -
Proceedsfrom sale of property
and equipment, Including 1,128 188 235
Insuranceproceeds
Net cashused in investing activities (88,048) (81,570) (44,816)
Immediately, you can observe that the main investing activity for Texas
Roadhouse is capex. Texas Roadhouse is growing briskly and spends plenty on
capex to open new restaurant locations across the United States. In its 10-K
filing with the SEC, it details that it spends money to remodel existing stores
and build new ones, as well as acquire the land they are built on. Overall,
capex is an extremely important cash flow item that investors are not going to
find in reported company profits.
Texas Roadhouse also strategically buys out franchises and spent $4.3 million
during 2012 to do so. Sometimes it may sell restaurant equipment that is
outdated or unused, which then brings in cash instead of being an outflow like
other capex. This activity amounted to just over $1 million in 2012.
Below is a more comprehensive list of cash flows that can stem from a firm‘s
investing activities:
· Examples of Inflows:
How to find the best credit card for your lifestyle.
 Proceeds from disposal of property, plant and equipment
 Cash receipts from disposal of debt instruments of other entities
99
 Receipts from sale of equity instruments of other entities
Examples of Outflows:
 Payments for acquisition of property, plant and equipment
 Payments for purchase of debt instruments of other entities
 Payments for purchase of equity instruments of other entities
 Sales/maturities of investments
 Includes purchasing and selling long- term assets and other investments.
Firms with excess capital or financial institutions such as banks and insurance
companies will have buying and selling activity from their investment
portfolios that flow through the investing activity portion of the cash flow
statement.
How do some balance sheet items relate to this cash flow section?
Analyzing the cash flow statement is extremely valuable because it provides a

reconciliation of the beginning and ending cash on the balance sheet. This
analysis is difficult for most publicly-traded companies because of the
thousands of line items that can go into financial statements. For Texas
Roadhouse, its net property and equipment increased by $34,437,000 between
2011 and 2012. Of this amount, the capital expenditure was capitalized (not
expensed) on the balance sheet, net of depreciation. The other costs were
expensed and reflected on the income statement. In regard to the nearly $4.3
million spent to buy out the franchised restaurant above, here is where it was
allocated across the balance sheet:
100
2012
r $ in thousands
Current assets 64
Property and equipment, net 127
Goodwill 2,741
Intangible asset 1,510
Current liabilities -142
Total assets 4,300
For a public company, it‘s going to be nearly impossible to use the original
balance sheet and cash flow statements to determine each item down to the
specific dollar amount. With the help of the notes in the financial statements
(the above is from Texas Roadhouse‘s notes on acquisitions), an interested
party can get a pretty clear understanding of the major items on the investing
portion of the cash flow statement and what it means for a firm‘s financial
health.
Investors Reviewing Cash Flow Statements
A firm can get itself into trouble by spending foolishly on acquisitions or

capex to either maintain or grow its operations. A great guide for capex is how
it relates to depreciation and amortization, which can be found in cash flow
from operations on the cash flow statement. This represents an annual charge
on past spending that was capitalized on the balance sheet to grow and
maintain the business. For Texas Roadhouse, this amounted to $46.7 million in
2012. The fact that capex was nearly double this amount demonstrates it is a
growth firm. Yet there is little worry about its financial health because it has
minimal long-term debt (other than capital leases) and generated an impressive
$146 million in operating cash flow for the year to easily cover capex and
$29.4 million in stock buybacks for the year (a cash flow from financing
activity).
101
3. Financing cash flows
In the previous section, we showed that cash flows through a business in four
generic stages. First, cash is raised from investors and/or borrowed from
lenders. Second, cash is used to buy assets and build inventory. Third, the
assets and inventory enable company operations to generate cash, which pays
for expenses and taxes before eventually arriving at the fourth stage. At this
final stage, cash is returned to the lenders and investors. Accounting rules
require companies to classify their natural cash flows into one of three buckets
(as required by SFAS 95); together these buckets constitute the statement of
cash flows. The diagram below shows how the natural cash flows fit into the
classifications of the statement of cash flows. Inflows are displayed in green
and outflows displayed in red:
State-lne-ut or Cash Flews
Cash Flow from Financing(CFF)

+ S.U e quiry 12 +s.u e quiry
+ Iss". debt -+ + Issue debt
• Pay dividend
C.st. Flow f."OmIn".sril., (CFI)

>-11------1-.-, Buy assets (PP&E~~ • Buy ossot. (PP&F)
:'~B~"~I~i~n~\'~.~n~to~'~)~·~> I---1---~~~~~~ ~~~-41

Cash Flow fa-ern01, •• ationS' «(,F0)
+ Make sale. 4 + Make -:;'\I~'(~"oU~('r (;'\!d,)
, Buv IU\'~ufOIY
P:\y opel :\tUlt costs ~ ,p:'l~'(O~f"

t-rriterest &. ~ Pay inter f'st On deb t .- ~ 'P:I'V Inl~1 e et on debt
DiVidend. P.y !..... » ~ ,P ..~"a"t'-:
"Repaid" to P." divideud
Debt & Eqw"ty_J___,!:..:!L..!!!.:.!!!!:!!.!!.---+l----1 ~
Hold.... J. I Net Cn.h Flow = CFF + CFt + CFO
The sum of CFF, CFI and CFO is net cash flow. Although net cash flow is
almost impervious to manipulation by management, it is an inferior
performance measure because it includes financing cash flows (CFF), which,
depending on a company's financing activities, can affect net cash flow in a
way that is contradictory to actual operating performance. For example, a
profitable company may decide to use its extra cash to retire long-term debt. In
102
this case, a negative CFF for the cash outlay to retire debt could plunge net
cash flow to zero even though operating performance is strong. Conversely, a
money-losing company can artificially boost net cash flow by issuing a
corporate bond or by selling stock. In this case, a positive CFF could offset a
negative operating cash flow (CFO), even though the company's operations are
not performing well.
Now that we have a firm grasp of the structure of natural cash flows and how
they are represented/classified, this section will examine which cash flow
measures are best used for a particular analysis. We will also focus on how you
can make adjustments to figures so that your analysis isn't distorted by
reporting manipulations.
Which Cash Flow Measure Is Best?
You have at least three valid cash flow measures to choose from. Which one is
suitable for you depends on your purpose and whether you are trying to value
the stock or the whole company.
The easiest choice is to pull cash flow from operations (CFO) directly from the
statement of cash flows. This is a popular measure, but it has weaknesses when
used in isolation: it excludes capital expenditures, which are typically required
to maintain the firm's productive capability. It can also be manipulated, as we
show below.
If we are trying to do a valuation or replace an accrual-based earnings measure,

the basic question is "which group/entity does cash flow to?" If we want cash
flow to shareholders, then we should use free cash flow to equity (FCFE),
which is analogous to net earnings and would be best for a price-to-cash flow
ratio (P/CF).
If we want cash flows to all capital investors, we should use free cash flow to
the firm (FCFF). FCFF is similar to the cash generating base used in economic
value added (EVA). In EVA, it's called net operating profit after taxes
103
(NOPAT) or sometimes net operating profit less adjusted taxes (NOPLAT),
but both are essentially FCFF where adjustments are made to the CFO
component.
3.2 HOW TO MANAGE CASH FLOW
Cash is king when it comes to the financial management of a growing

company. The lag between the time you have to pay your suppliers and
employees and the time you collect from your customers is the problem, and
the solution is cash flow management. At its simplest, cash flow management
means delaying outlays of cash as long as possible while encouraging anyone
who owes you money to pay it as rapidly as possible.
Measuring Cash Flow
Prepare cash flow projections for next year, next quarter and, if you're on
shaky ground, next week. An accurate cash flow projection can alert you to
trouble well before it strikes.
Understand that cash flow plans are not glimpses into the future. They're
educated guesses that balance a number of factors, including your customers'
payment histories, your own thoroughness at identifying upcoming
expenditures, and your vendors' patience. Watch out for assuming without
justification that receivables will continue coming in at the same rate they have
recently, that payables can be extended as far as they have in the past, that you
have included expenses such as capital improvements, loan interest and
principal payments, and that you have accounted for seasonal sales
fluctuations.
Start your cash flow projection by adding cash on hand at the beginning of the
period with other cash to be received from various sources. In the process, you
will wind up gathering information from salespeople, service representatives,
104
collections, credit workers and your finance department. In all cases, you'll be
asking the same question: How much cash in the form of customer payments,
interest earnings, service fees, partial collections of bad debts, and other
sources are we going to get in, and when?
The second part of making accurate cash flow projections is detailed

knowledge of amounts and dates of upcoming cash outlays. That means not
only knowing when each penny will be spent, but on what. Have a line item on
your projection for every significant outlay, including rent, inventory (when
purchased for cash), salaries and wages, sales and other taxes withheld or
payable, benefits paid, equipment purchased for cash, professional fees,
utilities, office supplies, debt payments, advertising, vehicle and equipment
maintenance and fuel, and cash dividends.
"As difficult as it is for a business owner to prepare projections, it's one of the
most important things one can do," says accountant Steve Mayer. "Projections
rank next to business plans and mission statements among things a business
must do to plan for the future."
Improving Receivables
If you got paid for sales the instant you made them, you would never have a
cash flow problem. Unfortunately, that doesn't happen, but you can still
improve your cash flow by managing your receivables. The basic idea is to
improve the speed with which you turn materials and supplies into products,
inventory into receivables, and receivables into cash. Here are specific
techniques for doing this:
• Offer discounts to customers who pay their bills rapidly.
• Ask customers to make deposit payments at the time orders are taken.
• Require credit checks on all new noncash customers.
• Get rid of old, outdated inventory for whatever you can get
105
• Issues invoices promptly and follow up immediately if payments are slow in
coming.
• Track accounts receivable to identify and avoid slow-paying customers.

Instituting a policy of cash on delivery (c.o.d.) is an alternative to refusing to
do business with slow-paying customers.
Managing Payables
Top-line sales growth can conceal a lot of problems-sometimes too well. When
you are managing a growing company, you have to watch expenses carefully.
Don't be lulled into complacency by simply expanding sales. Any time and any
place you see expenses growing faster than sales, examine costs carefully to
find places to cut or control them. Here are some more tips for using cash
wisely:
• Take full advantage of creditor payment terms. If a payment is due in 30

days, don't pay it in 15 days.
• Use electronic funds transfer to make payments on the last day they are due.
You will remain current with suppliers while retaining use of your funds as
long as possible.
• Communicate with your suppliers so they know your financial situation. If

you ever need to delay a payment, you'll need their trust and understanding.
• Carefully consider vendors' offers of discounts for earlier payments. These

can amount to expensive loans to your suppliers, or they may provide you with
a change to reduce overall costs. The devil is in the details.
• Don't always focus on the lowest price when choosing suppliers. Sometimes
more flexible payment terms can improve your cash flow more than a bargain-
basement price.
106
Surviving Shortfalls
Sooner or later, you will foresee or find yourself in a situation where you lack
the cash to pay your bills. This doesn't mean you're a failure as a
businessperson-you're a normal entrepreneur who can't perfectly predict the
future. And there are normal, everyday business practices that can help you
manage the shortfall.
The key to managing cash shortfalls is to become aware of the problem as

early and as accurately as possible. Banks are wary of borrowers who have to
have money today. They'd much prefer lending to you before you need it,
preferably months before. When the reason you are caught short is that you
failed to plan, a banker is not going to be very interested in helping you out.
If you assume from the beginning that you will someday be short on cash, you
can arrange for a line of credit at your bank. This allows you to borrow money
up to a preset limit any time you need it. Since it's far easier to borrow when
you don't need it, arranging a credit line before you are short is vital.
If bankers won't help, turn next to your suppliers. These people are more
interested in keeping you going than a banker, and they probably know more
about your business. You can often get extended terms from suppliers that
amount to a hefty, low-cost loan just by asking. That's especially true if you've
been a good customer in the past and kept them informed about your financial
situation.
Consider using factors. These are financial service businesses that can pay you
today for receivables you may not otherwise be able to collect on for weeks or
months. You'll receive as much as 15 percent less than you would otherwise,
since factors demand a discount, but you'll eliminate the hassle of collecting
and be able to fund current operations without borrowing.
Ask your best customers to accelerate payments. Explain the situation and, if
necessary, offer a discount of a percentage point or two off the bill. You should
107
also go after your worst customers-those whose invoices are more than 90 days
past due. Offer them a steeper discount if they pay today.
You may be able to raise cash by selling and leasing back assets such as
machinery, equipment, computers, phone systems and even office furniture.
Leasing companies may be willing to perform the transactions. It's not cheap,
however, and you could lose your assets if you miss lease payments.
Choose the bills you'll pay carefully. Don't just pay the smallest ones and let
the rest slide. Make payroll first-unpaid employees will soon be ex-employees.
Pay crucial suppliers next. Ask the rest if you can skip a payment or make a
partial payment.
Financial Statements - Cash Flow Computations - Indirect Method
Under U.S. and ISA GAAP, the statement of cash flow can be presented by
means of two ways:
1. The indirect method
2. The direct method
The Indirect Method
The indirect method is preferred by most firms because is shows a

reconciliation from reported net income to cash provided by operations.
Calculating Cash flow from Operations
Here are the steps for calculating the cash flow from operations using the
indirect method:
1. Start with net income.
2. Add back non-cash expenses.
(Such as depreciation and amortization)
3. Adjust for gains and losses on sales on assets.
108
Add back losses
Subtract out gains
4. Account for changes in all non-cash current assets.
5. Account for changes in all current assets and liabilities except notes payable
and dividends payable.
In general, candidates should utilize the following rules:
Increase in assets = use of cash (-)
Decrease in assets = source of cash (+)
Increase in liability or capital = source of cash (+)
Decrease in liability or capital = use of cash (-)
The following example illustrates a typical net cash flow from operating
activities:
XYZ Company
Cash Flow from Operating Activities
Indirect Method
Net income 66,800
Adjustments:
Depreciation and amortization 2,000
Deferred taxes 50
Decrease in accounts receivable 200
Increase in inventories (4,000)
Increase in accounts payable 1,150
Increase in accrued interest receivable (350)
Increase in accrued interest payable 100
109
Gain on sale of property (600)
Net cash flow operating activities 65,350
Cash Flow from Investment Activities
Cash Flow from investing activities includes purchasing and selling long-term
assets and marketable securities (other than cash equivalents), as well as
making and collecting on loans.
Here's the calculation of the cash flows from investing using the indirect
method:
XYZ Company
Cash Flow from Investment Activities
Indirect Method
Cash from sale of land (5,000)
Purchase of plant & equipment 50,000
Cash flow from Investment Activities 45,000
Cash Flow from Financing Activities
Cash Flow from financing activities includes issuing and buying back capital
stock, as well as borrowing and repaying loans on a short- or long-term basis
(issuing bonds and notes). Dividends paid are also included in this category,
but the repayment of accounts payable or accrued liabilities is not.
110
Here's the calculation of the cash flows from financing using the indirect method:
XYZ Company
Cash Flow from financing Activities
Indirect Method
Sale of Bonds 5,000
Stock Repurchase (6,000)
Cash Dividend (3,500)
Issue of Preferred shares 80,000
Cash Flow from Financing Activities 75,000
Calculating Total Cash flows.
Greene Co. shows the following information on its 2012 income statement:
Sales = #138,000
Costs = #71,500
Other expenses = #4,100
Depreciation expense = #10,100
Interest expense #7,900
Taxes = #17,760
Dividends = #5,400.
In addition, you‘re told that the firm issued #2,500 in new equity during 2012,
and redeemed #3,800 in outstanding long-term debt
a. What is the 2012 operating cash flow?
b. What is the 2012 cash flow to creditors?
c. What is the 2012 cash flow to stockholders?
111
d. If net fixed assets increased by #17,400 during the year, what was the
addition to NWC?
SOLUTION:
a. To calculate the OCF, we first need to construct an income statement. The

income statement starts with revenues and subtracts costs to arrive at EBIT.
We then subtract out interest to get taxable income, and then subtract taxes to
arrive at net income. Doing so, we get:
Income Statement
Sales #138,000
Costs 71,500
Other Expenses 4,100
Depreciation 10,100
EB #52,300
Interest 7,900
Taxable income #44,400
Taxes 17,760
Net income #16,640
Dividends #5,400
Addition to retained earnings 21,240
Dividends paid plus addition to retained earnings must equal net income, so:
Net income = Dividends + Addition to retained earnings
Addition to retained earnings = #26,640 — 5,400
112
Addition to retained earnings = #21,240
So, the operating cash flow is:
OCF = EBIT ± Depreciation — Taxes
OCF = #52,300 + 10,100 — 17,760
OCF = #44,640
b. The cash flow to creditors is the interest paid, plus any new borrowing.
Since the company redeemed long debt, the new borrowing is negative. So, the
cash flow to creditors is:
Cash flow to creditors = Interest paid — Net new borrowing
Cash flow to creditors = #7,900 — (—#3,800)
Cash flow to creditors = #11,700
c. The cash flow to stockholders is the dividends paid minus any new equity.
So, the cash flow to stockholders is:
Cash flow to stockholders = Dividends paid — Net new equity
Cash flow to stockholders = #5,400 —2,500
Cash flow to stockholders = #2,900
d. In this case, to find the addition to NWC, we need to find the cash flow from
assets. We can then use the cash flow from assets equation to find the change
in NV/C. We know that cash flow from assets is equal to cash flow to creditors
plus cash flow to stockholders. So, cash flow from assets is:
Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
Cash flow from assets = #11,700 + 2,900

113
Cash flow from assets = #14,600
Net capital spending is equal to depreciation plus the increase in fixed assets,
so:
Net capital spending = Depreciation + Increase in fixed assets
Net capital spending = #10,100 + 17,400
Net capital spending = #27,500
Now we can use the cash flow from assets equation to find the change in
NWC. Doing so, we
Find:
Cash flow from assets = OCF — Change in NV/C — Net capital spending
#14,600 = #44,640 — Change in NWC — #27,500
Change in NV/C = #2,540
4.0 CONCLUSION
The theoretical case for a CFT is clear. It is simpler than an income tax, with
lower economic costs. It can be made progressive, thus satisfying equity
criteria for good tax design.
Even if the considerable difficulties with a transition could be overcome,

integrating a CFT into a world where most of the economy is subject to an
income tax would also pose difficulties. There is a risk that the rules needed to
maintain CFT treatment, while at the same time protecting the income tax
base, might negate significant portions of the simplification gains from a CFT.
114
5.0 SUMMARY
Cash flow from operations (CFO) should be examined for distortions in the
following ways:
 Remove gains from tax benefits due to stock option exercises.
 Check for temporary CFO blips due to working capital actions. For
example, withholding payables, or "stuffing the channel", to temporarily
reduce inventory.
 Check for cash outflows classified under CFI that should be reclassified
to CFO.
 Check for other one-time CFO blips due to nonrecurring dividends or

trading gains.
Aside from being vulnerable to distortions, the major weakness of CFO is that
it excludes capital investment dollars. We can generally overcome this
problem by using free cash flow to equity (FCFE), which includes (or, more
precisely, is reduced by) capital expenditures (CFI). Finally, the weakness of
FCFE is that it will change if the capital structure changes. That is, FCFE will
go up if the company replaces debt with equity (an action that reduces interest
paid and therefore increases CFO) and vice versa. This problem can be
overcome by using free cash flow to firm (FCFF), which is not distorted by the
ratio of debt to equity.
How cash flow calculated with operating, investing and financial flow.
115
Helfert, E.A. (2001). "The Nature of Financial Statements: The Cash Flow
Statement". Financial Analysis - Tools and Techniques - A Guide for
Managers. McGraw-Hill.
Bodie, Z., Alex, K., & Alan, M. (2004). Essentials of Investments, 5th ed.
McGraw-Hill Irwin.
Barry, J.E. (2007). Interpretation and Application of International Financial

Reporting Standards. John Wiley & Sons.
116
UNIT 3 SINKING FUND
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Body
3.1 Sinking Fund
3.1.1 Types of Sinking Fund
3.2 Simple and Compound Interest
3.3 Debt Instrument
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
The sinking fund was first used in Great Britain in the 18th century to reduce
national debt. While used by Robert Walpole in 1716 and effectively in the
1720s and early 1730s, it originated in the commercial tax syndicates of the
Italian peninsula of the 14th century, where its function was to retire
redeemable public debt of those cities.
The fund received whatever surplus occurred in the national Budget each year.
However, the problem was that the fund was rarely given any priority in
Government strategy. The result of this was that the funds were often raided by
the Treasury when they needed funds quickly.
117
In 1772, the nonconformist minister Richard Price published a pamphlet on
methods of reducing the national debt. The pamphlet caught the interest of
William Pitt the Younger, who drafted a proposal to reform the Sinking Fund
in 1786. Lord North recommended "the Creation of a Fund, to be appropriated,
and invariably applied, under proper Direction, in the gradual Diminution of
the Debt." Pitt's way of securing "proper Direction" was to introduce
legislation that prevented ministers from raiding the fund in crises. He also
increased taxes to ensure that a £1 million surplus could be used to reduce the
national debt.
2.0 OBJECTIVES
 Define Sinking Fund
 Discuss Simple and Compound Interest
 Discuss features and types of debt instrument
3.0 MAIN BODY
3.1 DEFINITION OF SINKING FUND
A fund into which a company sets aside money over time, in order to retire its
preferred stock, bonds or debentures. A fund into which a company sets aside
money over time, in order to retire its preferred stock, bonds or debentures. In
the case of bonds, incremental payments into the sinking fund can soften the
financial impact at maturity. Investors prefer bonds and debentures backed by
sinking funds because there is less risk of a default.
118
A sinking fund is a fund established by an economic entity by setting aside
revenue over a period of time to fund a future capital expense, or repayment of
a long-term debt.
In North America and elsewhere where it is common for public and private
corporations to raise funds through the issue of bonds, the term is only
normally used in this context. However in the United Kingdom and elsewhere
where the issue of bonds (other than government bonds) is unusual, and where
long-term leasehold tenancies are common, the term is only normally used in
the context of replacement or renewal of capital assets, particularly the
common parts of buildings.
3.1.1 Types of Sinking Fund
A sinking fund may operate in one or more of the following ways:
 The firm may repurchase a fraction of the outstanding bonds in the open
market each year.
 The firm may repurchase a fraction of outstanding bonds at a special call

price associated with the sinking fund provision (they are callable
bonds).
 The firm has the option to repurchase the bonds at either the market
price or the sinking fund price, whichever is lower. To allocate the
burden of the sinking fund call fairly among bondholders, the bonds
chosen for the call are selected at random based on serial number. The
firm can only repurchase a limited fraction of the bond issue at the
sinking fund price. At best some indentures allow firms to use a
doubling option, which allows repurchase of double the required number
of bonds at the sinking fund price.
 A less common provision is to call for periodic payments to a trustee,

