Amity School of Business

Business Mathematics Notes

by Shanu Singh
Module- 3
Suppose a person takes a loan from a bank or from another person for a specified period of
time. After this period, the amount he will return will be higher than the amount of loan taken.
This additional amount will be paid by the borrower to the bank or second person for the use
of all loans given to him. This amount is called interest and the amount borrowed is called
principal. Generally, interest in expressed is.
percentage which is called rate of interest.
Interest is of two types:
1) Simple interest
2) Compound interest
If the lender is paid actual interest after every three months, six months or a year, it is called
simple interest. But if this interest, instead of being paid to the lender, is added to the principal
and interest for the next period is calculated on this new amount (principle + interest), it is
called compound interest. In compound interest, the lender is paid the full amount only once
after the completion of the period.

Theorem. IF P is the principle, r % is the rate of interest per period and n is the number of
periods, then
(i) Simple Interest (S.I.) = 𝑃. 𝑟. 𝑛 /100 and
𝑟
(ii) (ii) Compound Interest = 𝑃 (1 + 100) 𝑛 − 𝑃

Example. Suppose Rs. 1000 is lent at 10% per annum for 2 years. Calculate simple interest and
compound interest.
Example. Find the compound interest on Rs. 50000 invested at the rate of 10% for 4 years.

Example- At what rate % will Rs. 32768 yield Rs. 26281 as compound interest in 5
years.

Ex- In how many years will Rs. 30000 becomes Rs. 43923 at 10% rate of interest.
Present Value Formula
Present value refers to the current value today of an amount of money, or stream of income,
to be received at a particular future date. The present value or PV is the initial amount (the
amount invested, the amount lent, the amount borrowed, etc).
The future value or FV is the final amount. i.e., FV = PV + interest.
The present value formula (PV formula) is derived from the compound interest
formula.

Example
You have the concept of the time value of money, that shows you how money received
today is worth more in the future. Let us suppose that you need Rs 1,00,000 precisely five
years from today. You expect to earn 8% from an investment. The number of periods
would be five.
FV = Rs 1,00,000
n=5
r = 8%
PV = 1,00,000 / (1+0.08)^5
PV = Rs 68,058.

Example:-
Let us take the example of John, who is expected to receive $1,000 after 4 years.
Determine the present value of the sum today if the discount rate is 5%.
Solution:-
 Annuities
Many people have had the experience of making a series of fixed payments over a course of
time - such as rent, premium or vehicle payments - or obtaining a series of payments for a
course of time, such as the certificate of deposit (CD) or interest from a bond or lending money.
These ongoing or recurring payments are technically called "annuities”.
an annuity is a continuous stream of equal periodic payments from one party to another for a
specified period of time to fulfil a financial obligation.

What is Matrix?
A rectangular array of numbers, symbols, or any type of entries arranged in the form of rows
and columns is called Matrix.
A matrix has one or more than one number of rows and columns. The horizontal arrangement
of elements is called Row and the vertical arrangement is called the column of matrix.
Each element of a matrix is identified by its position which is given by the row and column in
which it is present. A matrix is represented by [A]m×n, where m is the number of rows and n
is the number of columns present in a matrix.
Thus, an element of the matrix can be represented as aij where i and j are the ith row and
jth column to which an element belongs.

Singleton Matrix
A matrix that has only one element is called a singleton matrix. In this type of matrix number
of columns and the number of rows is equal to 1. A singleton matrix is represented as [a]1⨯1.

Null Matrix
A matrix whose all elements are zero is called a Null Matrix. A null matrix is also called a Zero
Matrix because its all elements are zero.
Row Matrix
A matrix that contains only one row and any number of columns is known as a row matrix.
Column Matrix
A matrix that contains only one column and any number of rows is called a Column Matrix.

Horizontal Matrix
A matrix in which the number of rows is lower than the number of columns is called a
Horizontal Matrix. columns
Vertical Matrix
The matrix in which the number of rows exceeds the number of columns is called a Vertical
Matrix.
Rectangular Matrix
A matrix that does not have an equal number of rows and columns is known as a Rectangular
Matrix.
Square Matrix
A matrix that has an equal number of rows and an equal number of columns is called a Square
Matrix.
Diagonal Matrix
A matrix that has all elements as 0 except diagonal elements is known as a diagonal matrix. A
Diagonal Matrix is only possible in the case of a Square Matrix.
Scalar Matrix
A diagonal matrix whose all diagonal elements are non-zero and the same is called a Scalar
Matrix. Scalar Matrix is a kind of diagonal matrix where all diagonal elements are the same.
Identity Matrix is a special case of Scalar Matrix.
Identity Matrix
A diagonal matrix where all the diagonal elements are 1 and all non-diagonal elements are 0 is
called an Identity Matrix. The Identity Matrix is called Unit Matrix. The identity matrix or unit
matrix always has an equal number of rows and columns.
Triangular Matrix
A square matrix in which the non-zero elements form a triangular below and above the diagonal
is called a Triangular Matrix. Based on the triangle formed below or above the diagonal, the
triangular matrix is classified as:
• Upper Triangular Matrix
• Lower Triangular Matrix
Upper Triangular Matrix
A square matrix in which all the elements below the diagonal are zero and the elements from
the diagonal and above are non-zero elements is called an Upper Triangular Matrix. In an Upper
Triangular Matrix, the non-zero elements form a triangular-like shape.
In the example of the Upper Triangular Matrix, all the elements below the diagonal are zero.
Lower Triangular Matrix
A square matrix in which all the elements above the diagonal are zero and the elements from
the diagonal and below are non-zero elements is called a Lower Triangular Matrix. In a Lower
Triangular Matrix, the non-zero elements form a triangular-like shape from the diagonal and
below.
In the example of the lower triangular matrix, all the elements above the diagonal are zero.
Singular Matrix
A singular matrix is referred to as a square matrix whose determinant is zero and is
not invertible. If det A = 0, a square matrix “A” is said to be singular; otherwise, it