with the payments invested so that the accumulated sum can be used for
119
retirement of the entire issue at maturity: instead of the debt amortizing
over the life, the debt remains outstanding and a matching asset accrues.
Thus the balance sheet consists of Asset = Sinking fund, Liability =
Bonds.
Benefits and drawbacks
For the organization retiring debt, it has the benefit that the principal of the
debt or at least part of it, will be available when due. For the creditors, the fund
reduces the risk the organization will default when the principal is due: it
reduces credit risk.
However, if the bonds are callable, this comes at a cost to creditors, because
the organization has an option on the bonds:
 The firm will choose to buy back discount bonds (selling below par) at
their market price,
 while exercising its option to buy back premium bonds (selling above
par) at par.
Therefore, if interest rates fall and bond prices rise, a firm will benefit from the
sinking fund provision that enables it to repurchase its bonds at below-market
prices. In this case, the firm's gain is the bondholder's loss – thus callable
bonds will typically be issued at a higher coupon rate, reflecting the value of
the option.
We can obtain the sinking fund formula by writing R in terms of A in future

value of the annuity formula
A = R [(1+i)n-1]/i R = Ai/(1+i)n -1
GENERAL FORMULA FOR SINKING FUND PAYMENT
R = Ai / (1+i)n -1
R: periodic payment.
120
A: periodic payment R is required to accumulate a sum of A dollars.
n: number of periods.
i: interest rate.
EXAMPLE 7: A company wishes to spend #40000 for new equipment and

decides to set up a sinking fund to accumulate this money over a 3 – year
period. If payments are to be made to the fund quarterly, with interest
compounded quarterly at an annual rate of 5%, how large should the payments
be?
SOLUTION: A = 40000, i=0.05/4 = 0.0125 and n = 4*3=12 (payments). We

use the formula
40000 = R*[(1.0125)12 –1]/0.0125 = 12.86R
Solving for R we get R = #3110.42 (each payment should be #3110.42).
3.2 SIMPLE INTEREST AND COMPOUND INTEREST
Interest is the fee charged for the privilege of borrowing money. If you get a
loan from a bank or other financial institution, you are charged interest for the
privilege of using the institution‘s money. If you invest money in a savings
account, the bank pays you interest for the privilege of using your money. If
you buy an item like a car or stereo ‖on time,‖ you must pay interest for the
privilege of postponing full payment until after you have taken possession of
the item.
SIMPLE INTEREST
Interest that is computed on the principal* alone is called simple interest.
 the total amount of money borrowed (or invested).
121
Suppose you have to pay simple interest at a rate of %5 per year on a 2-year
loan of #300. The interest charged will be 300(0.05)(2)=#30 and the total
amount owed at the end of the 2-year period will be;
300+30 = #330
GENERAL FORMULA FOR SIMPLE INTEREST
A=P (1+rn)
P: principal for which the principal is borrowed
r: yearly interest rate
n: number of years
A: total amount at the end of n years.
COMPOUND INTEREST
Interest that is computed on the previously accumulated interest as well as on

the principal is called compound interest.
If the original principal is p dollars and if the interest is compounded annually

at the rate of r per year, then at the end of the first year the new principal will
be A1 = P+Pr = P(1+r)
the interest earned at the end of the second year is computed on A1, so at the
end of the second year, the accumulated amount will be
A2 = A1+A1r = A1(1+r) = P(1+r)²
Continuing, we see that at the end of n years, the accumulated amount will be
An= P(1+r)n
The interest we computed was compounded annually. In practice, however,

interest is usually compounded more than once a year. In either case, the
quoted rate of interest per year is called the stated, or nominal, rate and the
122
interval of time between successive interest calculations is called the
conversion period.
If interest at the nominal rate of r per year is compounded m times a year on a

principal of P dollars, then the simple interest rate per conversion period is
i= r/m. (annual interest rate/periods per year)
GENERAL FORMULA FOR COMPOUND INTEREST
An= P(1+i)n where i= r/m, n = m*l
P: amount of principal
r: nominal interest rate per year
m: number of conversion periods per year
l: number of years
An: accumulated amount at the end of n conversion periods.
EXAMPLE 1: Suppose you invest #2000 at an annual interest rate of % 6.

Find your balance at the end of 1 year if interest is compounded;
a) yearly b) semiannually c) quarterly d) monthly
SOLUTION: A = P (1+i)n with P=2000
a) i = 0.06/1 n = 1*1 A = 2000(1.06)= #2120
b) i = 0.06/2 n = 1*2 A = 2000(1.03)2= #2121.80
c) i = 0.06/4 n = 1*4 A = 2000(1.015)4= #2122.73
d) i = 0.06/12 n =1*12 A = 2000(1.005)12= #2123.36
123
the more often interest is compounded, the faster your balance will grow.
Banks sometimes compete on the basis of how frequently they compound
interest.
The time taken for an investment to double in values is called the doubling
time for that investment. Similarly, the time taken for an investment to triple in
values is called the tripling time.
3.3 DEBT INSTRUMENT
A paper or electronic obligation that enables the issuing party to raise funds by
promising to repay a lender in accordance with terms of a contract. Types of
debt instruments include notes, bonds, certificates, mortgages, leases or other
agreements between a lender and a borrower.
Investopedia explains 'Debt Instrument'
Debt instruments are a way for markets and participants to easily transfer the
ownership of debt obligations from one party to another. Debt obligation
transferability increases liquidity and gives creditors a means of trading debt
obligations on the market. Without debt instruments acting as a means to
facilitate trading, debt is an obligation from one party to another. When a debt
instrument is used as a medium to facilitate debt trading, debt obligations can
be moved from one party to another quickly and efficiently.
Characteristics and properties of bonds
Bonds are often referred to as debt instruments, debt obligations, or fixed

income securities (despite the fact that some bonds pay variable rates of
interest, or none at all).
Coupon Rate
The rate of interest that a bond pays to the bondholder is called the coupon
rate. This term dates back to when bonds were issued as paper certificates
124
(known as bearer bonds) with coupons attached. Bearer bonds became the
property of whoever had physical possession of the bond. The bondholder
would clip a coupon from the certificate and redeem it with the bond‘s paying
agent (usually a commercial bank) to collect their interest payment. Now
virtually all bonds are held in computerized book-entry form (all treasuries), or
a physical certificate without coupons.
The coupon rate is the stated annualized interest rate that the bond issuer is
contractually obligated to pay to the bondholder. The coupon payment is
usually paid on a quarterly, semi-annual, or annual basis and is based on the
maturity date. For example, if the maturity date is September 15, 2020, a bond
that pays quarterly interest will make a payment on March 15, June 15,
September 15, and December 15 each year until 2020.
The principal payment received at maturity and the basis for determining the
amount of the coupon payment is the stated par amount over the life of the
bond, regardless of the general level of interest rates. of the bond. A bond that
is paying a 7% coupon rate will pay #1,000 X 0.07, or #70 annually. If the
bond pays on a semi-annual basis, the bondholder will receive a #35 payment
twice a year on the coupon payment date. The coupon payment will not
change (assuming the bond is not a floating-rate bond)
Zero Coupon Bonds
Zero coupon bonds do not make coupon payments during the life of the bond.
Zero coupon bonds are issued at a discount to par value, and the return to the
investor comes in the difference that the bondholder pays for the bond
(discount to par value), and the amount of principal payment made at maturity
(par value).
Floating Rate Bonds
A floating rate bond has a coupon rate that is pegged to a benchmark, such as
libor, and is adjusted periodically. Floating rate bonds have the advantage of
125
being less volatile in price, but the disadvantage of providing an unpredictable
stream of income. Floating-rate bonds are attractive to investors that are more
interested in preservation of principal than in having an assured amount of
income.
Par Amount
The par amount of a bond is the amount of principal that the bondholder will
receive at maturity. Par amount is also referred to as face amount.
Bonds are typically issued and traded in units of #1,000, though some issues
have minimum amounts, such as #5,000. The par amount of a bond being
traded will determine how close to fair market price a particular bond will
trade for. The par amount that trades at the best market price is known as a
round lot, and smaller sizes are known as odd lots.
Maturity
The maturity dates is the specific day, month, and year that the bond issuer is
obligated to pay back the principal to the bondholder. There are rare examples
of extendable bonds that give the issuer or bondholder the option to extend the
maturity date of the bond.
In the bond market, the maturity of a bond is expressed as the number of years
remaining until the bonds maturity date. For example, a 30-year bond that was
issued ten years ago would be referred to as a 20-year bond.
When bonds are issued, there is a direct correlation between the maturity date
and the coupon rate of the bond. The longer the length of time to maturity, the
higher the coupon rate will be. There are a number of reasons for this
correlation; one of them is the time value of money. The time value of money
stipulates that an individual would rather receive money now than at some time
in the future due to the potential earnings capacity of the money. Another
reason for this is that the longer the time period, the more uncertainty is
126
involved with holding the bond. There is always a chance that the price of a
bond can decline, or an adverse event can befall the issuer of the bond that will
jeopardize their ability to pay the interest and/or principal. Normally, this
correlation also holds true for bonds trading in the secondary market, but there
are rare occasion when it does not.
Bond Pricing and Yield
As marketable debt instruments, bonds can be traded and their price can
fluctuate over time. Bond prices are quoted as a percentage of par amount.
For example, a bond price of 99 indicates a price of 99% of par, which would
be #990 for a par amount of #1,000. A bond trading at 101 3/8 is 101.375% of
par or #1013.75 (every 1/8th of a point is worth #1.25 for every #1,000 in face
amount). Bonds priced above par (such as 102 ½) are referred to as trading at
a premium, while bonds below par are at a discount. Bonds trading at 100 are
always quoted as trading at par.
An entity that is offering bonds in the primary or new issue market, it sets the
coupon rate to reflect the coupon rate of issues that are similar in maturity,
credit quality, etc. During the initial underwriting or offering period, the bonds
should trade close to par, but when the offering period ends, the price can
freely fluctuate on the secondary market. We will examine what factors
influence bond prices in detail in future lessons but they include:
 The general level of interest rates;
 The expected rate of inflation;
 The economic outlook;
 The issuer‘s credit rating;
 The supply of new debt issues; and
 The demand for bonds versus alternative investments.
127
While we have stated that the coupon rate remains constant for fixed rate
bonds, the market yield will fluctuate with the price of the bond. If a bond has
a coupon rate of 7 ¾% and the market yield for equivalent bond is 7 ¾%, then
the price of the bond would be par. But, if some event caused the market yield
on equivalent bonds to rise to 8%, the coupon yield of the bond at 7 ¾% is not
as attractive to potential buyers who can get a bond with the higher yield. The
price of the less desirable, lower yielding bond would drop in price until its
market yield was also 8%. This is a very important concept: When market
yields increase, bond prices decrease; when market yields decrease, bond
prices increase. That is to say that there is an inverse relationship between
changes market yield and changes in bond prices.
When a bond is purchased at a price other than par, the interest payment is no
longer the single factor that determines the rate of return on the investment. If
a bond is purchased at 90, the investor pays #900 for the bond, but will receive
#1,000 at maturity. In addition to receiving the interest payments over the life
of the bond, the investor will also earn a #100 profit at maturity. Conversely,
bonds that are purchased at a premium will cause the investor to experience a
loss at maturity. The measure of a bond‘s return that takes this principal gain
or loss at maturity is the bond‘s yield to maturity. The market yield that we
have been referring to is the bond‘s yield to maturity. Yield to maturity is the
measurement of the present value of a bond‘s future cash flows (coupon
payments and any principal gain or loss at maturity) based on the current
market price.
We could go through the mathematics of calculating yield to maturity and how

to determine what the price change of a bond would be for a given change in
interest rates, but it is much easier to just use bond calculators, like those found
here. For those that are curious enough to want to explore the mathematics,
you can find it here.
128
Another yield measurement that bond investors use is a bond‘s current yield.
The current yield is determined by simply dividing the annual coupon payment
by the market value of the bond. A #1,000 par bond trading at 96 would have
a market value of #960. If the bond had a stated coupon rate of 7 ½% it would
pay #75 annually: 75/960= .078125, so the current yield would be 7.8125%.
The current yield of a bond trading at a discount will always be higher than the
coupon rate, while the current yield of a premium bond will always be less
than the coupon rate. This also holds true for yield to maturity. Because yield
to maturity takes into account the time value of money, and current yield does
not, it is a much better measure of a bond‘s true return.
Other Bond Properties
It is essential for anyone investing in bonds to carefully review all aspects of a

bond before purchasing. Here are some important properties of bands that
should be carefully examined.
4.0 CONCLUSION
The theoretical case for a sinking fund is clear. It is simpler than an income
tax, with lower economic costs. It can be made progressive, thus satisfying
equity criteria for good tax design.
5.0 SUMMARY
A naira expected sometimes in the future is not equivalent to a naira today

because of time value of money. Interest is the payment made foe the use of
money. The concepts of time value of money forms the basis of discussion on
financial mathematics principles such as simple interest, compound interest,
and present value.
129
 If a bond with an annual coupon of 10% and a face value of #1,000 has
an infinite life, calculate the value if the bond yield is 12%.
 Suppose you are considering two investments: one that pays 10% simple
interest per annum and one that pays 10% compound interest per annum,
which would you choose? Why?
Helfert, E.A. (2001). "The Nature of Financial Statements: The Cash Flow
Statement". Financial Analysis - Tools and Techniques - A Guide for

Managers. McGraw-Hill.
Bodie, Z., Alex, K., & Alan, M. (2004). Essentials of Investments, 5th
ed. McGraw-Hill Irwin.
Barry, J.E. (2007). Interpretation and Application of International Financial
Reporting Standards. John Wiley & Sons.
130
UNIT 4: MATHEMATICAL PROGRAMMING (LINEAR
PROGRAMMING)
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Requirements for Linear Programming Problems
3.2 Assumptions in Linear Programming
3.3 Application of Linear Programming
3.4 Areas of Application of Linear Programming
3.5 Formulation of Linear Programming Problems
3.6 Advantages Linear Programming Methods
3.7 Limitation of Linear programming Models
3.8 Graphical Methods of Linear Programming Solution
4.0 Conclusion
5.0 Summary
6.0 Tutor Marked Assignment
7.0 References
1.0 INTRODUCTION
Linear programming deals with the optimization (maximization or

minimization) of a function of variables known as objective function, subject
to a set of linear equations and/or inequalities known as constraints. The
objective function may be profit, cost, production capacity or any other
measure of effectiveness, which is to be obtained in the best possible or
optimal manner. The constraints may be imposed by different resources such
as market demand, production process and equipment, storage capacity, raw
material availability, etc. By linearity is meant a mathematical expression in
131
which the expressions among the variables are linear e.g., the expression a1x1 +
a2x2 + a3x3 + ... + aⁿxⁿ is linear. Higher powers of the variables or their products
do not appear in the expressions for the objective function as well as the
constraints (they do not have expressions like x13, x2 3/2, x1 x2 , a1 x1 + a2 log x2 ,
etc.). The variables obey the properties of proportionality (e.g., if a product
requires 3 hours of machining time, 5 units of it will require 15 hours) and
additivity (e.g., amount of a resource required for a certain number of products
is equal to the sum of the resource required for each).
It was in 1947 that George Dantzig and his associates found out a technique for
solving military planning problems while they were working on a project for
U.S. Air Force. This technique consisted of representing the various activities
of an organization as a linear programming (L.P.) model and arriving at the
optimal programme by minimizing a linear objective function. Afterwards,
Dantzig suggested this approach for solving business and industrial problems.
He also developed the most powerful mathematical tool known as ―simplex
method‖ to solve linear programming problems.
2.0 OBJECTIVES
At the end of this study unit, you should be able to
 Explain the requirements for Linear Programming

 Highlight the assumptions of Linear Programming
 Identify the Areas of application of Linear Programming
 Formulate a Linear Programming problem
 Solve various problems using Linear Programming
132
3.0 MAIN CONTENT
3.1 REQUIREMENTS FOR A LINEAR PROGRAMMING

PROBLEM
All organizations, big or small, have at their disposal, men, machines, money
and materials, the supply of which may be limited. If the supply of these
resources were unlimited, the need for management tools like linear
programming would not arise at all. Supply of resources being limited, the
management must find the best allocation of its resources in order to maximize
the profit or minimize the loss or utilize the production capacity to the
maximum extent. However this involves a number of problems which can be
overcome by quantitative methods, particularly the linear programming.
Generally speaking, linear programming can be used for optimization

problems if the following conditions are satisfied:
1. There must be a well-defined objective function (profit, cost or quantities

produced) which is to be either maximized or minimized and which can be
expressed as a linear function of decision variables.
2. There must be constraints on the amount or extent of attainment of the

objective and these constraints must be capable of being expressed as linear
equations or inequalities in terms of variables.
3. There must be alternative courses of action. For example, a given product

may be processed by two different machines and problem may be as to how
much of the product to allocate to which machine.
4. Another necessary requirement is that decision variables should be

interrelated and nonnegative. The non-negativity condition shows that linear
programming deals with real life situations for which negative quantities are
generally illogical.
133
5. As stated earlier, the resources must be in limited supply. For example, if a
firm starts producing greater number of a particular product, it must make
smaller number of other products as the total production capacity is limited.
3.2 ASSUMPTIONS IN LINEAR PROGRAMMING MODELS
A linear programming model is based on the following assumptions:
1. Proportionality: A basic assumption of linear programming is that

proportionality exists in the objective function and the constraints. This
assumption implies that if a product yields a profit of #10, the profit earned
from the sale of 12 such products will be # (10 x 12) = #120. This may not
always be true because of quantity discounts. Further, even if the sale price is
constant, the manufacturing cost may vary with the number of units produced
and so may vary the profit per unit. Likewise, it is assumed that if one product
requires processing time of 5 hours, then ten such products will require
processing time of 5 x 10 = 50 hours. This may also not be true as the
processing time per unit often decreases with increase in number of units
produced. The real world situations may not be strictly linear. However,
assumed linearity represents their close approximations and provides very
useful answers.
2. Additivity: It means that if we use t1 hours on machine A to make product 1

and t2 hours to make product 2, the total time required to make products 1 and
2 on machine A is t1 + t2 hours. This, however, is true only if the change-over
time from product 1 to product 2 is negligible. Some processes may not behave
in this way. For example, when several liquids of different chemical
compositions are mixed, the resulting volume may not be equal to the sum of
the volumes of the individual liquids.
3. Continuity: Another assumption underlying the linear programming model

is that the decision variables are continuous i.e., they are permitted to take any
134
non-negative values that satisfy the constraints. However, there are problems
wherein variables are restricted to have integral values only. Though such
problems, strictly speaking, are not linear programming problems, they are
frequently solved by linear programming techniques and the values are then
rounded off to nearest integers to satisfy the constraints. This approximation,
however, is valid only if the variables have large optimal values. Further, it
must be ascertained whether the solution represented by the rounded values is
a feasible solution and also whether the solution is the best integer solution.
4. Certainty: Another assumption underlying a linear programming model is

that the various parameters, namely, the objective function coefficients, R.H.S.
coefficients of the constraints and resource values in the constraints are
certainly and precisely known and that their values do not change with time.
Thus the profit or cost per unit of the product, labour and materials required
per unit, availability of labour and materials, market demand of the product
produced, etc. are assumed to be known with- certainty. The linear
programming problem is, therefore, assumed to be deterministic in nature.
5. Finite Choices: A linear programming model also assumes that a finite

(limited) number of choices (alternatives) are available to the decision-maker
and that the decision variables are interrelated and non-negative. The non-
negativity condition shows that linear programming deals with real-life
situations as it is not possible to produce/use negative quantities.
Mathematically these non-negativity conditions do not differ from other

constraints. However, since while solving the problems they are handled
differently from the other constraints, they are termed as non-negativity
restrictions and the term constraints is used to represent constraints other than
non-negativity restrictions and this terminology has been followed throughout
the book.
135
3.3 APPLICATIONS OF LINEAR PROGRAMMING METHOD
Though, in the world we live, most of the events are non-linear, yet there are
many instances of linear events that occur in day-to-day life. Therefore, an
understanding of linear programming and its application in solving problems is
utmost essential for today‘s managers.
Linear programming techniques are widely used to solve a number of business,

industrial, military, economic, marketing, distribution and advertising
problems. Three primary reasons for its wide use are:
1. A large number of problems from different fields can be represented or at

least approximated to linear programming problems.
2. Powerful and efficient techniques for solving L.P. problems are available.
3. L.P. models can handle data variation (sensitivity analysis) easily.
However, solution procedures are generally iterative and even medium size
problems require manipulation of large amount of data. But with the
development of digital computers, this disadvantage has been completely
overcome as these computers can handle even large L.P. problems in
comparatively very little time at a low cost.
3.4 AREAS OF APPLICATION OF LINEAR PROGRAMMING
Linear programming is one of the most widely applied techniques of

operations research in business, industry and numerous other fields. A few
areas of its application are given below.
1. INDUSTRIAL APPLICATIONS
(a) Product mix problems: An industrial concern has available a certain

production capacity (men, machines, money, materials, market, etc.) on
various manufacturing processes to manufacture various products. Typically,
136
differents products will have different selling prices, will require different
amounts of production capacity at the several processes and will, therefore,
have different unit profits; there may also be stipulations (conditions) on
maximum and/or minimum product levels. The problem is to determine the
product mix that will maximize the total profit.
(b) Blending problems: These problems are likely to arise when a product can
be made from a variety of available raw materials of various compositions and
prices. The manufacturing process involves blending (mixing) some of these
materials in varying quantities to make a product of the desired specifications.
For instance, different grades of gasoline are required for aviation purposes.
Prices and specifications such as octane ratings, tetra ethyl lead concentrations,
maximum vapour pressure etc. of input ingredients are given and the problem
is to decide the proportions of these ingredients to make the desired grades of
gasoline so that (i) maximum output is obtained and (ii) storage capacity
restrictions are satisfied. Many similar situations such as preparation of
different kinds of whisky, chemicals, fertilizers and alloys, etc. have been
handled by this technique of linear programming.
(c) Production scheduling problems: They involve the determination of

optimum production schedule to meet fluctuating demand. The objective is to
meet demand, keep inventory and employment at reasonable minimum levels,
while minimizing the total cost Production and inventory.
(d) Trim loss problems: They are applicable to paper, sheet metal and glass
manufacturing industries where items of standard sizes have to be cut to
smaller sizes as per customer requirements with the objective of minimizing
the waste produced.
(e) Assembly-line balancing: It relates to a category of problems wherein the

final product has a number of different components assembled together. These
137
components are to be assembled in a specific sequence or set of sequences.
Each assembly operator is to be assigned the task / combination of tasks so that
his task time is less than or equal to the cycle time.
(f) Make-or-buy (sub-contracting) problems: They arise in an organization

in the face of production capacity limitations and sudden spurt in demand of its
products. The manufacturer, not being sure of the demand pattern, is usually
reluctant to add additional capacity and has to make a decision regarding the
products to be manufactured with his own resources and the products to be
sub-contracted so that the total cost is minimized.
2. MANAGEMENT APPLICATIONS
(a) Media selection problems: They involve the selection of advertising mix
among different advertising media such as T.V., radio, magazines and
newspapers that will maximize public exposure to company‘s product. The
constraints may be on the total advertising budget, maximum expenditure in
each media, maximum number of insertions in each media and the like.
(b) Portfolio selection problems: They are frequently encountered by banks,

financial companies, insurance companies, investment services, etc. A given
amount is to be allocated among several investment alternatives such as bonds,
saving certificates, common stock, mutual fund, real estate, etc. to maximize
the expected return or minimize the expected risk.
(c) Profit planning problems: They involve planning profits on fiscal year
basis to maximize profit margin from investment in plant facilities, machinery,
inventory and cash on hand.
(d) Transportation problems: They involve transportation of products from,

say, n sources situated at different locations to, say, m different destinations.
Supply position at the sources, demand at destinations, freight charges and
storage costs, etc. are known and the problem is to design the optimum
138
transportation plan that minimizes the total transportation cost (or distance or
time).
(e) Assignment problems: They are concerned with allocation of facilities

(men or machines) to jobs. Time required by each facility to perform each job
is given and the problem is to find the optimum allocation (one job to one
facility) so that the total time to perform the jobs is minimized.
(f) Man-power scheduling problems: They are faced by big hospitals,

restaurants and companies operating in a number of shifts. The problem is to
allocate optimum man-power in each shift so that the overtime cost is
minimized.
3. MISCELLANEOUS APPLICATIONS
(a) Diet problems: They form another important category to which linear
programming has been applied. Nutrient contents such as vitamins, proteins,
fats, carbohydrates, starch, etc. in each of a number of food stuffs is known.
Also the minimum daily requirement of each nutrient in the diet as well as the
cost of each type of food stuff is given and the problem is to determine the
minimum cost diet that satisfies the minimum daily requirement of nutrients.
(b) Agriculture problems: These problems are concerned with the allocation
of input resources such as acreage of land, water, labour, fertilisers and capital
to various crops so as to maximize net revenue.
(c) Flight scheduling problems: They are devoted to the determination of the
most economical patterns and timings of flights that result in the most efficient
use of aircrafts and crew.
(d) Environment protection: They involve analysis of different alternatives

for efficient waste disposal, paper recycling and energy policies.
139
(e) Facilities location: These problems are concerned with the determination
of best location of public parks, libraries and recreation areas, hospital
ambulance depots, telephone exchanges, nuclear power plants, etc.
Oil refineries have used linear programming with considerable success. Similar
trends are developing in chemical industries, iron and steel industries,
aluminium industry, food processing industry, wood products manufacture and
many others. Other areas where linear programming has been applied include
quality control inspection, determination of optimal bombing patterns,
searching of submarines, design of war weapons, vendor quotation analysis,
structural design, scheduling military tanker fleet, fabrication scheduling, steel
production scheduling, balancing of assembly lines and computations of
maximum flows in networks.
In fact linear programming may be used for any general situation where a
linear objective function has to be optimised subject to constraints expressed as
linear equations/inequalities.
3.5 FORMULATION OF LINEAR PROGRAMMING PROBLEMS
First, the given problem must be presented in linear programming form. This
requires defining the variables of the problem, establishing inter-relationships
between them and formulating the objective function and constraints. A model,
which approximates as closely as possible to the given problem, is then to be
developed. If some constraints happen to be nonlinear, they are approximated
to appropriate linear functions to fit the linear programming format. In case it
is not possible, other techniques may be used to formulate and then solve the
model.
EXAMPLE 9.1 (Production Allocation Problem)
A firm produces three products. These products are processed on three

different machines. The time required to manufacture one unit of each of the
140
three products and the daily capacity of the three machines are given in the
table below.
TABLE 9.1
Machine Time per unit (minutes) Machine capacity
Product Product Product (minutes/day)

1 2 3
M1 2 3 2 440
M2 4 - 3 470
M3 2 5 - 430
It is required to determine the daily number of units to be manufactured for

each product. The profit per unit for product 1, 2 and 3 is #4, #3 and #6
respectively. It is assumed that all the amounts produced are consumed in the
market. Formulate the mathematical (L.P) model that will maximize the daily
profit.
Formulation of Linear Programming Model
Step 1:
From the study of the situation find the key-decision to be made. It this
connection, looking for variables helps considerably. In the given situation key
decision is to decide the extent of products 1, 2 and 3, as the extents are
permitted to vary.
141
Step 2:
Assume symbols for variable quantities noticed in step 1. Let the extents.
(mounts) of products, 1, 2 and 3 manufactured daily be x1, x2 and x3 units
respectively.
Step 3:
Express the feasible alternatives mathematically in terms of variables. Feasible

alternatives are those which are physically, economically and financially
possible. In the given situation feasible alternatives are sets of values of x1, x2
and x3, where x1, x2, x= ≥ 0, since negative production has no meaning and is
not feasible.
Step 4:
Mention the objective quantitatively and express it as a linear function of

variables. In the present situation, objective is to maximize the profit.
i.e., maximize Z = 4x1 + 3x2 + 6x3.
Step 5:
Put into words the influencing factors or constraints. These occur generally
because of constraints on availability (resources) or requirements (demands).
Express these constraints also as linear equations/inequalities in terms of
variables.
Here, constraints are on the machine capacities and can be mathematically

expressed as
2x1 + 3x2 + 2x3 ≤ 440,
4x1 + 0x2 +3x3 ≤ 470,
2x1 + 5x2 + 0x3 ≤ 430.
142
EXAMPLE 9.2 (Diet Problem)
A person wants to decide the constituents of a diet which will fulfil his daily
requirements of proteins, fats and carbohydrates at the minimum cost. The
choice is to be made from four different types of foods. The yields per unit of
these foods are given in table 2.2.
TABLE 9.2
Food type Yield per unit Cost per unit (#)
1 3 2 6 45
2 4 2 4 40
3 8 7 7 85
4 6 5 4 65
Minimum 800 200 700

requirement
Formulate linear programming model for the problem.
Formulation of L.P Model
Let x1, x2, x3 and x4 denote the number of units of food of type 1, 2, 3 and 4
respectively.
Objective is to minimize the cost i.e.,
Minimize Z = #(45x1 + 40x2 + 85x3 + 65x4).
143
Constraints are on the fulfilment of the daily requirements of the various
constituents.
i.e., for protein, 3x1 + 4x2 + 8x3 + 6x4 ≥ 800,
for fats, 2x1 + 2x2 + 7x3 + 5x4 ≥ 200,
and for carbohydrates, 6x1 + 4x2 + 7x3 + 4x4 ≥ 700,
EXAMPLE 9.3 (Blending Problem)
A firm produces an alloy having the following specifications:
(i) specific gravity ≤ 0.98,
(ii) chromium ≥ 8%,
(iii) melting point ≥ 450°C.
Raw materials A, B and C having the properties shown in the table can be used
to make the alloy.
Table 9.3
Property Properties of raw material
A B C
Specific gravity 0.92 0.97 1.04
Chromium 7% 13% 16%
Melting point 440OC 490OC 480OC
Costs of the various raw materials per ton are: #90 for A, #280 for B and #40
for C. Formulate the L.P model to find the proportions in which A, B and C be
144
used to obtain an alloy of desired properties while the cost of raw materials is
minimum.
Let the percentage contents of raw materials A, B and C to be used for making
the alloy be x1, x2 and x3 respectively.
Objective is to minimize the cost
i.e., minimize Z = 90x1 + 280x2 + 40x3.
Constraints are imposed by the specifications required for the alloy.
They are;
0.92x1 + 0.97x2 + 1.04x3 ≤ 0.98,
7x1 + 13x2+ 16x3 ≥ 8,
440x1 + 490x2 + 480x3 ≥ 450,
and x1 + x2 + x3 = 100,
as x1, x2 and x3 are the percentage contents of materials A, B and C in making

the alloy.
Also x1, x2, x3, each ≥ 0.
EXAMPLE 9.4 (Advertising Media Selection Problem)
An advertising company wishes to plan its advertising strategy in three

different media television, radio and magazines. The purpose of advertising is
to reach as large a number of potential customers as possible. Following data
have been obtained from market survey:
145
TABLE 9.4
Television Radio Magazine Magazine II

I
Cost of an advertising # 30,000 # 20,000 # 15,000 # 10,000

unit
No. of potential 200,000 600,000 150,000 100,000

customers reached per
unit
No. of female 150,000 400,000 70,000 50,000

customers reached per
unit
The company wants to spend not more than #450,000 on advertising.

Following are the further requirements that must be met:
at least I million exposures take place among female customers, advertising on

magazines be limited to #150,000,
at least 3 advertising units be bought on magazine I and 2 units on magazine II,

the number of advertising units on television and radio should each be between
5 and 10.
Let x1, x2, x3 and x4 denote the number of advertising units to be bought on
television, radio, magazine I and magazine II respectively.
The objective is to maximize the total number of potential customers reached.

146
i.e., maximize Z = 10 (2x1 + 6x2 + 1.5x3 + x4).
Constraints are;
on the advertising budget: 30,000x1+20,000x2+15,000x3+10,000x4 ≤ 450,000
or 30x1+20x2+15x3+10x4 ≤ 450,
on number of female customers reached by
the advertising campaign: 150,000x1+400,000x2+70,000x3+50,000x4= ≥

100,000
or 15x1+40x2+7x3+5x4 ≥ 100
on expenses on magazine
advertising: 15,000x3+10,000x4 ≤ 150,000 or 15x3+10x4 ≤ 150
on no. of units on magazines: x3 ≥ 3,
x4 ≥ 2,
on no. of units on television: : 5 ≤ x1 ≤ 10 or x1 ≥ 5, x1 ≤ 10
on no. of units on radio: 5 ≤ x2 ≤ 10 or x2 ≥ 5, x2 ≤ 10
where x1, x2, x3, x4, each ≥ 0.
EXAMPLE 9.5 (Inspection Problem)

A company has two grades of inspectors, I and II to undertake quality control
inspection. At least 1,500 pieces must be inspected in an 8-hour day. Grade I
inspector can check 20 pieces in an hour with an accuracy of 96%. Grade II
inspector checks 14 pieces an hour with an accuracy of 92%.
Wages of grade I inspector are #5 per hour while those of grade II inspector
are #4 per hour. Any error made by an inspector costs #3 to the company. If
147
there are, in all, 10 grade I inspectors and 15 grade II inspectors in the
company find the optimal assignment of inspectors that minimizes the daily
inspection cost.
Let x1 and x2 denote the number of grade I and grade II inspectors that may be
assigned the job of quality control inspection.
The objective is to minimize the daily cost of inspection. Now the company
has to incur two types of costs: wages paid to the inspectors and the cost of
their inspection errors. The cost of grade I inspector/hour is
# (5 + 3 x 0.04 x 20) = #7.40.
Similarly, cost of grade II inspector/hour is
# (4 + 3 x 0.08 x 14) = #7.36.
: The objective function is
minimize Z = 8(7.40x1 + 7.36x2) = 59.20x1 + 58.88x2.
Constraints are on the number of grade I inspectors : x1 ≤ 10,
on the number of grade II inspectors : x2 ≤ 15,
on the number of pieces to be inspected daily:
20 X 8x1 + 14 X 8x2 ≥ 1,500
or 160x1 + 112x2 ≥ 1,500,
where x1,x2 ≥ 0.
148
EXAMPLE 9.6 (Product Mix Problem)
A chemical company produces two products, X and Y. Each unit of product X

requires 3 hours on operation I and 4 hours on operation IL while each unit of
product Y requires 4 hours on operation I and 5 hours on operation II. Total
available time for operations I and 11 is 20 hours and 26 hours respectively.
The production of each unit of product Y also results in two units of a by-
product Z at no extra cost.
Product X sells at profit of #I0/unit, while Y sells at profit of #20/unit. By-

product Z brings a unit profit of #6 if sold; in case it cannot be sold, the
destruction cost is # 4/unit. Forecasts indicate that not more than 5 units of Z
can be sold. Formulate the L.P. model to determine the quantities of X and Y
to be produced, keeping Z in mind, so that the profit earned is maximum.
Let the number of units of products X, Y and Z produced be x1, x2, xZ, where
xZ = number of units of Z produced
= number of units of Z sold + number of units of Z destroyed
= x3 + x4 (say).
Objective is to maximize the profit. Objective function (profit function) for

products X and Y is linear because their profits (#10/unit and #20/unit) are
constants irrespective of the number of units produced. A graph between the
total profit and quantity produced will be a straight line. However, a similar
graph for product Z is non-linear since it has slope +6 for first part, while a
slope of -4 for the second. However, it is piece-wise linear, since it is linear in
the regions (0 to 5) and (5 to 2Y). Thus splitting x into two parts, viz, the
number of units of Z sold (x3) and number of units of Z destroyed (x4) makes
the objective function for product Z also linear.
149
Thus the objective function is
maximize Z= l0x1 + 20x2 + 6x3 - 4x4.
Constraints are
on the time available on operation I: 3x1 + 4x2 ≤ 20,
on the time available on operation II: 4x1 + 5x2 ≤ 26,
on the number of units of product Z sold: x3 ≤ 5,
on the number of units of product Z produced: 2Y = Z
or 2x2 = x3 + x4 or -2x2 + x3+x4 = 0,
where x1, x2, x3, x4, each ≥ 0.
A firm manufactures three products A, B and C. Time to manufacture product

A is twice that for B and thrice that for C and if the entire labour is engaged in
making product A, 1,600 units of this product can be produced. These products
are to be produced in the ratio 3: 4: 5. There is demand for at least 300, 250
and 200 units of products A, B and C and the profit earned per unit is #90, #40
and #30 respectively.
150
Formulate the problem as a linear programming problem.
TABLE 9.5
Raw material Requirement per unit of product Total availability

(kg) kg
A B C
P 6 5 2 5,000
Q 4 7 3 6,000
Formulation of L.P. Model
Let x1, x2 and x3 denote the number of units of products A, B and C to be
manufactured.
Objective is to maximize the profit. i.e.,
maximize Z = 90x1 + 40x2 + 30x3.
Constraints can be formulated as follows:
For raw material P, 6x1 + 5x2 + 2x3 ≤ 5,000,
and for raw material Q, 4x + 7x2 + 3x3 ≤ 6,000.
Product B requires 1/2 and product C requires 1/3rd the time required for
product A.
Let t hours be the time to produce A. Then t/2 and t/3 are the times in hours to
produce B and C and since 1,600 units of A will need time 1,600t hours, we
get the constraint,
t x1+t/2 x2+t/3x3 ≤ 1,600t or x1 + x2/2 + x3/3 ≤ 1,600.
151
Market demand requires.
x1 ≥ 300,
x2 ≥ 250,
and x3 ≥ 200.
Finally, since products A, B and C are to be produced in the ratio 3: 4: 5, x1:

x2: x3:: 3: 4: 5
or x1/3 = x2/4,
and x2/4 = x3/5.
Thus there are two additional constraints
4x1 - 3x2=0,
5x2- 4x3 = 0,
where x1, x2, x3 ≥ 0.
EXAMPLE 9.8 (Trim Loss Problem)
A paper mill produces rolls of paper used in making cash registers. Each roll of
paper is 100m in length and can be used in widths of 3, 4, 6 and 1 (km. The
company production process results in rolls that are 24 cm in width. Thus the
company must cut its 24cm roll to the desired widths. It has six basic cutting
alternatives as follows:
152
Cutting alternatives Width of rolls (cm) Waste (cm)
3 4 6 10
1 4 3 - - -
2 - 3 2 - -
3 1 1 1 1 1
4 - - 2 1 2
5 - 4 1 - 2
6 3 2 1 - 1
The minimum demand for the four rolls is as follows:
Roll width (cm) Demand
2 2,000
4 3,600
6 1,600
10 500
The paper mill wishes to minimize the waste resulting from trimming to size.
Formulate the L.P model.
Key decision is to determine how the paper rolls be cut to the required widths
so that trim losses (wastage) are minimum.
Let x, (j = 1, 2, ..., 6) represent the number of times each cutting alternative is

to be used.
153
These alternatives result/do not result in certain trim loss.
Objective is to minimize the trim losses.
i.e., minimize Z =x3+2x4+2x5+x6.
Constraints are on the market demand for each type of roll width:
For roll width of 3cm, 4x1 + x3 + 3x6 ≥ 2,000,
for roll width of 4 cm, 3x1 + 3x2 + x3 + 4x5 + 2x6 ≥ 3,600,
for roll width of 6cm, 2x2 + x3 + 2x4 + x5 + x6 ≥ 1,600,
and for roll width of 10cm, x3 + x4 ≥ 500.
Since the variables represent the number of times each alternative is to be used,
they cannot have negative values.
:. x1, x2, x3, x4, x5, x6, each ≥ 0.
EXAMPLE 9.9 (Production Planning Problem)
A factory manufactures a product each unit of which consists of 5 units of part

A and 4 units of part B. The two parts A and B require different raw materials
of which 120 units and 240 units respectively are available. These parts can be
manufactured by three different methods. Raw material requirements per
production run and the number of units for each part produced are given
below.
154
TABLE 9.6
Method Input per run (units) Output per run (units)
Raw material 1 Raw material 2 Part A Part B
1 7 5 6 4
2 4 7 5 8
3 2 9 7 3
Formulate the L.P model to determine the number of production runs for each
method so as to maximize the total number of complete units of the final
product.
Let x1, x2, x3 represent the number of production runs for method 1, 2 and 3
respectively.
The objective is to maximize the total number of units of the final product.
Now, the total number of units of part A produced by different methods is 6x1
+ 5x2 + 7x3 and for part B is 4x1 + 8x2 + 3x1. Since each unit of the final
product requires 5 units of part A and 4 units of part B, it is evident that the
maximum number of units of the final product cannot exceed the smaller value
of 6x1 +5x2 +7x3 and 4x1 +8x2 +3x3
5 4
Thus the objective is to maximize
Z= Minimum of 6x1 +5x2 +7x3, 4x1 +8x2 +3x3
5 4
155
Constraints are on the availability of raw materials. They are, for
raw material 1, 7x1 + 4x2 + 2x3 ≤ 120,
and raw material 2, 5x1 + 7x2 + 9x3 ≤ 240.
The above formulation violates the linear programming properties since the
objective function is non-linear. (Linear relationship between two or more
variables is the one in which the variables are directly and precisely
proportional). However, the above model can be easily reduced to the
generally acceptable linear programming format.
Let y = 6x1 +5x2 +7x3, 4x1 +8x2 +3x3
5 4
It follows that 6x1 + 5x2 + 7x3 ≥ y and 4x1 + 8x2 + 3x3≥ y
5 4
i.e., 6x1 + 5x2 + 7x3 - 5y ≥ 0, and 4x1 + 8x2 + 3x3 - 4y ≥ 0.

Thus the mathematical model for the problem is
Maximize Z = y,
subject to constraints 7x1 + 4x2 + 2x3 ≤ 120,
5x1 + 7x2 + 9x3 ≤ 240,
6x1 + 5x2 + 7x3 - 5y ≥ 0,
4x1 + 8x2 + 3x3 - 4y ≥ 0,
wherex1, x2, x3, y ≥ 0.
EXAMPLE 9.10 (Fluid Blending Problem)
An oil company produces two grades of gasoline P and Q which it sells at #30
and #40 per litre. The company can buy four different crude oils with the
following constituents and Costs:
156
TABLE 2.7
Crude oil Constituents Price/litre (#)
A B C
1 0.75 0.15 0.10 20.00
2 0.20 0.30 0.50 22.50
3 0.70 0.10 0.20 25.00
4 0.40 0.10 0.50 27.50
Gasoline P must have at least 55 per cent of constituent A and not more than
40 per cent of C. Gasoline Q must not have more than 25 per cent of C.
Determine how the crudes should be used to maximize the profit.
Formulation of Mathematical Model
Key decision to be made is how much of each crude oil be used in making
each of the two grades of gasoline. Let these quantities in litres be represented
by xIJ, where i = crude oil 1, 2, 3, 4 and j = gasoline of grades P and Q
respectively. Thus
x1p = amount in litres of crude oil 1 used in gasoline of grade P
x2p = amount in litres of crude oil 2 used in gasoline of grade P
… …………………………………………………………
……………………………………………………………
x1q = amount in litres of crude oil 1 used in gasoline of grade Q
X2q = amount in litres of crude oil 2 used in gasoline of grade Q
157
… …………………………………………………………
……………………………………………………………
Objective is to maximize the net profit.
i.e., maximize Z = # [30(xip + x2p + x3p, + x4p) + 40(xiq + x2q + x3q + x4q)
-20(x1p +Xia) - 22.50 (x2p +x2q) - 25 (x3p x3q) - 27.50(x4p - x4q)
or maximize Z = #[10x1p + 7.50x2p + 5x3p, + 2.50x4p + 201q + l7.50x2q + l5x3q)
Constraints are on the quantities of constituents A and C to be allowed in the

two grades of gasoline.
i.e., 0.75x1p + 0.20x2p + 0.70x3p + 0.40x4p ≥ 0.55 (x1p, + x2p + x3p + x4p),
0.10x1p + 0.50x2p + 0.20x3p + 0.50x4p ≤ 0.40 (x1 + x2p + x3p+x4p),
and 0.10x1q + 0.50x2q + 0.20x3q + 0.50x4q≤ 0.25 (x1q + x2q + x3q + x4q),
where x1p, x2p, x3p,x4p, x1q, x2q, x3q, x4q, each ≥ 0.
EXAMPLE 9.11 (Production Planning Problem)
A company manufacturing air coolers has, at present, firm orders for the next 6
months. The company can schedule its production over the next 6 months to
meet orders on either regular or overtime basis. The order size and production
costs over the next six months are as follows:
Month: 1 2 3 4 5 6
Orders: 640 660 700 750 550 650
Cost/unit (#) for
regular production: 40 42 41 45 39 40
Cost/unit (#) for
158
overtime production: 52 50 53 50 45 43
With 100 air coolers in stock at present, the company wishes to have at least
150 air coolers in stock at the end of 6 months. The regular and overtime
production in each month is not to exceed 600 and 400 units respectively. The
inventory carrying cost for air coolers is #12 per unit per month. Formulate the
L.R model to minimize the total cost.
Key decision is to determine the number of units of air coolers to he produced

on regular as well as overtime basis together with the number of units of
ending inventory in each of the six months.
Let xij be the number of units produced in month j (j = 1, 2, ..., 6), on a regular
or overtime basis (i = 1, 2). Further let yj represent the number of units of
ending inventory in month j (j= 1, 2, ..., 6).
Objective is to minimize the total cost (of production and inventory carrying).
i.e., minimize Z = (40x11 + 42x12 + 41x13 + 45x14 + 39x15 + 40x16)
+ (52x21 + 50x22 + 53x23 + 50x24 + 45x25 + 43x26)
+12(y1 + y2 + y3 + y4 + y5 + y6)
Constraints are
for the first month, 100 + x11 + x21 - 640 = y1,
for the second month, y1 + x12 + x22 - 660 = y2,
for the third month, y2 + x13 + x23 – 700 = y3
for the fourth month, y3 + x14 + x24 – 750 = y4
for the fifth month, y4 + x15 + x25 – 550 = y5
159
and for the sixth month, y5 + x16 + x26 – 650 = y6
Also, the ending inventory constraint is
Y6 ≥ 150
Further, since regular and overtime production each month is not to exceed
600 and 400 units respectively,
x11, x12, x13, x14, x15, x16, each ≤ 600,
and x21, x22, x23, x24, x25, x26, each ≤ 400.
Also xij ≥ 0 (i=1, 2; j=1, 2,..., 6), yj ≥ 0.
EXAMPLE 9.12 (Transportation Problem)
A dairy firm has two milk plants with daily milk production of 6 million litres
and 9 million litres respectively. Each day the firm must fulfil the needs of its
three distribution centres which have milk requirement of 7, 5 and 3 million
litres respectively. Cost of shipping one million litres of milk from each plant
to each distribution centre is given, in hundreds of naira below. Formulate the
L.P model to minimize the transportation cost.
Distribution Centres
1 2 3 Supply
2 3 11 6
1 9 6 9
Plants 7 5 3
Demand
160
Key decision is to determine the quantity of milk to be transported from either

plant to each distribution centre.
Let x1, x2 be the quantity of milk (in million litres) transported from plant I to
distribution centre no. 1 and 2 respectively. The resulting table representing
transportation of milk is shown below.
1 2 3
x1 x2 6-x1-x2
7-x1 5-x2 9-(7-x1)
(5-x2)
7 5 3
Objective is to minimize the transportation cost.
i.e., minimize Z = 2x1 + 3x2 + 11(6 – x1 – x2) + (7 - x1) + 9(5 - x2)
+ 6[9 - (7 - x1) - (5 - x2)] = 100 - 4x1 - llx2.
Constraints are
6 – x1 - x2 ≥ 0 or x1 + x2 ≤ 6,
7 - x1 ≥ 0 or x1 ≤ 7,
5 - x2 ≥ 0 or x2 ≤ 5,
and 9 - (7 - x1) - (5 - x2)≥0 or x1+x2 ≥ 3,

161
where x1,x2 ≥ 0.
A plant manufactures washing machines and dryers. The major manufacturing

departments are the stamping department, motor and transmission deptt. and
assembly deptt. The first two departments produce parts for both the products
while the assembly lines are different for the two products. The monthly
deptt.capacities are;
Stamping deptt. : 1,000 washers or 1,000 dryers
Motor and transmission deptt. : 1,600 washers or 7,000 dryers
Washer assembly line : 9,000 washers only
Dryer assembly line : 5,000 dryers only.
Profits per piece of washers and dryers are #270 and #300 respectively.
Formulate the
L.P model.
Let x1 and x2 represent the number of washing machines and dryers to be

manufactured each month.
The objective is to maximize the total profit each month.
i.e. maximize Z = 270x1 + 300x2.
Constraints are on the monthly capacities of the various departments.
For the stamping deptt.,x1 + x2 ≤ 1,

1,000 1,000
For the motor and transmission deptt.,
162
x1 + x2 ≤ 1
1,600 7,000
for the washer assembly deptt., x1 ≤ 9,000
and for the dryer assembly deptt., x2 ≤ 5,000
where x1 ≥ 0, x2 ≥ 0.
A certain farming organization operates three farms of comparable

productivity. The output of each farm is limited both by the usable acreage and
by the amount of water available for irrigation. Following are the data for the
upcoming season:
Farm Usable acreage Water available in acre feet
1 400 1,500
2 600 2,000
3 300 900
The organization is considering three crops for planting which differ primarily
in their expected profit per acre and in their consumption of water.
Furthermore, the total acreage that can be devoted to each of the crops is
limited by the amount of appropriate harvesting equipment available.
Crop Minimum acreage Water consumption in Expected profit
acre feet per acre per acre
A 400 5 # 400
B 300 4 # 300
163
C 300 3 # 100
However, any combination of the crops may be grown at any of the farms. The
organization wishes to know how much of each crop should be planted at the
respective farms in order to maximize expected profit. Formulate this as a
linear programming problem.
The key decision is to determine the number of acres of each farm to be

allotted to each crop.
Let x, (i = farm 1, 2, 3; j = crop A, B, C) represent the number of acres of the

ith farm to be allotted to the jth crop.
The objective is to maximize the total profit.
i.e., maximize Z = # 400 ∑x1A + 300∑x1B + 100∑x1C.
Constraints are formulated as follows:
For availability of water in acre feet,
5x1A + 4x1B + 3x1c ≤ 1,500,
5x2A + 4x2B + 3x2C ≤ 2,000,
5x3A + 4x3B + 3x3C ≤ 900.
For availability of usable acreage in each farm,
x1A + x1B + x1C ≤ 400,
x2A + x2B + x3C ≤ 600,
x3A + x3B + x3C ≤ 300.
164
For availability of acreage for each crop,
x1A + x2A + x3A ≥ 400,
x1B + x2B + x3B ≥ 300,
x1C + x2C + x3C ≥ 300.
To ensure that the percentage of usable acreage is same in each farm,
x1A + x1B + x1C X 100 = x2A + x2B + x2C X 100 = x3A + x3B + x3C X 100
400 600 300
or 3(x1A + x1B + x1C) = 2(x2A + x2B + x2C), and
(x2A + x2B + x2C) = 2(x3A + x3B + x3C).
where x1A, x1B, xIC, x2A, x2B, x2C, x3A, x3B, x3C, each ≥ 0.
The above relations, therefore, constitute the L.P. model.
3.6 ADVANTAGES OF LINEAR PROGRAMMING METHODS
Following are the main advantages of linear programming methods:
1. It helps in attaining the optimum use of productive factors. Linear

programming indicates how a manager can utilize his productive factors most
effectively by a better selection and distribution of these elements. For
example, more efficient use of manpower and machines can be obtained by the
use of linear programming.
2. It improves the quality of decisions. The individual who makes use of linear
programming methods becomes more objective than subjective. The individual
having a clear picture of the relationships within the basic equations,
inequalities or constraints can have a better idea about the problem and its
solution.
165
3. It also helps in providing better tools for adjustments to meet changing
conditions. It can go a long way in improving the knowledge and skill of future
executives.
4. Most business problems involve constraints like raw materials availability,

market demand, etc. which must be taken into consideration. Just because we
can produce so many units of products does not mean that they can be sold.
Linear programming can handle such situations also since it allows
modification of its mathematical solutions.
5. It highlights the bottlenecks in the production processes. When bottlenecks

occur, some machines cannot meet demand while others. remain idle, at least
part of the time. Highlighting of bottlenecks is one of the most significant
advantages of linear programming.
3.7 LIMITATIONS OF’LINEAR PROGRAMMING MODEL
This model, though having a wide field, has the following limitations:
1. For large problems having many limitations and constraints, the

computational difficulties are enormous, even when assistance of large digital
computers is available. The approximations required to reduce such problems
to meaningful sizes may yield the final results far different from the exact
ones.
2. Another limitation of linear programming is that it may yield fractional

valued answers for the decision variables, whereas it may happen that only
integer values of the variables are logical.
For instance, in finding how many lathes and milling machines to be produced,
only integer values of the decision variables, say x1 and x2 are meaningful.
Except when the variables have large values, rounding the solution values to
166
the nearest integers will not yield an optimal solution. Such situations justify
the use of special techniques like integer programming.
3. It is applicable to only static situations since it does not take into account the
effect of time. The O.R. team must define the objective function and
constraints which can change due to internal as well as external factors.
4. It assumes that the values of the coefficients of decision variables in the

objective function as well as in all the constraints are known with certainty.
Since in most of the business situations, the decision variable coefficients are
known only probabilistically, it cannot be applied to such situations.
5. In some situations it is not possible to express both the objective function

and constraints in linear form. For example, in production planning we often
have non-linear constraints on production capacities like setup and takedown
times which are often independent of the quantities produced. The
misapplication of linear programming under non-linear conditions usually
results in an incorrect solution.
6. Linear programming deals with problems that have a single objective. Real
life problems may involve multiple and even conflicting objectives. One has to
apply goal programming under such situations.
When comparison is made between the advantages and

disadvantages/limitations of linear programming, its advantages clearly
outweigh its limitations. It must be clearly understood that linear programming
techniques, like other mathematical tools only help the manager to take better
decisions; they are in no way a substitute for the manager.
3.8 GRAPHICAL METHOD OF SOLUTION
Once a problem is formulated as mathematical model, the next step is to solve

the problem to get the optimal solution. A linear programming problem with
167
only two variables presents a simple case, for which the solution can be
derived using a graphical or geometrical method. Though, in actual practice
such small problems are rarely encountered, the graphical method provides a
pictorial representation of the solution process and a great deal of insight into
the basic concepts used in solving large L.P. problems. This method consists of
the following steps:
1. Represent the given problem in mathematical form i.e., formulate the

mathematical model for the given problem.
2. Draw the x1 and x2-axes. The non-negativity restrictions x1 ≥ 0 and x2 ≥ 0

imply that the values of the variables x1 and x2 can lie only in the first
quadrant. This eliminates a number of infeasible alternatives that lie in 2nd,
3rd and 4th quadrants.
3. Plot each of the constraint on the graph. The constraints, whether equations
or inequalities are plotted as equations. For each constraint, assign any
arbitrary value to one variable and get the value of the other variable.
Similarly, assign another arbitrary value to the other variable and find the
value of the first variable. Plot these two points and connect them by a straight
line. Thus each constraint is plotted as line in the first quadrant.
4. 1dentify the feasible region (or solution space) that satisfies all the
constraints simultaneously. For type constraint, the area on or above the
constraint line i.e., away from the origin and for type constraint, the area on or
below the constraint line i.e., towards origin will be considered. The area
common to all the constraints is called feasible region and is shown shaded.
Any point on or within the shaded region represents a feasible solution to the
given problem. Though a number of infeasible points are eliminated, the
feasible region still contains a large number of feasible points
168
5. Use iso-profit (cost) function line approach. For this plot the objective
function by assuming Z = 0. This will be a line passing through the origin. As
the value of Z is increased from zero, the line starts moving to the right,
parallel to itself. Draw lines parallel to this line till the line is farthest distant
from the origin (for a maximization problem). For a minimization problem, the
line is nearest to the origin. The point of the feasible region through which this
line passes will be optimal point; It is possible that this line may coincide with
one of the edges of the feasible region. In that case, every point on that edge
will give the same maximum/minimum value of the objective function and will
be the optimal point.
Alternatively use extreme point enumeration approach. For this, find the co-
ordinates each extreme point (or corner point or vertex) of the feasible region.
Find the value of the objective function at each extreme point. The point at
which objective function is maximum/minimum optimal point and its co-
ordinates give the optimal solution.
4.0 CONCLUSION
Linear programming involves with the optimization (maximization or
minimization) of a function of variables known as objective function, subject
to a set of linear equations and/or inequalities known as constraints. The
objective function may be profit, cost, production capacity or any other
measure of effectiveness, which is to be obtained in the best possible or
optimal manner. The constraints may be imposed by different resources such
as market demand, production process and equipment, storage capacity, raw
material availability and so on.
5.0 SUMMARY
All organizations, big or small, have at their disposal, men, machines, money
and materials, the supply of which may be limited. If the supply of these
169
resources were unlimited, the need for management tools like linear
programming would not arise at all. Supply of resources being limited, the
management must find the best allocation of its resources in order to maximize
the profit or minimize the loss or utilize the production capacity to the
maximum extent. However this involves a number of problems which can be
overcome by quantitative methods, particularly the linear programming.
Generally speaking, linear programming can be used for optimization
problems if the following conditions are satisfied- there must be a well-defined
objective function; there must be constraints on the amount or extent of
attainment of the objective and these constraints must be capable of being
expressed as linear equations or inequalities in terms of variables; there must
be alternative courses of action; decision variables should be interrelated and
nonnegative; and the resources must be in limited supply. Linear Programming
has the following assumptions- Proportionality, Additivity, Continuity,
Certainty, and Finite Choices. LP solution methods can be applied in solving
industrial problems, management related problems, and a host of other
problem areas.
6.0 TUTOR MARKED ASSIGNMENT

1. Briefly discuss what linear programming involves.
2. Identify and discuss five assumptions of linear programming.
3. List and explain three areas where linear programming can be applied.
4. Highlight four limitations of linear programming.
5. Give five advantages of the linear programming method.
6. A manufacturer has two milk plants with daily milk production of 9
million litres and 11 million litres respectively. Each day the firm must
fulfil the needs of its three distribution centres which have milk
requirement of 9, 6 and 4 million litres respectively. Cost of shipping
one million litres of milk from each plant to each distribution centre is
170
given, in hundreds of naira below. Formulate the L.P model to minimize
the transportation cost.
1 2 3 Supply
3 4 12 9
2 10 7 11
Plants 9 6 4
Demand
7.0 REFERENCES
Dixon – Ogbechi, B.N. (2001). Decision Theory in Business, Lagos: Philglad
Nig. Ltd.
Denardo, E.V. (2002). The Schience of Decision making: A Problem-Based
Approach Using Excel. New York: John Wiley.
Gupta, P.K., & Hira, D.S. (2012). Operations Research, New – Delhi: S.
Chand & Company.
Lucey, T. (1988). Quantitative Techniques: An Instructional Manual, London:
DP Publications.
171
MODULE THREE
UNIT 1: COMPUTATION OF AREAS BY CALCULUS
1.0 Introduction
2.0 Objectives
3.1 Area under a Curve
3.2 Partition of a Closed Internal
3.3 Computation of Area as Limits
4.0 Conclusion
5.0 Summary
7.0 References/Further Reading
172
1.0 INTRODUCTION
One of the early mathematicians that attempted to find the area under a curve
was a Greek named Archimedes. He used ingenious methods to compute the
area bounded by a parabola and a chord. See Fig (1.1).
In this unit, you will study how to develop necessary tools of calculus to
compute areas under curve as a mere routine exercise. The area under a curve
gave birth to the second branch of calculus known as integration. The tools that
will be developed here will naturally lead to the definition of integration in the
next unit – unit 2. Recall that the word to integrate connotes ―whole of‖ which
could be interpreted to mean ―find the whole area of‖. This concept is what
will be introduced in this unit and this will be fully developed in the next unit.
2.0 OBJECTIVES
After studying this unit, you should be able to correctly
i. Approximate area under a curve by the sum of areas of rectangles inscribed

in the curve.
ii. Approximate the area under a curve by the sum of the areas of rectangles
circumscribed over the curve.
iii. Define a partition of a closed interval (a, b)
173
iv. Compute the exact value of the area under a curve by the limiting process.
3.1 AREA UNDER A CURVE
You are quite familiar with the computation of the areas of plane figures such
as triangles, parallelogram trapezium, regular polygons etc. Interestingly, you
studied in elementary geometry that the area of a regular polygon can be
computed by cutting it into triangles and sum up the areas of the triangles.
You are also aware t hat the area of a circle is r2. This formula was derived by
the method of limit. You could recall that the limit of the areas of inscribed
regular polygons as the number of sides approaches infinity is equal to the area
of the circle. See Fig. 1.2 a-c
Inscribed polygons Inscribed polygons Inscribed

polygons
of 4 sides of 6 sides of 8 sides
Fig. 1.2a Fig. 1.2b Fig. 1.2c
Let y = f(x) be a continuous function (see the first course on calculus i.e.
calculus I unit 4 for definition of continuous function) of x on a closed interval
[a, b]. In this case for better understanding, you assume that the f(x) is positive
in the closed interval i.e. f(x) > 0. For all XE [a,b]. Then the problem to be
considered is to calculate the area bounded by the graph y = f(x) and the
vertical lines y = f(a) and y = f(b) and below by the x – axis as shown in Fig.
1.3.
174
Y
0 a b X
Fig. 1.3
You can start by dividing the area into n thin strips of uniform width
Δx = (b-a) by lines perpendicular to the x – axis at the end points x = a and
x = b and many intermediate points which can be numbered as X1, X2, Xn-1
(see fig 1.4)
f(X1) ‐B C
F
f(X2) ‐
f(Xn‐1) ‐
A D E
0 a=X0 X1 X2 . . . Xn‐2 Xn‐1 Xn=b X
Fig. 1.4
175
The sum of the areas of these n rectangular strips gives an approximate value
for the area under the curve. To put the above more mathematically, you can
define the area of each strip in terms of f(x) and x. Given that Δx = x1 – a = x2-
x1 = .. = b-xn-1. For example the area of the rectangular strip ABCD in Fig. 1.4
above is given as:
Area of ABCD = f(x2) . (x1-x0) = f(x2) Δx
Example:
Suppose f(x) = x2-3 in Fig 1.5 with n = 6 were a = 2, b = 8, dx = 8-2 = 6
Therefore: dx = 1 i.e. you have 6 rectangular strips.
2 ‐
1 ‐
1 2 3 4 5 6
2 3 4 5 6 7 8
Fig. 1.5
Area is given as sum of
f(2) Δx = 1.1 =1
f(3) Δx = 6.1 =6
f(4) Δx = 13.1 = 13
f(5) Δx = 22.1 = 22
f(6) Δx = 33.1 = 33
176
f(7) Δx = 46.1 = 46
In fig. 1.4 above the area under the curve is larger than the sum of the areas of
the inscribed rectangular strips numbered 1 to 6 i.e. sum of areas of strips =
1+6+13+22+33+46 = 121 which is less than area under curve.
Example:
Using the same example Y = x2-3 use circumscribed rectangular strips instead
of inscribed ones to compute the area under the curve. See Fig. 1.6
1
1 2 3 4 5 6
X
2 3 4 5 6 7 8
Area is given as the sum of
f(x) . Δx = 6.1 = 6
f(x) . Δx = 13.1 = 13
f(x) . Δx = 22.1 = 22
f(x) . Δx = 33.1 = 33
f(x) . Δx = 46.1 = 46
177
f(x) . Δx = 61.1 = 61
Area = 6+13+22+33+46+61 = 181
As should be expected this area is greater than the area under the curve f(x) =
x2-3.
In the computation with the circumscribed rectangular strips the sides of the
rectangles are assumed in this case to be the points of the function in their
respective subintervals. In the case of the inscribed rectangles, the sides of the
rectangles are the minimum values of the function in their respective
subintervals.
Therefore the area under the curve lies between the sum of the areas of the
inscribed rectangles and the sum of the areas of the circumscribe rectangles.
This takes to the issue of limit. Therefore it will be right to say as n α Δx 0
this implies that the Lim (Max Area – Min Area) = 0 as Δx 0.
From the foregoing, you can now define the area under curve as the limit of the
sums of the areas of inscribed (circumscribed) rectangles as their common base
of length dx approaches zero and the number of rectangles increases without
bound. In symbols you can write the above limit as:
A = lim [f(x0) Δx + f(x7) Δx +..+ f(xn-1)] Δx n ∞
= lim [f(x1) Δx + f(x2) f +..+ f(xn-1)] Δx n  ∞
OR
n-1 n
A = lim Σ f(xk) dx = lim Σ (fxk) dx
n X1 K=10 n  X1 K=1
178
Exercise
Repeat the above example using n = 10. Find the difference between the sum
of areas of the inscribed rectangle (i.e. the minimum area) and the sum of areas
of the circumscribed rectangles (i.e. the maximum area).
3.2 PARTITION OF A CLOSED INTERVAL
Let [a, b] be a bounded closed interval of real numbers. A partition of a closed

interval [a, b] is a finite set of points
P = {a = x0, x1, x2, .., xn-1, xn-b} where
a = x0 < x1 < x2 < .. < xn-1, xn = b
Example:
P = {0, 1/6, 1/3, ., 2/3, 5/6, 1} and
Q = {0, ¼ , ½ , ¾ , 13 are both partition of {0, 13}
PUQ = {0, 1/6, ¼ . 1/3 , ½ , 2/3 , ¾ , 5/6 1} is a partition of [0, 1]
PnQ = {0, ½ , 1} is a partition of [0,1]
See fig. 1.6(a) to (c)
179
P
PQ
0 1/6 1/3 ½ 2/3 5/6 10
PnQ
0 ¼ ½ ¾ 1
1/6 ¼ 1/3 ½ 2/3 7/4 5/6
0 ½ 1
A partition of P = {x0, x1, .., xn} of [a, b] divides [a, b] into n closed sub
interval [x0, x1], [x1, x2], …, [xn-1, Xn]
The closed interval
[xr-1, xr] is called the rth subinterval of the partition.
Given a partition of P[a = x0, x2, …, xn = b] the length of the subinterval s are
the same and it is denoted by Δxr = xr- xr-1
This equal to the length of the interval [a, b] divided by the number of
subintervals n
i.e. Δxr = b – a
n
180
Example: Δx for p is 1 – 0 = 1/6
Δx for Q is 1 – 0 = ¼
4
Not in all case you will get subintervals of the same length. Example is PUQ
The length of x1 – X0 = 1/6 – 0 = 1/6
The length of x2 – X1 = - 1/6 = 1/12
Such partitions in which the subintervals are not of the same length are called
irregular partition.
Exercise: Write down a regular partition for
(1) [2, 8], n = 12
(2) [1, 8], n = 7
Ans:
(i) [2, 5/2, 6/2, 7/2, 8/2, 9/2, 10/2, 11/2, 12/2, 13/2, 14/2, 15/2, 16/2]
(ii) [1, 2, 3, 4, 5, 6, 7, 8]
3.3 COMPUTATION OF AREAS AS LIMITS
In this section you will combine the results of section 3.1 and 3.2 to compute
the areas under curves using the limiting process.
181
Example
A good starting point is to consider the area under the curve Y = X (see Fig.
1.7)
P P
f(b)
f(a)
Q
P A B
a= X1X2 ½ , Xn=b
Fig 10.7
which the interval Xє [a, b] let there be n-regular partition of [a, b] i.e.
Δx = b – a
P [a, x1, x2, .., xn-1, xn = b]
x1 = a + xx
x2 = a + 2Δx
x3 = a + 3Δx
xn-1 = a + (n-1) Δx
Areas of inscribed rectangles are
f(a) . Δx = a.Δx
f(x1) . Δx = (a+Δx).Δx
182
f(x2) . Δx = (a+2Δx). Δx
f(xn-1) Δx = (a+(n-1)Δx) . Δx
Sum of the areas of the rectangles is given as
√ = (a . Δx + (a + Δx) + … + (a+ (n-1) Δx).Δx
= [a+((1+2+3+…(n-1) dx
n-1
= na + (Σ, K) Δx ) Δx
K=1
n-1
(Σ K = (n-1)n (The sum of an arithmetic 1 progression with different d=1)
S= [na + (n-1)n dx ] dx
but dx = b – a therefore
S = [na + (n-1)n b – c) ] b – c
2 n n
= [a + b – a n – 1] (b – a)
2 n
Taking limit as n ∞ you get
Lim S = lim (a + b – a . n – 1 (b – a)
n ∞ n  ∞ (2 n )
= (a + b – a) (b – a) lims n – 1
2 n ∞ n
183
= (a + (b – a) (b – a) . 1
= a + b . (b – a)
In fig. 10.8, the area of trapezium AQPB is the same as the area under the
curve and as you know the area of trapezium is given as:
½ base x sum of two parallel sides
= ½ (b – a) x f(a) + f(b)
= ½ (b – c) (b + a)
Example
Find the area under the graph Y = x + 1 0 ≤ x ≤ 6
Solution:
Let n be a positive integer that there be a partition of [a, b] into n regular

partition.
Therefore; Δx = b
x1 = Δx
x2 = 2Δx
x3 = 3Δx
xn-1 = (n-1) Δx
184
C
B
A 1 2 n‐1 n D
O X1 X2 Xn‐1 X1 =6
Fig. 1.8
Area of (n-1) rectangles is given as
f(0).Δx = 1.Δx
f(x1).Δx = (Δx + .1) Δx
sum of areas of rectangles is
S = Δx + (Δx+1)Δx+ (2Δx+1) Δx+(3Δr+1)Δx
+ … + (n-1) Δx +1) Δx
= (Δx+ (Δx+1)+(2Δx+1) + : (n-1)(Δx+) Δx
= [Δx + n +) n-1 kΔx] Δx

Σ
K=1
S = [Δx + (n+ (n-1)n Δx] Δx let Δx = l
2 n
185
then
S = [b] + [(n + (n-1) n b)] b

n] [( 2 ) n)] n
= b + (1 + b . n -1)
n 2).b
Taking limits as n  ∞
Lim S = lim b + b lim (1 + b (n-1)

n 2 n
n∞n–1∞n∞
= 0 + b (1 + b/2)
lim S = b + b 2
n∞2
4.0 CONCLUSION
In this unit, you have studied how to find an approximate value of the area
under a curve by computing the sums of areas of rectangles inscribed under the
cure and circumscribed over if you have defined a partition of a closed
interval. You have studied that as the number of partitions of a closed interval
[a, b] is increased without bound the value of the sum of the areas of the
rectangles (inscribed or circumscribed) approaches the exact value of the area
under the curve in the given interval [a, b] that is the limit of the sum of areas
of the rectangles is equal to the exact area under the given curve as the number
n of partition tends to infinity or the length dx of the subinterval of the
partition tends to zero.
186
5.0 SUMMARY
In this unit you studied how to
* Compute the minimum value of area under a curve i.e. sum of area of
rectangles inscribed under a curve within an interval
* Compute the maximum value of the area under a curve i.e. the sum of
areas of rectangles circumscribed over the curve.
* Define a partition of a closed interval [a, b] i.e. a= x1 < x2 < … < x2 = b

= P[a, b]
* Compute the exact area under a curve in a given interval [a, b] by taking
the limit of the sum of the areas of the rectangles (inscribed or
circumscribed) as the number n of partition of [a, b] is increased without
bound i.e.
A = lim ∫n where dx = b – a
n ∞ n
1. Show that the sets
{0, 1} {0, ., ½ ,1}, {0, ¼, ½, 1} and
{0, 1/4 , 1/3, ½, 5/8, 1} are partition of {0, 1}
2. Which of the partition of [0, 1] in exercise (1) above are regular?
3. Find the minimum and maximum values of the area under the curve f(x)
= 2x for xЄ[0, 1] and P(0, ¼, ½, 1)
187
2. Find the minimum value of the area under the curve f(x)= 1- x xe [0,2]
P(011/3, ¾ 1, 2).
3. Find the area under the curve Y = x2 XЄ[0, b] by taking appropriate

limits.
4. Find the area under the curve Y = mx a ≤ x ≤ b by taking appropriate

limits.
5. Sketch the graph of Y = X + 1. Divide the internal into n = 6

subintervals with dx = (b-a)/6. Sketch the inscribed rectangles.
6. Repeat Σ x 7 but this time sketches the circumscribed rectangle.
7. Compute the sums of areas in Є x 7 and Є x 8 above.
8. Find the area under the curve Y = x + 1 a ≤ b by taking appropriate

limits of results of exercise 9 above.
7.0 REFERENCES
Gupta, P.K., and Hira, D.S. (2012). Operations Research, New – Delhi: S.
Chand & Company.

DP Publications.
188
UNIT 2: DEFINITE INTEGRAL
1.0 Introduction
2.0 Objectives
3.0 Definition of the Definite Integral
3.1 The Fundamental theorem of Integral Calculus
3.2 Evaluation of Definite Integral
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In unit 1, you studied how to compute the area under a curve and showed how
you could estimate it by computing sums of area of rectangles. Using the
above estimate you applied the concept of limit to get the exact value of the
area under a curve. These methods were applied to functions or graphs that
could easily be sketched i.e. not too complicated functions. In this unit, you
will be introduced to the famous path taken by Leibniz and Newton in showing
how exact areas can be computed easily by using integral calculus. It is
necessary you refer once more to unit 1 of this course before embarking on this
one. It will help you have a proper grasp of this unit if you do so.
189
2.0 OBJECTIVES
After studying this unit you should be able to:
* Define the definite integral of a function within an interval [a, b].
* Evaluate definite integrals of function.
* State the fundamental theorem of integral calculus.
3.0 DEFINITION OF DEFINITE INTEGRAL
In unit 1, you studied that the sum of the areas of inscribed rectangles gives a
lower (minimum) approximation of the area under the curve of the function
f(x). If you list all the values of the function f(x) in a given interval [a, b] and
take the least among these value you will have what is known as the infimum
of f(x) for all xЄ [a, b]
i.e. Inf f(x) XЄ[a, b].
let Inf f(x) = Mr and XЄ P[a, b]
when dxr = xr-xr-1. then the area is Mr. dxr. The sum of such area is
AL = Σ Mr (xr – xr-1) is called the Lower Sum of the function f(x).
If you take the maximum value of f(x) within [a, b] and find their areas i.e. Mr
= ∫up f(x) XЄ [xr-1 xr] then the Upper sum for the areas is given as
Au = Σ Mr(xr – xr-1)
r=1
No known concept has been introduced. You are rewriting sum of areas of a
rectangles inscribed under the curve f(x) as AL = Σ Mr (xr – xr-1) and the sum of
areas of rectangles circumscribed over f(x) as Au = ΣMr xr – xr-1)
190
Once you keep the fact you will not run into any difficulty understanding what
follow next. Definition: The unique number I which satisfies the inequality
AL(P)≤ I ≤ Au(P) for all partitions P of [a, b] is called the definite integral (or
more simply the integral of f on [a, b] and is written as: I = ∫abf(x)dx
This symbol Ѕ dates back to Leibniz and it is called integral sign. It is an

elongated S, which represents sum. The numbers in this case are called the
limits of integration. The expression ∫ab f(x) dx (read integrating from b to a
with respect to x)
In the above definition, it has been assumed that f(x) is continuous in the
closed [a, b]. This condition guarantee the existence of a number I such that
AL(p) ≤ I ≤ AL(p).
The prove of the above theorem could be found in the text suggested for
further reading given at the end of this course.
If f(x) ≥ 0X Є[a, b] then
I = ∫abf(x)dx = Area under the curve f(x)
Example
Given that f(x) = K  XЄ[a, b] show that ∫abf(x)dx = K(b – a)
Solution: Let P = {u, xo, x1, x2, .., xn = b} be any partition of [a, b]
Since f(x) = KXЄ [a, b] the f(x0) = f(x1) = … = f(xn)
Let AL (P) = Σ mΔXr = KΔX1 + K + ΔX2+.. KΔXn
= K(ΔX1 +...+ΔXn) = K(b-a)

Also
Au(P) = ΣMrΔXr = K(b-a)
191
But
AL(P) ≤ ∫abf(x)dx ≤ Au(P)
then K(b-a) ≤ ∫abf(x)dx ≤ K(b-a)
∫abf(x)dx = K(b-a)
Example
Given that f(x) = x show that ∫abxdx = ½ (b2-a2)
Solution: Let P{axo, x1, .. , xn, = b} be an arbitrary partition of [a, b].

f(x) = x for XЄ [Xr, Xr2,] for all such subintervals.
So Mr ≤ f(x) mr XЄ [xr, xrt1] such mr and mr exist for each subinterval.
Let Mr = xr and mr = xr-1

then n n
Au(P) = ΣmrΔxr = Σ xrΔx

r=1 r=1
= x1(x1-xo)+x2(x2-x1)+…+ xn(xn-xr-1)
and n
AL(P) = Σ mrΔxr = Σxr-1Δxr
r-1 r-1
= xo(x1-xo) + x1(x2-x1) + .. x2-1(x-xn-1)

For each index,
xr-1 ≤ ½ (xr + xr-1) ≤ xr
Therefore
AL(P) ≤ ½ (x1+xo) (x1-xo) + ½ (x2+x1) (x2-x1) + …+ ½ (xn+xn-1)

(xn-xr-1)
≤ Au(P)
But ½ (x1+xo) (x1-xo) + ½ (x2+x1) (x2-x1) + .. + ½ (xn+xn-1)

(Xn+Xn-1)
192
= ½ (x12 – x02 + x22 – x22 + … + x2 – x2n-1) = . (x2n – x2o )
 AL (P) ≤ ½ (x2n – x2o) ≤ Au(P)
 AL (P) ≤ ½ (b2-a2)
 ∫abx dx = ½ (b2 - a2)
The following properties of definite integral are hereby stated without their
proofs are beyond the scope this course:
1. If a < c < b then ∫acf(x)dx + ∫cbf(x)dx = ∫abf(x)dx
2. If a < b then –∫abf(x)dx = ∫ baf(x)dx
3. ∫aaf(x) dx = 0
Example: Given that

∫01f(x)dx = 6, ∫13f(x)dx = 5
∫37f(x)dx = 2
Find (i) ∫17f(x)dx (ii) ∫13f(x)dx (iii) ∫11f(x)dx (iv) ∫71f(x)dx
Solution:
(i) ∫ 07f(x)dx
∫07f(x)dx = ∫0tf(x)dx + ∫x7f(x)dx
let t = 3 i.e. ∫07f(x)dx = ∫03 f(x)dx + ∫37 f(x)dx = 5 + 2 = 7
(ii) ∫1 3f(x)dx = ∫1 tf(x)dx + ∫t3(x)dx
let t = 0 ∫13f(x)dx ∫10 f(x)dx + ∫03f(x)dx = -6 + 5 = 1
(iii) ∫ 11f(x)dx = 0
(iv) ∫7 1f(x)dx = -∫17f(x)dx = [∫1 3f(x)dx + ∫1 7f(x)dx = -[-1+2]
193
Exercise: Given that ∫22f(x)dx = 2, ∫03f(x)dx = 4 and ∫24f(x)dx = 7
Find (i) ∫04f(x)dx (ii) ∫43f(x)dx (iii) ∫32f(x)dx
(iv) ∫23f(x)dx
Answer: (i) 9 (ii) -5 (iii) -2 (iv) 2
3.2 FUNDAMENTAL THEOREM OF INTEGRAL CALCULUS
To find the value of the function F(x) = ∫abf(x)dt for some simple function it
could easily be evaluated. Either by the limiting process discussed in unit or by
direct evaluation as was done in the previous section. Such process might
prove very laborious for certain classes of functions. In this section you will
examine the direct connection between differential calculus and integral
calculus. This connection was made possible by looking at the summation
process of finding areas and volumes and the differentiation process of finding
the scope of a target to a curve. It is quite interesting that the process of
carrying out inverse differentiation yields an easy tool of solving the
summation problem.
So you will now discuss the proof of the fundamental theorem concept behind
the theorem is that before you can evaluate a definite integral Sabf(x)dx you
will first of all find a function Fl(x) whose derivative is f(x). i.e. F1(x) = f(x)
Є (A, B). You will now as first step study the proof of the following theorem:
Theorem 1: If f(x) is a continuous function on [a, b], the function F(x) defined
on [a, b] by setting F(x) = ∫axf(t) dt is a(i) continuous function on [a, b] and (ii)
satisfies F1(x) = f(x) for all x in (a, b).
Proof: You will begin with xЄ [a, b] and show that
194
Lim F(x+h) – F(x) = f(x)
h  O- h
In figure 2.1 F(x +h) = area from a to x + h
F(X)
F(x+h)
F(X)
0 a x h x+ h b
f(x) = area from a to x
f(x+h) –F (x) = area from x to x + h
(Area = base x height)
F(x + h) – F(x) = area from x to x + h  f(x) if h 0
h h
(Note f(x) = height of the area under curve in Fig. 2.1
If x < x + h ≤ b then
F(x+h) – F(x) = ∫ax+hf(t)dt – ∫axf(t)dt
(since from statement of theorem F(x) = ∫axf(t)dt)

It follows therefore that
F(x+h) – F(x) = ∫ax+h(f(t)dt + ∫xaf(t)dt
= ∫xx+h(f(t)dt
Let Mh = maximum value of f(x) on [x, x+h]

and mh = minimum value of f(x) on [x, x+h ]
since Mh (x+h – x) = Mh.h
and mh (x+h – x) = mh.h
therefore, Mh = upper sum (see UNIT 1)

195
and mh = lower sum (see UNIT 1)
therefore
mh.h ≤ ∫xx+hf(t)dt ≤ Mh.h
= mh.h ≤ F(x+h – F(x) ≤ Mh.h

h
since f(x) is a continuous function on [x, x + h] therefore
Lim mh.h = f(x) = lim Mh.h
H  0- h 0-
thus lim F(x+h) – F(x) = f(x) .- I
h0 h
In a similar manner you can show that if X Є (a, b), then
Lim F(x+h) – F(x) = f(x) -I
h 0+ h
Now if xЄ (a, b) then equation (I) and (II) hold
Thus Lim F(x+h) – F(x) = f(x)
H0 h
and lim F(x+h) – F(x) = F1 (x)

h 0 h
therefore F1(x) = f(x)
since F1(x) exists then F(x) must be continuous on (a, b). Before you prove the
fundamental theorem of calculus. Look at this definition.
Definition:
A function F(x) is called an anti-derivative for f(x) on (a. b) if and only if
(i) F(x) is continuous on (a, b) and
(ii) F1(x) = f(x) for all XЄ (a, b)

196
Using the above definition you can rewrite theorem 1 as
If f is continuous on (a, b) then
F(x) = ∫xf(t)dt
The above now says to you that you can construct or find an anti-derivative for
f(x) by integration f(x). The next theorem you are going to study will tell you
that you can evaluate the definite integral ∫ahf(x)dx by finding an anti-
derivative for f(x).
The Fundamental Theorem of Integral Calculus:
Let f(x) be continuous for all xЄ (a, b) If P(x) is an anti-derivative of f(x) for
all xЄ (a, b) then ∫aaf(x)dx = P(b) – P(a)
Proof: In theorem 1, the function F(x) = ∫axf(t)dt is an anti-derivative for f(x)

for all XЄ (a, b). If P(x) is another anti-derivative for f(x) for all xЄ (a, b), then
it implies that both P(x) and F(x) are continuous for all XЄ (a, b) and also will
satisfy that P1(x) = F1(x) for all XЄ (a, b). There exist a constant C such that
F(x) – P(x) = C
Since F1(x) = P1(x) and derivative of a constant is zero

i.e. F(x) – P(x) = C F1(x) – P1(x) = 0
Since F(a) = 0 then P(a) + C = 0 and C = -P(a)
This implies that
F(x) = P(x) – P(a) for all XЄ (a, b)
Thus F(h) = P(b – P(a) (x = b)
Since F(b) = ∫abf(t)dt = P(b)-P(a)
which is the required result.
197
3.3 EVALUATION OF DEFINITE INTEGRAL
You are now set to seek or construct anti-derivates F(x) which will evaluate
the definite integral given as ∫abf(x)dx
Example: Find ∫abxdx
Solution
Let F(x) = ½x2 as an anti-derivative
Then ∫abxdx = ½ (b2 – a2)
Find the ∫abxndx when n is a positive integral the anti-derivative to use is
F(x)= 1 xn+1
n+1
F1(x) = xn ∫abxn = F(b) – F(a)
=1 (bn+1 – aa+1)
n+1
Notation:
∫abf(x)dx = [F(x)]b = F(b) – F(a)
thus ∫abx4dx [ 1 x4 +1]b = 1/5 (b5 – a5)
4+1
Example:
∫2(6x5-2x3-x)dx
Let F(x) = x6 – 2x4 – x2
4 2
198
then ∫12(6x5 – 2x3 – x)dx = [x6 – 1x4 – x2]14
2 2
= 3960.
Example:
Evaluate the following integrals by applying the fundamental theorem.
(i) ∫ 30(x-1) (x-2)dx
(ii) ∫ 37 dx
(x-2)2
(iii) ∫ 01(x 3/4 + ½ x ½) dx
(iv) ∫a9(a2 x – x4 )dx
(v) ∫ 13 2 - x dx
x3
(vi) ∫ 18(√t – 1)dt

t2
(vii) ∫ 136 – tdt
(viii) ∫12x2(x-1)dx
(ix) ∫ 14√x+1dx
(x) ∫0 1(x-1) 17dx
Solution: To evaluate ∫-30(x-1) (x-1)dx

you expand the function (x - 1) (x -1)
= x2 – 2x + 1
(i) ∫ 03(x-1) (x-1)dx = ∫ 03(x2-2x+1) dx
let F(x) = 1/3 x3 - x2 + x serve as anti-derivative

therefore ∫03 (x2-2x+1) = [1/3x3 – x2 + x]03 = 3
199
(ii) ∫ 37 dx
(x-2)
construct a function with derivative as 1 it is not difficult to see that
(x-2)2
d -1
dx x-2) = (x-2)2
therefore: ∫37dx = [- 1 ]7 = 8-
(x-2) [ x-2]3 10
(iii) ∫ 01(x 3/4 + ½ x ½ )dx
let F(x) = 4/7x3/4 + ½ x ½ ) = 4/7 x 7/4 + 1/3 x 3/2
therefore ∫01(x3/4 + ½ x ½ ) = [ 4/7 x7/4 + 1/3 x3/4)1 = 19/0
(iv) ∫0 9(a2x2 – x4 )dx

let F(x) = (a2 x3 - x5)
∫a(a2x2-x4)dx = [ a2 x3 – x5 ]a
3 5]0
= a3 x 3 - a5
3 5
(v) ∫ 13 2 – x dx = ∫3(1 – 1)dx
x3
Let F(x) = 1 - 1
x x2
then ∫13 2 – x = [1 – 1 ]3 = 9
x3 [x x 2 ]1 2
(vi) ∫8(√E – 1/t2)dt
200
Let F(t) = 2t3/2 + 1
3 t
4.0 CONCLUSION
In this unit, you have studied how to define a definite integral. You have seen
the connection between the summation process of finding the area under a
curve and the differentiation of the function representing the area under the
curve. You have studied that the fundamental theorem of integral calculus is
the bridge between the summation process and the differentiation process i.e.
you can find the area under a curve by finding an anti-derivative for the curve.
You have applied the theorem in evaluation of definite integrals.
5.0 SUMMARY
You have studied the following in this unit:
1. How to define a definite integral
2. How to evaluate definite, integral using the following properties:
a b c c b a
(i) ∫a f = 0, (ii) ∫a f + ∫b = ∫a and (iii) ∫a f = -∫b f
3. How to apply the fundamental theorem of integral calculus in evaluating

the definite integral of rational functions.
6.0 TUTOR MARKED ASSIGNMENTS
Evaluate the following integrals by applying the fundamental theorem of

integral calculus.
201
(1) ∫ 01(4x – 3)dx
(2) ∫ 105x – 3dx
(3) ∫ 01(3x + 2)dx
(4) f5√x
(5) ∫-ca(x – a)2dx
(6) ∫1 2(5+ t x)dx
7.0 REFERENCES/FURTHER READING
Chand & Company.
DP Publications.
202
UNIT 3: INDEFINITE INTEGRAL
1.0 Introduction
2.0 Objectives
3.0 Indefinite Integration
3.1 Properties of Indefinite Integration
3.2 Application of Indefinite Integration
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
You have studied rules for differentiation of various functions such as

polynomids functions, rational functions, trigonometric function of sines,
cosines, tangent etc. hyperbolic functions and then inverses, exponent and
logarithm functions. All these you studied in the first course in calculus.
However, the reverse process i.e. anti-differentiation is somehow not as
straight forward process as the differentiation. The reasons being that there are
no systematic rules or procedures for anti-differentiation. Rather success on
techniques of anti-differentiation depends much more on your familiarity with
differentiation itself. So before embarking on the study of this unit, it might be
worth the time to practice some of the differentiation in calculus I. Do not be
discouraged when you come across functions whose derivatives are not very
203
common. In this unit and subsequent ones you will study some basic methods
of anti-differentiation.
2.0 OBJECTIVES
After studying this unit, you should be able to:
(i) Evaluate indefinite integral as anti-differentiation.
(ii) Recall notations for integration and
(iii) Recall properties of indefinite integration
(iv) Evaluate indefinite integrals using the properties of indefinite

integration.
(v) Integrate differential equations that are separable.
3.0 INDEFINITE INTEGRATION
In this section an informal definition of what is anti-differentiation will be

given. Suppose that the derivative of the function is given as:
dy = f(x)
dx
and you were asked to find the function y = F(x). For example you are given
the differential equation.
dy = 2x.
dx
From your experience with differentiation you can easily know that y = x2
since dy = 2x
dx
204
Interestingly, it is not only y = x² that can be differentiated to give dy = 2x.
dx
Other function like y = x2- 1, y = x2 + 2, y = x2 + a, y = x2 + 4 can be

differentiated to yield
dy = 2x
dx
2
In general any function of this form y = x + c, where C is any constant will
yield a differential equation of this type
dy = 2x
dx
You are now ready to take this definition.
Definition 1: An equation such as dy = f(x) which specifies the derivative as
dx
a function of x (or as a function of x and y) is called a differential equation.
For example dy = sine
dx is differential equation
Definition 2: A function y = f(x) is called a solution of the differential

equation
dy = f(x) if over domain a<xcb f(x) is differentiable and
dx
d f(x) = f1(x) = f(x)
dx
in this case f(x) is called an integral of f(x) with respect to x.
205
Definition 3: If F(x) is an integral of the function f(x) with respect to x so is
the function F(x) + C an integral of f(x) with respect to x, where c is an
arbitrary constant.
If d f(x) = f(x) so also is f(x) + C i.e. d [f(x) + C] =
dx dx
d f(x) + C dc = df(x) + 0 = f1(x) = f(x)

dx dx dx
From the above if y = f(x) is any solution of dy = f(x) then all other solutions
are contained in the formula y= f(x)+C dx where C is an arbitrary constant this
gives rise to the symbol. ∫f(x) dx = f(x) + C – (1) where the symbol S is called
an integral sign (see unit 2). Equation 1 is read the integral of f(x)dx is equal to
f(x) plus C since dy = 2x and a typical
dx
solution is f(x) = x2 + C. then d f(x) = 2x = d(x2 +C)
dx dx
= y = x2 + C
and dy = d (x2 + C) = 2x
dx dx
206
Example: If y = x dy = 1
dx
= ∫dydx = ∫1dx = x + C
dx
In other words, when you integrate the differential of a function you get that
function plus an arbitrary constant.
Example: Solve the differential equation dy = 4x3
dx
Solution: let dy = 4x3
dx
then dy = 4x3dx integrate both side you get ∫dy = ∫4x3dx but d(x2)=4x3dx.
dx
therefore y = ∫4x3dx = ∫d(x4) = x4C.
Example: Solve the differential equation dy = 2x + 1
dx
= dy = (2x + 1) dx
but d(x2 + x) = 2x + 1
dx
therefore ∫dy = ∫ (2x + 1)dx becomes y = ∫ dx2 + x) = x2 + x + C.
compare ∫d(F(x) ) = F(x) with the result of UNIT 2.
Example: Solve the following differential equation:
(1) dy = x2 – 1 (2) dy = 1 + x
dx dx x2
207
(3) dy = x (4) dy = 2x + 3
dx y dx
(5) dy = (x2 + √x)dx (6) dy = 3x2-2x+3
dx dx
(7) ds = 3t2-2t-6 (8) dv = 5u4-3xu2-1
dt du
(9) dx = 8√x (10) dy = (2x2- 1)
dt dx x2
Solution: dy = x2- 1
dx
= dy (x2 – 1)dx
∫dy = S(x2-1)dx
but d(x3 – x) = (x2-1)dx
therefore: y = ∫d(x3 -x) = x3 – x + C
3 3
(2) dy = 1 + x
dx x2
∫dy = S(1 + x)dx
x2
d(-1 + x2 ) = (1 + x) dx
x 2 x2
y = ∫d(x2 – 1) = x2 - 1 + c
2 x 2 x
(3) dy = x
dx y
208
∫ydy = ∫x dx
d(y2 ) = ydy and d(x2 ) = xdx
2 2
therefore: ∫ydy = ∫d(y2)
∫d(y2 ) = ∫d(x2)
2 2
= y 2 = x 2 + C1
2 2
y2 = x2 + 2C1
y2 = x2 + C
(4) dy = 2x + 3
dx
∫dy = ∫ (2 + 3) dx
y = ∫d(x2 + 3x) = x2 + 3x + C
(5) dy = (x2 + √x)
dx
dy = (x2 + √x) dx
∫dy = ∫ (x2 + √x)dx
y = ∫d(x3 + 2x3/2) = x3 + 2x3/2 + C
3 3 3 3
(6) dy = 3x2 – 2x – 5
dx
dy = 3x2 – 2x – 5
∫dy = ∫ (3x3-x2-5x) = x3-x2-5x+C
209
(7) ds = 3t2 – 2t - 6
dt
∫ds = ∫ (3t2 – 2t – 6)dt
∫ = ∫d(t3-t2-6t) = t3- t2 – 6t + C
(8) dv = 5u4 – 3u2 - 1
du
∫dv = ∫ (5u4 – 3u2- 1)du
V = ∫d(u5- U3 – U) = U5 – U3 – U + C
(9) dx = 8√x dt
dt
dx = 8√x dt
= ∫dx = ∫8 dt
√x
∫d(2√x) = ∫d(8t)
2√x + Cx = 8t + Ct
2√x = 8t + Cx + Ct
2√x = 8t + C, where C = Cx + Ct
(10) dy = (4x2 – 1)
dx x2
∫dy = ∫ (4x2 – 1)dx
y = ∫d( 4x3 – 1) = 4x3 – 1 + C
3 x 3 x
3.1 PROPERTIES OF INDEFINITE INTEGRAL
So far, you would have been doing much of guess work to find an appropriate
anti-derivative that will fit the answers above you will now be given some
210
properties of indefinite integral. It would help reduce the amount of guesswork
when evaluating integrals.
(1) The integral of the differential of a function U is U plus an arbitrary constant.
∫du = u + c
(2) A constant may be moved across the integral sign Sadu1 = aSdu
(3) The integral of the sum of two differentials is the sum of their integrals
∫ (du + dv) = ∫du + ∫dv
(4) The integral of difference of two differential is the difference of their integrals
∫ (du - dv) = ∫du - ∫dv
(5) As a consequent of 2, 3 and 4 above, you have that ∫a(du+ dv) = a∫du+ a ∫dv
∫du1 +du2 + du3…duh = ∫du1+∫du2+ ..+ ∫duh
(7) If n is not equal to minus 1, the integral of Undu is obtained by adding one to the
exponent dwindling by the new exponent and adding an arbitrary constant
∫undu = Un+1 = C
n+1
Find the following
Example (1) ∫ (5x10 – x8 + 2x)dx = ∫5x10dx – ∫x8dxt ∫2xdx
= 5x 10+1 – x 8+1 + 2x 1+1
10+1 8+1 1+1
= 5x11 – x 9 + x2 + C
11 9
(2) ∫x3/2dx = x 3/2+1 = x5/2
3/2+1 5/2
= 2/5 x5/2
(3) ∫ 3x + 1dx
211
Let u = 3x+1
then du = 3 = du = 3dx
dx
Therefore ∫√3x+1dx = ∫u½ du
here dx = du
therefore 1/3Su½ du = 1/3u½+1
½+1
= 1 2u3/2 = 2U3/2
3 3 9
= 2(3x+1)
(4) ∫√- 1 dx
Let U = 4x – 1 du = 4 = dx = du
dx 4
then ∫√4x-1dx = ∫u ½ du
¼ ∫u ½ du = U ½+1 = 2(4x-1)3/2 + C
½ +1 12
Examples: Evaluate the following integrals
(i) ∫√1=4x (ii) ∫3 1 + x dx
(iii) ∫ 5 2x+1 (iv) ∫ 4 4x - 2
212
Solution:
(i) ∫ √1-4xdx let U = 1- 4x
then du = 4, dx = -du
dx 4
therefore ∫√1-4x dx = ∫u½ (-du) = - ¼ ∫u ½du
= - 1 [2u3/2] = - 1(1-4x)3/2 + C
4 [3 ] 6
(ii) ∫ 3 1 + x dx
then du = 1 du = dx
dx
therefore ∫ 3 1 + x dx = ∫ u1/3du = 3u4/3 = 3(1 + x)4/3 + C
4 4
(iii) ∫ 5 2x 1 dx let U = 2x + 1
then du/dx = 2 = dx = du/2
therefore ∫ 5 2x +1 dx = ∫ U1/5 du = ½ [5U 6/5 ] = 5(2x+1)6/5C
2 6
= 5 (2x + 1)6/5 + C
12
(iv) ∫ 4 4x-2 dx let U = 4x - 2
then du = 4dx dx = du/4
∫ 4 4x -2dx = . ∫U1/4 du = . [4/5(4x-2)5/4]
= 1/5 (4x-2)5/4
213
Exercise: Evaluate the integrals
(1) ∫ (8x7 – 6x5 – x4 + 3x3 + 2) dx
(2) ∫ (6x + 1)1/6 dx
(3) ∫ (1 – 4x)1/4 dx
(4) ∫ (4 – 10x)1/10 dx
(5) ∫ (x – 1)1/3dx
3.2 APPLICATION OF INDEFINITE INTEGRATION

Most elementary differential equation could be solved by integrating them.
Example: Solve the differential equation given as dy = f(x)
dx
 dy = f(x) dx
 ∫dy = Sf(x) dx
 y = Sf(x) dx
Such class of differential equation is used to solve various types of problems

arising from Biology, all branches of engineering, physics, chemistry and
economics.
In application of indefinite integral the value of the arbitrary constant must be

found by applying the initial conditions of the problem that is being solved.
Therefore before continuing it is important that you know more about this
arbitrary constant C.
Example: Let dy = 2x
dx
then y = x2 + C
214
The graph of y = x2 for C = 0 is given in Fig. 3.1
Y
Y=X2C2
Y=X2C1
Y=X2
Y=X2C 3
X
Y=X2C 4
Fig. 3.1
Any other integral curve y2 + C can be obtained by shifting this curve y = x2

through a vertical displacement C. In Fig.3.1 such vertical displacements give
rise to a family of parallel curves. They are parallel since the slope of each
curve is equal to 2x. This family of curves has the property that for any given
part (xo, yo) where xo1D (i.e. D is the domain of definition) there is only one
and only one curve from the family of curves that passes through the part (xo,
yo). Hence the part (xo, yo) must satisfy the equation
Yo = xo2+C
i.e. C = yo – xo2 so for any particular point (xo yo) C can be uniquely be determined.
This condition that y = yo and x = xo imposed on the differential equation du/dx

= 2x is referred to as initial condition. You will use this method to solve
problems on application of integration.
Example: Total profit P(x) from selling X units of a product can be

determined by integrating the differential equation of the marginal profit dp/dt
215
and using some initial conditions based on the market forces to obtain the
constant of integration. Given that
dp/dt = 2 + 3/(2x-1)3
Find P(x) for 0 ≤ x ≤ C if P(1) = 1.
Solution:
dp = ∫ (2 + 2)dx = ∫ 2+2 dx
(2x-1)3 (2x – 1)3
∫dp = ∫ (2 + 2 ) dx
(2x-1)3
P = 2x - -1 + C
2
2(2x-1)
Since Po = 1 Xo = 1
1 = 2.1 - 1 + C
2(2-1)2
 C = -1/2
Therefore P(x) = 2x – 1 - ½
2(2x-1)
Example: Given that dy/dx = 8x7
Find y when y = -1 and x = 1
Solution:
∫dy = ∫8x7 dx
y = x8 + C
-1 = 1+C
C = x8 – 2
Exercises:
Solve the following equations subject to the prescribed initial conditions:
216
(1) dy/dx = 4x2 – 2x – 5 x = -1, y = 0
(2) dy/dx = 4(x-5)3 x = 0, y = 2
(3) dy/dx = x 2 +1 dx x = 1, y = 1
x4
(4) dy/dx = x 1+x2 x = 0, y = 0
(5) dy/dx = x ½ + x1/5 x = 0, y = 2
You will study more on application of indefinite integration in the last unit in the course.
Ans: (i) y = 4/3x3-x2+5x+22/3 (ii) y = (x-5)4-623
(iii) y = -1/x – 1/3x3+7/3 (iv) y = 1/3(x2+1)3/2-1/3
(v) y = 2/3x3/2
4.0 CONCLUSION
In this unit emphasis has been on techniques of finding anti-derivative.

Therefore, you have studied numerous solved examples on method of finding
anti-derivatives of functions. You have known the notation for indefinite
integration as ∫f(x)dx = f(x) + C. You have studied properties of indefinite
integration and how to use them to evaluate integrals. You have studied how to
integrate simple differential equations.
5.0 SUMMARY
You have studied:
(1) The definition of indefinite integral
(2) Properties and notation of indefinite integration
(3) To evaluate integrals using both the notation and properties of indefinite
integration.
217
(4) To integrate differential equation that are separable.
6.0 TUTOR MARKED ASSIGNMENTS
Evaluate the following integrals:
(1) ∫√dx (2) ∫ 4x 1
(3) ∫ (7x6-4x3 + 4x6 – 2x) (4) ∫ dx/x7 dx
(5) ∫ x 4 – 1 dx (6) ∫ ( x + 1 ) dx
X6 1+ x
Solved the differential equation at the specified points:
(13) dy/dx = x 2 – 1 y=0x=1
x4
(14) dy/dx = 1 y = 2, x = 1
√1+7x
(15) dy/dx = (1 – 4x)1/4 y = 1, x = -3
7.0 REFERENCES
Gupta, P.K., & Hira, D.S. (2012). Operations Research, New – Delhi: S.
Chand & Company.
DP Publications.
218
UNIT 4
INTEGRATION OF TRANSCEDENTAL FUNCTIONS
1.0 Introduction
2.0 Objectives
3.0 Integration of Rational and Experimental
3.1 Integration of Trigonometric Functions
3.2 Integration by Inverse Trigonometric Functions
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In the previous unit, you studied the integration of polynomial function and
simple rational function. However, there are some functions whose derivatives
are not very common. Integration of such functions uncommon derivatives can
only be possible by using derivatives of known functions to do the evaluation.
In this unit integration of transcendental and rational function are discussed.
These integration will form part of the basic tools that will be needed in applying
techniques of integration that will be studied in the next unit.
2.0 OBJECTIVES
After studying this unit you should be able to correctly
(i) Derive the formula for integrating rational functions, exponential

function and trigonometric functions
219
(ii) Evaluate definite and indefinite integrals of sinx, cos x, ex and any
combination of them
(iii) To evaluate integrals by using the derivatives of inverse trigonometric

functions of sinx and tan x.
3.0 INTEGRATION OF RATIONAL AND EXPONENTAL FUNCTION
3.0.1 The integral ∫du/u =, u ≠0 Recall that d/dx 1nu = du/u - I
then the integral counterpart of equation I above is that ∫du/u = ln1u1+C
In the above u is a differentiable function of x and u>0 for all values of x in the specified
domain.
Example: Find ∫8x dx
2x-1
Solution: let u = x2-1, du = 2x dx
then
du = x dx
therefore
∫ 8x dx = 8 ∫ du
x2-1 2
= 4∫du = 4/u/u∫+C
Example: Find ∫ x 2 - dx
1+3x3

let u = 1+3x3, du = 9x2dx
 x2dx = du/9
220
∫ x 2 dx = ∫du = 1 ∫du
13x3 9 9 u
= 1ln/u/ + C = 1ln/1+3x3/+C
9 9
Example: Find
∫ 8x 3 – 2 dx
x4-x+1
let u = x4 – x + 1, du = (4x3 – 1) dv
but (8x3 – 2)dx = 2(4x3-1) dx
therefore: ∫ (8x 3 – 2)dx = ∫ 2(4x 3 -1)dx = ∫2du
x4-x+1 x4-x+1 u
= 2ln/u/+C
= 2ln/x4 – x + 1/ + C
Example: Find ∫ (1 – 1 ) dx
(x+1 x+2)
let u = x + 1 and v = x + 2
du = dx du = dx
∫ (1 – 1 ) dx = ∫dx – ∫dx = ∫du – ∫dv
(x+1 x+2) x+1 x+2 u v
= ln/u/ - ln/v/ + C
= ln/x+1/ - ln/x+2/ + C
Example: Find ∫log (x+1)dx
x+1
let u = log (x+1) du = 1 dx
x+1
221
therefore: (x+1) du = dx ∫log(x+1)dx = ∫u. .(x+1)du
x+1 x+1
= ∫udu = ½ u2 + C
= ½ log (x+1)2 + C
Exercise: Evaluate the following integrals
(1) ∫dx (2) ∫3 dx
3-4x x-5
(3) ∫x dx (4) ∫logx du
x2-2 x
(5) ∫4x – 2 dx
x2 – x+1
Ans: (1) -1 ln/(3-4x) /+C (2) 3ln/(x-5) + C
(3) ½ ln/x2-2/ + C (4) ½ logx2 + C
(5) 2ln/x2 – x + 1/
The method adopted above is to differentiate the denominator and check if it is

a factor of the numerator; if so with appropriate algebraic manipulation, the
derivative of the denominator will be made to look like the numerator. This
method was used in UNIT 3.
i.e. ∫g(x)dx let u = P(x)
P(x)
1
and du = P (x)dx = g(x)dx
then ∫g(x) = ∫du = ln/u/ + C
P(v) u
 Ln/P(x) + C
222
3.0.2 THE INTEGRAL ∫ exdu
Recall that de u = de u . du = eu du
dx du dx dx
then de u = eu du
dx dx
 deu = eudu then ∫deu
= ∫eudu therefore ∫eudu
= eu + C
Example: Find Se-xdx.
Let u = -x, du = 1dx
 dx -du
therefore ∫e-x dx = ∫e(-du) = -∫eudu
= -eu + C = e-x C.
Example: Find ∫e2xdx. Let u = 2x  du = 2dx
dx = du
therefore ∫e2xdx = ∫eu(du) = ½ ∫eudu
= ½ e2x + C
Example: Find ∫e x/3dx let u = x, du = dx
3 3
dx = 3du, Sex/3 ∫ex/3du = ∫eu.(3du)
∫ex/3 dx = 3Seudu = 3euC
= 3ex/3 + C
223
Example: ∫4e2xdx Let U = e2x du = 2e2xdx.
∫4e2xdu = 2∫2e2xdx = 2∫du = 2u + C
= 2e2x + C
Example: ∫ (ex x)2 (ex 1)dx
Let u = ex + x = du = (ex 1)dx
∫ (ex + x)2 (ex + 1) dx = ∫u2du
= U3 + C = (e x + x) 3 + C
3 3
Example: ∫xex2dx
Let u = x2 du = 2x dx
 du = x dx
then ∫xex2 dx = ½ Seudu
= ½ eu + C = ½ ex2 + C
Exercise: Evaluate the following integrals
(1) ∫e3xdx (2) ∫esx
(3) ∫8e4x dx (4) ∫ (ex – x)2 (ex – 1) dx
(5) ∫3x2 ex3
Ans: (1) 1/3e3x + C (2) 2e5x + C (3) 2e4x + C
52
(5) ex3 + C
3.1 INTEGRATION OF TRIGONOMETRIC FUNCTIONS
Recall from UNIT 8 of the first course on calculus that for any differentiable function U of
X that
224
d (sinu) = cosudu
dx dx
d (cosu) = sin2U du
dx dx
d (tanu) = -cosec2udu
dx dx
d(cotu) = -cosec2udu
dx dx
d(secu) = secu tan u du
dx dx
d (asecu) = -wsecucotudu
dx dx
Using the above you will integrate the following trigonometric function as
(1) ∫sinudu = -∫-sinudu = -∫d(cosu)
dx
= - cosu C
therefore
∫sinu du = -Cosu +C
(ii) ∫Cosu du = ∫dsinu) = sinu C
therefore
∫cosudu =sinu = Sinu+C
Given that ∫1 . d [f(x)] dx = log/f(x) + C
f(x) dx
then
(iii) ∫tanudu = ∫sinu du = -∫1.d cosu)
cosu cosu
225
= -∫dv = lnv + C, where v = cosu
= -lnkosul + C = ln(1 ) = ln/secU/+C
cosu
therefore ∫tan u du = ln/secu/ + C
(iv) ∫secudu = ∫secu (sec u + tan u) du
(sec u + tan u)
= ∫ sec 2 + sec u tan u du
sec u + tan u
Let V = tan u + sec u, dv = sec2u + tan u sec u du
therefore: ∫ sec2u + tan u secu du = ∫dv
tan u + tan u v
(v) Scotudu = ∫cosu du = ∫1 d(sin u)
sin u sin u
= ln/sinu/ + C
(vi) ∫ cosec u du = ∫cosec u cosec u – cot u
cosecU – cotU
= ∫ cosec2 u – cot ucosec u du
cosec u – cot u
= ∫dv , v = cosec u – cot u
v dv = cosec2 u – cot cosec u du
 ln/v/ + C = ln/cosec u – cot u/ + C.
Example: Find ∫sec2 u du = ∫d(tan u) C
= tan u + C
Example: Find ∫cosec2 u du = -∫-cosec2 u du -∫ (d(cot u) = -cotu + C
Example: Find ∫sec u tan u du ∫sec u tan u = ∫d(sec u) = sec u + C
226
Example: Find ∫ cos x sin x dx
Let u = sinx du = cos x dx
therefore ∫ sin x cos x dx = ∫ u du
= u 2 + C = sin 2 x + C
2 2
Example: Find ∫sec3x tan x dx
Let u = sec x du = sec x tan x dx
therefore ∫sec3x tan x dx = ∫sec2x sec x tan x dx
= ∫u2du = u3 + C
= sec3 x + C
Example: Find ∫cosec3 x cot x dx. Let u = cosec x du = -cosec x cot x dx
Therefore ∫cosec3x cot x dx = ∫cosec2 x cosec x cot x dx
= -∫u2du = -u3 + C
= -cosec3 x + C
Example: Find ∫ xcosax2 dx
Let U = ax2 du = 2axdx
∫ xcosax2dx = ∫ ½ a (cos ax2) (2ax) dx
= ½ ∫cos U.du = ½ a (sinU + C)
= ½ a sin ax2 + C
Example: Find ∫ sec2 x dx
1+tanx
let U = 1 + tanx du = sec2x dx
227
therefore ∫ sec2 xdx = ∫du = ln/u/+C
1+tanx u
= ln/1+ tanx1 + C
Exercises: Find the following integrals
(i) ∫sin (2x-1) dx (ii) ∫sin ½ ax dx
(ii) ∫2cos2x sinx dx
Ans: (i) - ½ cos (2x – 1) + C
(ii) -2 cos ½ ax + C
(iii) -2cos3x + C
3.2 INTEGRATION OF INVERSE TRIGONOMETRIC FUNCTION
Recall that d (arc sin u) = 1 du
dx √1-x2 dx
to evaluate ∫arc sin u du you have to know how to integrate by part which is
one of the techniques of integration that you will study next unit. For now
∫arc sin u du = u arc sin u + √1 – u2 + C and
∫arc tan u du = u ar tan u = - ½ ln/1+u2/+C
You can proceed to make use of the derivative of arc tan x to evaluate special integrals.
Recall d (arc tan u) = 1
Du 1+u2
u2 = a2v2
therefore: ∫du = ∫adv = ∫ adv
√a2-u2 √a2-a2v2 a√1-v2
= ∫dv = arc sin v + C
228
√1-v2
= arc sin u + C
Example: Find ∫du
√4-u2
Solution: ∫du = ∫du = arc sin u + C
√4-u2 = ∫du = arc sin u + C
√(2)2- u2 2
Example: Find (1) ∫dx
a2+(x+2)2
Solution let u = (x + 2), du = dx
therefore dx = ∫du
a2 + (x + 2)2 a2 + u2
= 1arc tan u + C
a a
= 1 arc tan (x + 2) + C
a a
Example: Find ∫dx
√a2 + (x-1)2
Let u = x-1 du = dx
therefore ∫dx = arc sin u + C
√a2+u2 a
= arc sin x – 1 + C
Exercises: Find the following integrals:
(i) ∫ dx (ii) ∫ dx
16 + 4x2 √9 – 64x2
229
(iii) ∫ dx (iv) ∫ dx
49 + (x+2)2 √25 – 9x2
(v) ∫05dx
25+x2
Ans: (i) ¼ arc tan x (ii) arc sin 8x
8 3
(iii) 1/7 art tan x+2 (iv) arc sin 3x
7 5
(v) Π/20
4.0 CONCLUSION
In this unit you have derived the formula for common rational functions and
how to find their integrals. You studied how to derive the integration formula
of trigonometric functions. Evaluation and trigonometric functions were
treated. You also find the integrals of special functions using the inverse
functions of sin x and tan x. The formulas derived in this unit will be used to
study methods and techniques of integration which will be studied in the next
unit of this course.
5.0 SUMMARY
In this unit you have studied how to;
1. Deriv e formula such as:

(i) ∫1 du = ln/u/+C
u
(ii) ∫sin u du = -cos u + C
(iii) ∫cos du = sin u + C
(iv) ∫tan u du = ln/sec u/+ C
230
(v) ∫cot u du = ln/sin u/+C
(vi) ∫ secu du =ln/tan u + sec u/
(vii) ∫cosec u du = ln/cosec u – cot u/ + C
(viii) ∫eu du = eu + C
2. Evaluate integral of this form ∫du = arc sin u + C
√a2-u2 a
and ∫ du = 1 arc tan u + C
a2+u 2 a a
3. How to use the formula in (i) above to evaluate integrals.
Find the following integrals

(1) ∫ dx (2) ∫ 1 dx (3) ∫ x dx
5 – 7x x–6 x2 – 4
(4) ∫ 10x + 5 dx (5) ∫e4 dx (6) ∫ sin(4x-1) dx

5x2+5x+1
(7) ∫ sinc x covx du (8) ∫ du (9) ∫ sin4ax cos ax dx

sin2x
(10) ∫ x cot(x)2dx
231
UNIT 5
INTEGRATION OF POWERS OF TRIGONOMETRIC FUNCTIONS

1.0 Introduction
2.0 Objectives
3.0 Basic Formulas
3.1 Powers of Trigonometric Function
3.2 Even Powers of Sines and Cosines
3.3 Powers and Products of Other Trigonometric Functions
4.0 Conclusion
5.0 Summary
7.0 Further Reading
1.0 INTRODUCTION
So far what you have studied in the last two units is to find the function whose
derivative gives you the integral of another function. This process is summed
up in the fundamental theorem of integral calculus. For a review, consider
evaluating the integral ∫f(x)dx what you have studied in unit 2 and 3 is to find a
function f(x) such that d/dx f(x) = f(x) – 1 then F(x)+C = ∫f(x)dx. The process
of finding f(x) that satisfies equation 1 above is the difficult aspect and that is
why differentiation is taught before integration. So far, all you have been doing
is making a good guess for the function F(x) which is dependent on how
familiar you are with differentials of functions. In this unit you will study how
to make the guesswork a lot easier. This will be done by introducing firstly the
use of differentiation formulas alongside their integration formulas, second, by
232
applying some techniques that will be developed here based on the knowledge
of function as well as their respective derivative. Since it is the anti-derivative
that gives the solution to the integral it is necessary once again you review
basic rules and formulas for derivatives of function in the course calculus I.
The emphasis in this unit would be on developing skills rather than finding
specific answer to any given problem. Therefore as was done in the previous
units a particular example might be solved several times with different
methods. Therefore the examples in this unit have been kept fairly simple so
that you would be able to develop the necessary skills expected of you.
2.0 OBJECTIVES
After studying this unit you should be able to correctly
1. Recall differential formulas and their corresponding integrals
2. Evaluate integrals involving powers of trigonometric functions
3. Evaluate integrals involving products of even powers of sines and

cosines
4. To develop techniques and methods for evaluating integrals of any

function formed by functions of the trigonometric functions.
3.0 BASIC FORMULA
The first requirement for skill in integration is a thorough mastery of the

formulas for differentiation. Therefore, a good starting point for you to develop
the skill required of you in this course is for you to build your own table of
integral. You may make your own note in which the various sections are
headed by standard form like SUndu and then under each heading include
several examples to illustrate the range of application of the particular formula.
233
Therefore, what will be done in this unit is to list formulas for differentiation
together with their integration counterparts.
Summary of Differential Formulas and Corresponding Integrals
1. du = du dx 1. ∫du = u C
2. d(au) = a du 2. ∫ a du = a ∫ du
3. d(u + v) = du + dv 3. ∫ (du + dv) = ∫ du + ∫ dv
4. d(un) = nun-1du 4. ∫ un du = u n+1 + C, n ≠- 1

n+1
5. d(ln u) = du 5. ∫ du = ln /u/ + C
6. a) d(eu) = eu du 6. a) ∫ eu du = eu + C
b) d(au) = au ln a du b) ∫ au du = a u + C
ln a
7. d(sin u) = -sin u du 7. ∫ cos u du = sin u + C
8. d(cos u) = -sin u du 8. ∫ sin u du = tan u + C
9. d(tan u) = sec u tan u du 9. ∫ sec3 u du = tan u + C
10. d(cot u) = -csc2 u du 10. ∫ csc2 u du = -cot u + C
11. d(sec u) = sec u tan u du 11. ∫ sec u tan u du = sec u + C
12. d(csc u) = -csc u cot u du 12. ∫ csc u cot u du = -csc u + C
13. d(sin-1 u) = du 13. ∫ du = {sin-1 u + C
1 – u2 and ∫ 1 – u2 {-cos-1 u + C
14. d(cos-1 u) = du 14.
1 – u2
234
3.1 INTEGRATION INVOLVING POWERS OF TRIGONOMETRIC
FUNCTIONS
From the above basic formula you have that:

(1) ∫un du = u n+1 + C for n  –1
n+1
and
(2) ∫un du = ln/u/+C n = 1
This could be used to evaluate integrals involving powers of trigonometric functions.
Example: Find ∫ sinn ax cos ax dx
Let u = sin ax du = acos ax dx
then du = cos ax dx, un = sinn ax
therefore: ∫ sinn ax cos ax dx = ∫ un du
= n n+1 + C
a(n + 1)
using equation (1) above you get
(3) ∫ sinn ax cos ax dx = sin n+1 ax + C
a(n + 1)
with equation (2) you get n + 1
(4) ∫ cos ax dx = 1 ln /sin ax/+C
sin ax a
Interestingly this is the same result arrive at when you derive the formula for
∫ cot u du = ∫ cos ax dx = ln/sin u/ + C
sin ax
235
In a similar manner you can find ∫cosn ax sin ax dx
Let u = cos ax du = -a sin ax
Un = cosn ax then
∫ cosn ax sin ax dx = ∫ uu(-du) = - U n+1 C
n+1
for n ≠ 1
therefore ∫cosn ax sin ax dx = -cos n+1 ax C
(n + 1)a
for n = 1 ∫ sin ax dx -1ln/cosax/ + C
cos ax a
this is the same as ∫ tan ax dx
i.e. ∫ tan ax dx = -1. ln/cos ax/ + C
= 1 ln/sec ax/ + C
Example: Try finding ∫ sin3 x dx you find out that the above method does not
work because there is cos x side of it to give d (sin x)/ therefore, another
method has to be tried.
Recall that sin3x = sin2x sin x
= (1 – cos2x) sin x
sin3x = sin x – cos2x sin x
then let u = cos x du = -sin x
∫ sin3 dx = ∫ sin x dx - ∫cos2x sin x dx
= -cos x + cos3 x + C
236
The above give rise to a formula or technique for integrating odd powers of sin
x or cos x
i.e. cos2n+1 x = cos2n x cos x
but cos2n x = (cos2 x)n = (1 – sin2 x)
therefore cos2n+1 x = (1-sin2 x)n. cos x
let u = sin x du = cos x dx
therefore ∫ cos 2n+1 x dx = ∫ (1 – sin2 x)n cos x dx
= ∫ (1 – u2) du.
What follows next is to expand the expression (1-u2) du where u = cos x smf
∫ cos2n+1 x dx = -∫(1-u2)n du where u = sin x
Example: Find (1) ∫cos3 x dx ii ∫ sin5 x dx
Solution: ∫ cos 2n+1 x dx = ∫(1 – u2)n du 2n + 1 = 3  n = 1, u = sin x
therefore: ∫ cos3 x dx = -∫ (1 – u2) du = u – u 3
= sin x – sin3 x + C
(optimal) = sin x – sin x + sin 2 x cos x
3 3
= sin2 x cos x - 2 sin x
3 3
(ii) ∫ sin5 x dx
2n + 1 = 5 n 2, u = cos x
therefore ∫ sin5 x dx = ∫ (1 – u2)2 du
= ∫ (1 – 2u2 + u4) du
= u – 2u 3 + u 5 + C
3 5
237
therefore ∫ sin5 x dx = cos x – 2 cos3 + 1 cos5 x + C
3 5
(optimal) = 1 cos4 x sin x + 4 cos2 x sin x + 8 sin x + C
5 15 15
Example: Find ∫ secx tan x dx
Solution: ∫ sec x tan x dx = ∫ 1 sin x = ∫ sin x
cos x cos x cos2 x

-2
then ∫ sec x tan x dx = ∫ cos x sin x dx
therefore ∫ cos-2 x sin x = -cos -2+1 + C
-2 + 1
= cos -1 x + C
-1
= -1 + C
cosx
= sec x + C
Example: Find ∫ tan4 x dx
recall that sin2 + cos2 x = 1
therefore tan2 x = sec2 x – 1
then
∫ tan4 x dx = ∫ tan2 x. tan2 x dx
= ∫ tan2 x (sec2 x – 1) dx
= ∫ (tan2 x sec2 x – tan2 x) dx
= ∫ tan2 x sec2 x - ∫ (sec2 x – 1) dx
= ∫ (tan2 x sec2 x) dx - ∫ sec2 x dx + ∫ dx
let u = tan x du = sec2 x dx
therefore ∫ tan4 x dx = ∫ u2 du - ∫ du - ∫ dx
238
= u 3- u – x
= 1 tan3 x – tan x + x + C
Therefore, for n = even you can derive the formula using the technique above.
∫ tann x dx = ∫ tann-1 x (sec2 x – 1) dx
= ∫ tann-2 x sec2 x) dx - ∫ tann-2 x dx
= ∫ (tann-2 x sec2 x) dx - ∫ (secn-2 x – 1) dx
= ∫ (tann-2 x sec2 x ) dx - ∫ secn-2 + dx
= ∫ tan n-1 - ∫ tan n-2 x dx
n–1
Exercises:
(i) ∫ sin3 x dx (ii) ∫ tan2 4x dx (iii) ∫ cos5 x dx
(iv) ∫ cot3 x dx (v) ∫ cos3 x sin2 x dx (vi) ∫ secu x tan u du
Ans:
(i) 1/3 cos3 x –cos x + C (ii) tan4 x – 4x + C
(iii) sin x – 2 sin3 x + 1/5 sin5 x + C (iv) -cot 2 x – ln/sin x / + C
3 2
(v) sin 3 x - sin 5 x + C (vi) ln(cosec x – cot x) + C
3 5
3.2 INTEGRATION OF EVEN POWERS OF SINES AND COSINES
In the previous section you have studied how to integrate odd powers of sin x
and cos x. You will attempt to evaluate integrals of even powers of sines and
cosines by applying the same technique used above for odd powers i.e.
∫ sinn x cosm x dx where m or n is an even numbers.
that ∫ cos½ x sin3 dx evaluate the integral.

239
Recall that 3 is odd as such sin3 x = sin2 x sin x = (1 – cos2 x) sin x.
therefore: ∫ cos ½ x sin3 x dx = ∫ cos ½ x 91 – cos2 x) sin x dx
for u = cos x du = sin x dx.
therefore: ∫ cos ½ x (1 – cos12 x) sin dx = ∫ u ½ (1 – u2) du
= ∫ (u ½ - u) du = 2 u 3/2 - u 2
3 2
= 2cos 3/2 x = cos 2 x + C
3 2
If in the above you have sin4 x instead of sin3 x then you have to evaluate
∫ cos ½ x sin4 x dx
Then using the above method will fail because sin4 x =(1 – cos2 x)2 which give
∫ cos ½ x sin4 x dx = ∫ cos ½ x (1-cos2 x)2 dx
missing above is –sin x dx = du that goes with the cos x. Therefore, there is a need to use
another trigonometric identity. The one that will be used is given as
sin2 x = . (1 – cos 2x) and cos2 x = . (1 + cos 2x).
Note: The above identities are derived by adding or subtracting the equations
cos2 x + sin2 x = 1 and cos2 x – sin2 x = cos 2x
Recall
∫ sin4 x dx = ∫ (sin2 x)2 dx
= ∫ [ ½ (1 – cos 2x]2 dx
= ∫ ¼ (1 – 2 cos 2x + cos2 2x) dx
= ¼ ∫ (1 – 2 cos 2 x + ½ (1 – cos 4x) dx
= ¼ [x – sin 2x + x – 1 sin4 x]
2 8
= 3 x – ¼ sin 2x = 1 sin 4x + C
8 32
240
Example: Find ∫ sin2 x cos2 x dx
Here both powers are even.
Let sin2 x = (1 – cos2 x)

2 2 2 2
Therefore sin x cos x = (1 – cos x) cos x
 ∫ sin2 x cos2 x dx = ∫ (cos1 x – cos4 x) dx
∫ cos2 x dx - ∫ cos4 x dx
∫ cos2 x dx = ∫ ½ (1 + cos 2x) dx = x + sin 2x
2 4
∫ cos4 x dx = ∫ (cos2 x)2 dx = ∫ [ . (1 + cos 2x)]2 dx
= ∫ ¼ [1 + 2 cos 2x + cos2 2x] dx
= ¼ [1 + 2cos 2x + . (1 + cos 4x)] dx
= 3x + . sin 2 x + 1 sin 4x
8 32
∫ sin2 x cos2 x dx = x + sin 2x + 3x + ¼ sin 2x + 1 sin 4x
2 4 8 32
= 7 x ½ sin 2x + 1 sin 4x + C
8 32
Example: Find ∫ cos6 x dx
 ∫ cos6 x dx = ∫(cos2 x)3 dx = ∫ 1 (1 + cos 2x)3 dx
= 1 ∫ (1 + 3 cos 2x + 3cos2 2x + cos3 2x) dx
= 5 x + ¼ sin 2x + 3 sin 4x -1 sin3 2x + C.
16 64 48
3.3 POWERS AND PRODUCTS OF OTHER TRIGONOMETRIC FUNCTIONS
In this section, you shall evaluate two types of integrals
241
(1) ∫ tanm x secn x dx and
(2) ∫ cotm x cosexn dx
Example: When n is even you write tanm x secn x = tanm x secn-2 x sec2 x and then express
secn-2 in terms of tan2 x using sec2 x + 1 = tan2 x.
Example: ∫ tan3 x sec2 x dx
let u = tan x du = sec2 x dx.
then ∫ tan3 x sec2 x dx = ∫ u3 du
= u4 + C = tan4 x + C
4 4
When n and m are both odd you write
tan x secn x = tanm-1 x secn-1 sec x 1an u
and express tanm-1 x in terms of sec2 x using tan2 x = sec2 x – 1
Example: ∫ tan3 x sec3 x dx
tan3 x sec3 x = tan2 x sec2 x tan x sec x
and tan2 x = (sec2 x – 1)
therefore: ∫ tan3 x sec3 x dx = ∫ (sec 3x – 1) sec2 x sec x tan x dx
= ∫ (sec4 x – sec2 x) sec x tan x dx
(but u = sec x, du = se x 1 an x du)
therefore ∫ tan3 x sec3 x dx = ∫ (u4 – u2) du
= u 5 – u 3+ C
5 3
= sec 3 x – sec 3 x + C
5 3
242
you can do the same for cotm x cosecn x in a similar manner. That is for ∫ cotm x cosecn x dx
when n is even you write out cotm x cosecn x = cotm x cosecn-2 cosec x and express cosecn-2
in terms of cot2 x using cosec2 x = cot2 x + 1
Example: ∫ cot5 x cosec4 x dx
= ∫cot5 x cosec2 x cosec2 x dx
= ∫ cot5 x (cot2 x + 1) cosec2 x dx
= ∫ cot7 cosec2 x dx + ∫ cot5 x cosec2 x dx
(u = cot x du = -cosec2 x dx).
= -cot 8 x - -cot 6 x + C
8 6
In similar manner when m and n are both odd you have cotm x cosexn x = cotm-1 x cosecn-1 x
cosec x cot x and then express cotm-1 x in terms of cosec2 x using cot2 x = cosec2 x – 1
Example: ∫ cot5 x cosec3 x dx
= ∫ cot4 x cosec2 x cosec x cot x dx
= ∫ (cosec2 x – 1)2 cosec2 x cosec x cot x dx
= ∫ (cosec6 x – 2 cosec4 x + cosec2 x) cosec x cot x dx
u = cosec x du = - cosec x cot x dx
= ∫ (u6 – 2u4 + u2) (-du)
= -u 7 + 2 u 5 – u 3 + C
7 5 3
= -cosec7 x + 2cosec5 x – cosec3 x + C
7 5 3
Exercises Find
1. ∫ cot3 x cosec3 x dx
2. ∫ cot3 x cosec2 x dx
3. ∫ tan5 x sec2 x dx
243
Ans:
1. -cosec5 x + cosec3 x + C
5 3
2. -cot 4 x + C
3. tan6 x + C
4.0 CONCLUSION
In this unit, you have reviewed differential formulas and their corresponding
integrals. These basic formulas will be used throughout the remaining part of
the course. You have developed techniques of finding integrals of powers of
trigonometric functions by using the trigonometric identities;
(i) cos2 x + sin2 x = 1 and
(ii) 1 + tan2 x = sec2 x etc.
You have also studied how to evaluate the products of even powers of sines
and cosines functions. These integrals will be used when developing other
techniques of integration in the next unit of this course.
5.0 SUMMARY
You have studied in the unit how to
(i) Recall basic differential formulas and corresponding integrals
(ii) Use these basic formulas to develop techniques of integration of powers

of trigonometric function
(iii) Evaluate the integrals of odd powers of trigonometric function such as
∫ sinn x dx, ∫ cosn x dx

244
(iv) Evaluate the integrals of trigonometric function such as ∫ tann x dx, ∫
cotn x dx where n is odd or even
(v) Evaluate the integrals of even powers of sec x and cosec x
(vi) Evaluate the integrals of products of even powers of sin x and cos x such
as ∫ cosn x dx, ∫ sinn x dx, ∫ cosn x dx sinm x dx where n or m is even or
both are even.
(1) Find ∫ sin2 x cos2 x dx

(2) Show that ∫ tan ax dx = 1 ln/cosax/+C
a
(3) Find ∫ sin3 4x dx
(4) Find ∫ tan5 x sec3 x dx
(5) Show that ∫ sec2n x dx = ∫(1+u2)n-1 du where u = tan x
7.0 REFERENCES
Chand & Company.
DP Publications.
245
MODULE FOUR
Unit 1: Mathematical Tools I: Simultaneous Equations, Linear Functions,
and Linear Inequalities
Unit 3: Probability
UNIT 1: MATHEMATICAL TOOLS I: SIMULTANEOUS

EQUATIONS, LINEAR FUNCTIONS, AND LINEAR
INEQUALITIES
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Simultaneous Equations
3.2 Linear Functions
3.3 Linear Inequalities
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignment
1.0 INTRODUCTION
This unit is a continuation of our discussions on mathematical
tools. This focuses on the other aspects of equations and inequalities
that are useful in business and economic decisions.
246
2.0 OBJECTIVES
At the end of this unit, you should be able
to:
 explain what simultaneous equation systems are all
about
 describe how simultaneous equation systems are
formulated and solved
 analyse business conditions using linear functions
and linear inequalities.
3.0 MAIN CONTENT

3.1 Simultaneous Equations
A simultaneous equation system is a set of equations with two or
more unknown. The mostly used method of solving a simultaneous
equation system is the so-called ―Addition-Subtraction‖ or
―Elimination‖ method.
Consider the following example:

Solve for X and Y in the system of equations:
3X – 4Y = 13 (1)
3Y + 2X = 3 (2)
Solution:
Rearranging equation (1) and (2), we get:
3X – 4Y = 13 (1)
2X + 3Y = 3 (2)
Multiplying equation (1) by 2 (the coefficient of X in equation (2)) and equation
247
(2) by 3 (the coefficient of X in equation (1), we get:
6X – 8Y = 26 (3)
6X + 9Y = 9 (4)
Subtract equation (4) from equation (3) to get:

6X – 8Y = 26
-(6X + 9Y = 9)
0-17Y = 17
-17Y = 17
Y = -1
Substituting the value of Y = -1 to equation (1), we get:

3X -4(-1) = 13
3X + 4 = 13
3X = 13 - 4
3X = 9
X=3
The solution is therefore X = 3; Y = -1.
Note that this substitution will yield the same result if equation (2) is used in the
substitution.
Application:
1. Suppose a factory manager is setting up a production schedule for two models, A
and B, of a new product. Model A requires 4 units of labour input and 9 units of
capital input. Model B requires 5 units of labour input and 14 units of capital input.
The total available labour input for the production of the product is 335 man-
hours per day, and that of capital is 850 units per day. How many of each model
should the manager plan to make each day so that all the available labour hours
and capital inputs are used.
Solution:
248
Tabulating the schedule, we get:
Input Model A Model B Total

Available
Labour 4 5 335
Capital 9 14 850
Let X = number produced of model A per day

Y = number produced of model B per day
These require a total of:

4X + 5Y = 335 (labour)
and 9X + 14Y = 850 (capital)
We now have the simultaneous equations:
4X + 5Y = 335 (1)
9X + 14Y = 850 (2)
Solving for X and Y simultaneously, we
get: Multiplying eq. (1) by 9 and eq. (2)
by4:
36X + 45Y = 3015 (3)
36X + 56Y = 3400 (4)
eq. (1) – eq. (2):
36X + 45Y = 3015

-(36X + 56Y) = 3400)
0 – 11Y =-
385
-11Y = -385
Y = -385 = 35
249
-11
Substituting for y in eq. (1):
4X + 5(35) = 335
4X + 175 = 335
4X = 335 – 175
4X = 160
X = 40
The solution values, Y = 35 and X = 40 indicate that, according to the specified
constraints, the manager should plan to make 40 units of model A and 35 units of
model B.
3.2 LINEAR FUNCTIONS

A function, f, is said to be a linear function if f(x) can be written in a form:
f(x) = ax + b; a  0
The function: Y = f(x) ax+b is an equation of a straight line, with slope

= a and Y – intercept = b.
Examples:
(1) Suppose f is a linear function with slope of 2 and f(4) = 8, find f(x).
Solution:
The linear function is of the form:
f(x) = ax + b Here, a = 2 and
f(4) = 8 = 2(4) + b
8=8+b
B=8–8=0
Thus, f(x) = 2x + b
= 2x + 0
=2x
f(x) = 2x
250
(2) In testing an experimental diet for hens, it was determined that the average
live weight, w, (in kgs) of a hen was statistically a linear function of the number of
days, d, after the diet was begun,
where 0  d  50. Suppose the average we ight of a hen beginning

the diet was 4kg. And 25 days later, it was 7kg.
a) Determine w as a linear function of d.

b) What is the average weight of a hen for a 10 days period?
Solutions
a) The required function is of the form:
W = f(d) = md + b,
where m is the slope and b is the constant intercept.
By definition, m= - W = W2 - W1
-d d2 - d1
From the given information:
when d = 0; w = 4 and when d = 25; w = 7.
It follows that, W1 = 4; w2 = 7, d1 = 10, d2 = 25
71 4 3
m=  
25 1 0 25
Using the so-called point-slope form of a linear function:
w - w1 = m(d - d1), we get:
251
w – 4 = 3 (d – 0)
25
w – 4 = 0.12d
w = 0.12d + 4
Thus, the required linear function is

W = 0.12d + 4
(b) When d = 10, w = 0.12 (10) + 4

= 5.2
Thus, the average weight of a hen for a 10 days period is 5.2 kg.
3.3 LINEAR INEQUALITIES

An Inequality is simply a statement that two numbers are not equal. A
linear inequality in the variable, X, is an inequality that can be written
in the form:
aX + b<0 or aX + b  0; (a 0).
Examples
Solve the inequalities:
(1) 2(X - 3) < 4
(2) 3 – 2X  6
Solutions
(1) 2(X - 3) < 4
2X - 6 < 4
2X < 4 + 6
2X < 10
2X < 10
252
2 2
X<5
(2) 3 – 2X < 6
-2X + 3 < 6
-2X < 6-3
-2X < 3
-2X < 3
-2 -2
X  -3/2
The reverse in inequality sign is due to the negative effect.

Application:
1. The current ratio of any business organisation is the ratio of its current assets to
its current liabilities. The Managing Director of ACE Equipment Co. has decided
to obtain a short-term loan to build up inventory. The company has current assets
of N350, 000 and current liabilities of N80, 000. How much can the Managing
Director borrow if the company‘s current ratio must be not less than 2.5?
Note that funds received are considered current assets and loans are considered
current liability.
Solution
Let X = the amount to be borrowed Then,
current assets = 350,000 +X Current liability =
80,000 + X
By definition,
Current ratio = Current Assets

Current Liabilities
= 350,000 + X
80,000 + X
253
Thus, according to the specification:
350,000+X  2.5
80,000 + X
Solving, we get:
350,000 + X  2.5 (80,000 + X)
350,000 + X  200,000 + 2.5X
X – 2.5 X  200,000 – 350,000
-1.5 X  - 150,000
-1.5 X  -150,000
-1.5 -1.5
X ≤ 100,000
Thus, the Managing Director can borrow not more than or as much as
N100, 000 and still maintain a current ratio of not less than 2.5.
2. A publishing company finds that the cost of publishing each copy of a

magazine is N0.38. The revenue from dealers of the magazine is N0.35
per copy. The advertising revenue is 10% of the revenue received
from dealers for all copies sold beyond10,000 units. What is the
least number of copies which must be sold so as to have a positive
profit?
Solution
Let x = number of copies to be sold.
By definition,
Profit (U ) = R-C
Where R = Revenue from dealers + Revenue from adverts.
Revenue from dealers = N0.35x

Revenue from adverts = 0.10 [0.35(x-10,000)]
Total Cost (C) = 0.38x
254
Thus,
Profit (U ) = 0.35x+0.10[0.35(x-10,000)] – 0.38 x > 0

Solving, we get:
0.35x + 0.10 [0.35x – 3500] – 0.38 x > 0

0.35x + 0.035x – 350 – 0.38x > 0
0.35x + 0.035x – 0.38x > 350
0.005 x > 350
0.005 x > 350
0.005 0.005
x > 70,000
Thus, the total number of copies to be sold must be greater than 70,000. That is, at
least 70,001 copies.
SELF ASSESSMENT EXERCISE

1. Solve the inequality: 9Y + 1 ≤ 2Y – 1
4
2. Using inequality symbols symbolise the statement: The number of man-hours,
X, to produce a commodity is not less than 2.5 nor more than 4.
4.0 CONCLUSION
This unit has focused on simultaneous equations, linear functions and linear
inequalities as extension to the most basic mathematical tools of quantitative
analysis. The unit looked at these subjects with some emphasis on the practical
business applications.
5.0 SUMMARY
1. A simultaneous equation system is a set of equations with two or more unknown.
The mostly used method of solving a simultaneous equation system is the so-called
255
―Addition- Subtraction‖ or ―Elimination‖ method.
2. A function, f, is said to be a linear function if f(x) can be written in a form:

f(x) = ax + b; a  0
The function: Y = f(x) ax+b is an equation of a straight line, with slope = a and Y –
intercept = b.
3. An inequality is simply a statement that two numbers are not
equal. A linear inequality in the variable, X, is an inequality that can
be written in the form:
aX + b<0 or aX + b  0; (a  0).

Let P = 0.09q + 50 be the supply equation for a manufacturer. The
demand equation for his product is:
P = 0.07q + 65
a) If a tax of N1.50/unit is to be imposed on the manufacturer, how
will the original equilibrium price be effected if the demand
remains the same?
b) Determine the total revenue obtained by the manufacturer at the
equilibrium point, both before and after the tax.

Haessuler, E.F. &Paul, R.S. (1976). Introductory Mathematical
Analysis for Students of Business and Economics, (2nd

edition.) Reston Virginia: Reston Publishing Company.
256
UNIT 2: MAHEMATICAL TOOLS II: INTRODUCTION TO
MATRIX ALGEBRA
CONTENTS
1.0 Introduction.
2.0 Objectives
3.0 Main Content
3.1 Equality of Matrices
3.2 Matrix Addition
3.3 Scalar Multiplication
3.4 Matrix Multiplication
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
An understanding of matrices and their operations is essential for input
output analysis in business and economic decisions. It is also essential for
solving complicated problems in simultaneous equation systems. In this unit,
you will just be introduced to the basic rudimentary of matrices, with
some simple applications.
A matrix is a rectangular array of numbers, called entries. Examples are:
257
Mat!'lx C _ [1 3 91 _, !'ow mat!'lx
2.0 OBJECTIVES
 State the basic principles of matrix algebra
 analyse the important mathematical operations of
matrices
 apply matrices in business decisions.
258
3.0 MAIN CONTENT
3.1 Equality of Matrices
Two matrices, A and B, are said to be equal, A = B, if they have the

same dimension and their corresponding entries are equal.
Example:
GI".~n A,-
FX,
laz;
Y + 1]
a\'V
For A = B, X = 2; Y + 1 = 7; 2Z = 4; 5w = 2
3.2 Matrix Addition
If A and B are two matrices with the same dimension, then the sum,
A + B is the matrix obtained by adding the corresponding entries in A
and B.
3.3 Scalar Multiplication
If A is an (m x n) matrix and K is a real number (or scalar), then KA is a

scalar multiplication.
Example
Jf A_Ii a] and K - 10
tl -a
1'1 3 I [1':1 3Q ]
thm K'A. - sc I" -a _, 4"J -ao
3.4 Matrix Multiplication
If A is an (m x n) matrix and B is an (n x p) matrix, the product AB = C is of

dimension (m x p). For this product to exist, the number of columns in A
(that is, n) must equal the number of rows in B (that is, n). It follows that if:
259
Where: C11 = a11b11 + a12b21 + a13b31
C12 = a11b12 + a12b12 + a13b32
C13 = a11b13 + a12b23 + a13b33
C21 = a21b11 + a22b21 + a23b31
C22 = a21b12 + a22b22 + a23b32
C23 = a21b13 + a22b23 + a23b33
Examples
1.Suppose the prices in N per unit for products A,B, and C are represented by
the price matrix:
Price of
A B C
P =[2 3 4]
(1x3)
The quantities purchased are given by the quantity matrix:
Q.'
(9 X 1)
f 7]a unit's af A
unit'S of B
11 unit'S (lfe
Compute the total expenditure on the products.
Solution
Required to compute PQ:
= 2(7) + 3(5) + 4(11)

= [ 73 ]
(1x1)
Thus, the total expenditure on products A,B, and C is N73.
2. A manufacturer of calculators has an East Coast and a West

Coast plant, each of which produces Business Calculators and Standard
Calculators. The manufacturing time requirements (in hours per
calculator) and the assembly and packaging costs (in naira per hour)
are given by the following matrices:
Hours per Unit

Assembly 0.2
T = 0.2
260
Packaging 0.1Standard Calculators
0.1 Business Calculators
Naira per Hour

East Coast West Coast
C = 5 6 Assembly
4 5 Packaging

a) What i s t h e t o t a l c o s t o f m a n u f a c t u r i n g a b u s i n e s s
calculator on the East Coast?
b) Calculate the manufacturer‘s total cost of producing the calculators in the two
plant locations.
Solutions
Question (a) and (b) requires the product matrix:
Where D11 = 0.2(5) + 0.1(4) = 1.4

D12 = 0.2(6) + 0.1(5) = 1.7
D21 = 0.3(5) + 0.1(4) = 1.9
D22 = 0.3(6) + 0.1(5) = 2.3
It follows that the cost matrix:
East Coast West Coast

1.4 1.7  Business Calculator
1.9 2.3Standard Calculator
261
a) The total cost of manufacturing a Business Calculator in the East
Coast is the entry in D11 = N1.40.
b) The cost matrix, D, indicates that the total cost of producing 1 unit of Business
Calculator is N1.40 in the East Coast, and N1.70
in the West Coast. The cost of producing 1 unit of Standard Calculator is N1.90 in the
East Coast, and N2.30 in the West Coast.
SELF ASSESSMENT EXERCISE 1

A square matrix, M, of dimension, (3x3), has elements Mij = 3j
Where i represents row and j represents column. Write out the matrix.
4.0 CONCLUSION
This unit had exposed you to the basic principles of matrices. Of most importance are
the operations in matrices, similar to mathematical operations, including:
(i) equality of matrices; (ii)

addition of matrices;
(iii) scalar multiplication; and,
(iv) matrix multiplication.
The unit also made some simple applications of such matrix operations.
5.0 SUMMARY
You had learned the followings from the unit‘s discussions:
1.Two matrices, A and B, are said to be equal, A = B, if they have the same dimension
and their corresponding entries are equal.
2. If A and B are two matrices with the same dimension, then the
sum, A + B is the matrix obtained by adding the corresponding entries in A and B.
i
3. If A is an (m x n) matrix and K is a real number (or scalar), then
KA is a scalar multiplication.
4. If A is an (m x n) matrix and B is an (n x p) matrix, the product
AB = C is of dimension (m x p). For this product to exist, the number of
columns in A (that is, n) must equal the number of rows in B (that is, n).
Suppose a building contractor has accepted orders for five ranch style
houses, seven cape cod-style houses and twelve colonial-style houses.
These orders can be represented by the row matrix
Q = [5 7 12]
Furthermore, suppose the raw materials that go into each type of house are
steel, wood, glass, paint, and labour. The entries in the matrix R below
give the number of units of each raw material going into each type of
house:
Ste~l VV'QQd Olass Paint LabQ~n'

~ilIneh
It - CL~peC(ltl 7
[6 20
13
1~
12
7
~
17]
21
ColonlRl ~ 2fi S· ei ~1
a) Compute the product, QR, the amount of each raw material needed for
the contract.
b) Suppose that steel costs N15/unit, wood costs N8/unit, glass, paint and
labour cost N5, N1, and N10 per unit respectively. These costs are
represented in the column matrix:
15
8 

C = 5 
 
1 
 10

ii

Compute the product RC, that is, the cost of each type of house.

Haessuler, E.F. and Paul, R.S. (1976), Introductory Mathematical
Analysis for Students of Business and Economics, 2nd edition. Reston

Virginia: Reston Publishing Company.
iii
UNIT 3 PROBABILITY
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Definition of Terms
3.2 Definition of Probability
3.3 Frequentist or Relative Probability
3.4 Bayesian or Subjective Probability
3.5 Axiomatic Probability
3.6 Basic Laws of Probability
3.7 Conditional Probability
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
So far, you have learnt about measures of location and variability. This prior
knowledge will enhance your understanding of probability. Simply put, all humans
are faced with uncertainty about life; thus, probability theory is a basic component
of decision-making, under uncertainty. From the sciences, arts to the humanities
we are confronted with decision making under uncertainty. The objective of this
unit then, is to present to you the basic concept of probability needed for an
understanding of statistical inference. We shall introduce the subject by
considering probabilities that are based on observed data.
iv
2.0 OBJECTIVES
At the end of the unit, you should be able to:
• highlight the role of probability in drawing inferences, in the face of uncertainty
• assign probabilities using classical, relative, Bayesian and axiomatic models
• describe permutation and combination.
3.0 MAIN CONTENT

3.1 DEFINITION OF TERMS
Here, let us look at a number of terms
a. Random equipment
This is an experiment which the outcome is unpredictable- for example, tossing a
coin, rolling a die, lottery card game etc.
b. Sample space
This is the set of all possible outcome of a random experiment. This sample space
is denoted by, and a generic element of the sample space is denoted by Ω. For
example, driving to work, a commuter passes through a sequence of three
intersections with traffic lights. At each light, he either stops, (s) or continues (c).
The sample space is the set of all possible outcomes.
Ω= {CCC, CCS, CSS, CSC, SSS, SSC, SCC, SCS} Where, CSC- for example,
denotes the outcome of the movement of the commuter- through the first light,
stopping at the second light and continuing through the third light.
c. Event Here, we are interested in particular subset of Ω, which in probability
language are called events. We denote events by capital alphabets A, B, C,… X, Y,
Z. In the example above, the event that the commuter stops at the first light is the
subset of Ω denoted as follows
A = {SSS, SSC, SCC, SCS}.
v
d. Intersection of two events A set M is said to be intersection of two sets A and B
if the elements of M are the elements common to both A and B. M is denoted as M
= A n B. For example, if A is the event that the commuter stops at the first light
(listed above) and if B is the event that he stops at the third light, therefore-
B = {CCS, CSS, SSS, SCS) M = A n B = {SSS, SCS)
e. The union of two sets A and B, is the event M that either A occurs or B occurs
or both occur- M = A U B. For example, if A is the event that the commuter stops
at the first light (see above) and B is the event that he stops at the third light (see
above), therefore: M = {SSS, SSC, SCC, SCS, CCS, CSS}.
f. Impossible events An impossible event is an event that will never happen. It is
represented by φ. For example, T = {x: 0 < 1 x < , x Σ N} is an impossible event,
where N is the set of natural numbers.
g. Sure events or certain event An event that must happen is called sure or certain
event. For example, in tossing a die- T = {x : 1 < x < 6} is a sure event.
h. Mutually exclusive events Two events- P and Q are called mutually exclusive
event or disjointed events if the occurrence of one of them precludes (prevents) the
occurrence of the other. That is, P n Q = φ. For example, in rolling a die, where P
and Q are numbers on the upturned face of the die. Let P = {x : P is even} Q = {x :
Q is odd) Then P n Q = φ, which- when interpreted, P and Q are mutually
exclusive.
i. Complementary events
The complement of an event- Ac, is the event that A does not occur, and thus
consist of all those elements in the sample space that are not in A. That is, if A U
Ac = or Ac = Ω – A. For example, the complement of the event that the commuter
stops at the first light is the event that he continues at the first light. :. Ac = {CCC,
CCS, CSC}
vi
j. Event space (₳)
The set of all possible subset of a sample space is called the event space, it is most
often called the power set in elementary mathematics. For
example, 4 Ω= { a, b ) 78 = {a}, {b}, {a,b}, {φ}} = {(a}, {b} (Ω){φ}}
k. Independent event Two events P and Q are said to be independent if the
occurrence (or non-occurrence) or P has no effect on the occurrence (or non-
occurrence) of Q. For example, toss a coin twice, and each time, observe the face
that shows up. The events- P = {heads in first toss} Q = {heads in second toss}
3.2 DEFINITION OF PROBABILITY

The earliest definition of probability is the classical or objective definition, which
is based on repeated trial of tests and the assumption that various outcome of a trial
are equally, likely and mutually exhaustive events. For example, if there are n
exhaustive, equally, likely and mutually exclusive cases- “y” of which are
favourable to the occurrence of event T, then Pr (T) = y/n For example, if S = {1,
2, 3, 4, 5, 6}. Find the probability of getting a number less than 6. These are six
possible cases, out of these 6 cases, only 5 numbers are less than 5 i.e: T = { 1, 2,
3, 4, 5}. Therefore, Pr (T) = y/n = 5/6
3.3 FREQUENTIST OR RELATIVE PROBABILITY

When the number of trails is carried out in an infinite number of repeated tests, we
can define the relative frequency f the event (P) in terms of Rf(P) = Number of
trials in which P occurs Total number of trails This ratio Rf(P) is called the
empirical probability. This definition assumes that probability of an event has a
limiting value on the long run. Pr (P) = lim = y . n -7 n
vii
We, therefore, conclude that the definitions by the classical and relative frequency
schools of thought are based on objectivity.
3.4 BAYESIAN OR SUBJECTIVE PROBABILITY

According to the Bayesian model, probability is not based on repeated trials of
tests. For Bayesian then, probability is a model for quantifying the strength or
personal options. Baye‘s rule describes how personal opinion evolves with
experience. Suppose that the prior probability of A is P (A). On observation of an
event P, the opinion about P changes to Pr (A/P) according to Baye‘s rule-
Pr (A/P) = Pr {P/A} Pr {A}
Pr (P)
You will learn more about this, as we proceed in this course.
3.5 AXIOMATIC PROBABILITY

An axiom is a rule or principle that is, generally, believed to be true. It does not
need to be proved or debunked. In the axiomatic approach, we develop an idealised
model from which we can predict the probability of the occurrence of various
events. This model establishes abstract relationship between the events of a
random experiment, and as such, could be used in calculating their probabilities.
For example- Pr (A or B) = Pr (A) + Pr (B) - P (A n B) – non mutually exclusive
event is an axiomatic approach.
Example 1
(1) A die is rolled once; what are the probabilities of getting:
i. an even number
ii. an odd number
iii. a prime number
iv. an event prime number
viii
v. an odd prime number.
Solution
Let S = {1, 2, 3, 4, 5, 6}
Let P = event that even number occurs
Q = event that odd number occurs
M = event that prime number occurs
L = event that even prime number occurs
F = event that odd prime number occurs
(i) n (S) = 6
P {2, 4, 6}
n (P) = 3
Pr (P) = n (P) = 3 = 1/2
n(S) 6
(ii) Q {1,3,5}
n (Q) = 3
Pr (Q) = n (Q) = 3 = 1/2
n(S) 6
(iii) M{2,3,5}
Pr (M) = n (M) = 3 = 1/2

n(S) 6
ix
Example 2 If four fair coins are tossed, find the probability of getting:
i. at least, 3 heads
ii. at most, one head
iii. exactly, four heads
Solution Let the sample space be S and at least 3 heads, at most one head and
exactly four heads be M, N and O respectively.
Then- S = {(H H H H), (HHHT), (HHTH), (HHTT), (HTHT)} {(HTTH), (HT,TT),

(THHH),(THHT)(THTH) {(THTT), (TTHH), (TTHT),(TTTH),(TTTT)}
n (S) = 16 M = {(HHHH), (HHHT), (HTHH),(HHTH),(THHH)}
n (M) = 5 N = {(HTT),(THTT),(TTHT),(TTTH)}
N (N) = 4
O = {HHH}
n (O) = 1
1. Pr (M) = n(M)/n(S) = 5/6
2. Pr (N) = n(N)/n(S) = 4/16 = ¼
3. Pr (O) =n(O)/n(S) = 1/16
3.6 BASIC LAWS OF PROBABILITY

You are to note the following
a. 0 ≤ P(E) ≤ 1
b. P (Ω) = 1, Pr(φ) = 0
c. For any E Ω and its complement
x
Ec, we have: Pr (E) + Pr (Ec) = 1
d. For any events E1 and E2 Pr (E1, U, E2) = P (E1) + Pr (E2) – (E2) – Pr (E1
n E2)
3.7 CONDITIONAL PROBABILITY

The conditional probability of a given B is denoted by Pr (A/B). Similarly, the
conditional probability of B given A is represented by Pr(B/A).
.
That is- Pr (A/B) = Pr (A n B) provided Pr (B) ≠ 0
Pr (B)
Example 3
If A and B are independent events with Pr(A) = 0.05 and Pr(B) = 0.65 Find- Pr
(A/B)
Solution- Pr (A/B) = Pr (A n B)/ Pr (B)
0.05 Pr(B)=0.65 Pr (A) x Pr (B)/ Pr (B) = Pr (A) = Pr(A/B) = Pr(A) x Pr(B)
= 0.05 x 0.65 = 0.325
4.0 CONCLUSION
By now, your understanding of the concept of probability should have been
enhanced. Decision- making is paramount in life, in business and research work.
By applying the principles of probability, quality decisions can be easily arrived at.
Your lives are full of choices and better alternative choices indicate a better chance
for improvement and optimum performance. Applying the mathematics of
xi
probabilities you learned in this unit will make a difference. You are going to now
study probability distributions in the next unit.
5.0 SUMMARY
You have learnt the following key facts in this unit. • Addition rule for mutually
exclusive events- if A and B are two mutually exclusive events, then the probability
of obtaining either A and B is equal to the probability of obtaining A plus the
probability of obtaining B. Pr (A or B) = Pr (A) + Pr (B) • Addition rule for non-
mutually exclusive events- if A and B are non- mutually exclusive events, then we
must subtract the probability of the joint occurrence of A and B from the sum of
their probabilities. Pr (A or B) = Pr (A) + Pr (B) - Pr (A ∩ B) • Bayes‘s rule for
conditional probabilities. A general method for revising prior probabilities in the
light of new information, to provide posterior probabilities. Two events: Pr (B /A)
= Pr (A and B) Pr (A)
General form: Pr (B /A) = Pr (A/Bj) Pr (Bj) n Σ Pr (A/Bj) Pr (Bj) j=1
i. A residential sub-division developer has a house styles to build on 11 adjacent

lots. How many distinguishable arrangements are possible if the developer decides
to build 2 houses of each style?
ii. An investment firm is interested in the following- A = {Common stock in NYZ

corporation gains 10% next year} B = {Gross national product gains 10% next
year}. The firm has assigned the following probability distribution on the bases of
available information- Pr(A / B) = 0.8 (P (B) 0.3
xii
Compute Pr (A n B)
iii. In a large sub-urban community, 30% of the large household use Brand A
toothpaste, 27% use Brand B, 25% use Brand C, and 18% use brand D. In the four
groups of households, the proportion of resident who learned about the brand they
use through television advertising are as follows= Brand A, 0.10, Brand B, 0.05,
Brand C, 0.02 and Brand D, 0.05; In a household selected at random from
community, it is found that i. what is the probability that the brand of toothpaste
used in the household is (a) A (b) B (c) C (d) D? ii. Use diagram to show the prior
probability, conditional probabilities, and joint probability.

Brian, P.M., & Philip, M.N. (2006). Applied Statistics for Public Policy. New
Delhi: Prentice-Hall.
James, T. & Benon, P.G. (1988). Statistics for Business and Economics. (4th ed.).
United States: Dellen Publishing Company Inc.
Kasumu, R. B. (2002). Introduction to Probability Theory. A First Course. JAB
Publishers. residents learned about the toothpaste through television
advertising:
xiii

MTH106

Uploaded by

Document Informationclick to expand document information

Document Informationclick to expand document information

Copyright:

Available Formats

MTH106

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MTH106

Uploaded by

Copyright:

Available Formats

NATIONAL OPEN UNIVERSITY OF NIGERIA

COURSE CODE: MTH 106

COURSE TITLE: MATHEMATICS FOR MANAGEMENT

Course Developer: Mr. SUFIAN JELILI BABATUNDE & BORO IRENE

What you will learn in this course

Working through This Course

Unit 2 Cash Flow

Unit 3 Sinking Fund

Unit 1: Computation of Areas by Calculus

Unit 2: Definite Integral

Unit 3: Indefinite Integral

Unit 4: Integration of Transcendental functions

Unit 5: Integration of Powers of Trigonometric functions

Unit 1: Mathematical Tools I: Simultaneous Equations, Linear Functions, and

Unit 2: Mathematical Tools II: Introduction to Matrix Algebra

References and Other Resources

Course Marking Scheme

Assignments Four assignments, best three marks of

100% of course marks

How to Get the Most from This Course

Course Title MATHEMATICS FOR MANAGEMENT SCIENCES II

Course Developer/Writer: Mr. SUFIAN JELILI B.

Programme Leader: Dr I.D Idrisu

Course Coordinator: Mrs. Adegbola Eunice

Abuja Office: NOUN Building

Unit 2 Cash Flow

Unit 3 Sinking Fund

Unit 1: Computation of Areas by Calculus

Unit 2: Definite Integral

Unit 3: Indefinite Integral

Unit 4: Integration of Transcendental functions

Unit 5: Integration of Powers of Trigonometric functions

Unit 1: Mathematical Tools I: Simultaneous Equations, Linear Functions, and

Unit 2: Mathematical Tools II: Introduction to Matrix Algebra

Unit 3: Probability Theory and Applications

UNIT 1: SETS & SUBSETS

The theory of sets lies at the foundation of mathematics. It is a concept that

At the end of this unit, you should be able to:

 Identify sets from some given statements

 Rewrite sets in the different set notation

 Identify the different kinds of sets with examples

3.0 MAIN BODY

As mentioned in the introduction, a fundamental concept in all a branch of

Example 1.1 The numbers 0, 2, 4, 6, 8

Example 1.2 The solutions of the equation x²+ 2x+1 = 0

Example 1.3 The vowels of the alphabet: a, e, i, o, u

Example 1.4 The people living on earth

The countries England, France and Denmark Example 1.8

The capital cities of Nigeria

Example 1.9 The number 1, 3, 7, and 10

Example 1.10 The Rivers in Nigeria

Sets will usually be denoted by capital letters;

Lets take as an example; if we define a particular set by actually listing its

We call this the tabular form of a set

Now, try your hand on this

State in words and then write in tabular form

4. D = {x}│x is a letter in the word ―correct‖}

3. It read ―C is the set of x such that x is positive and x is negative‖. There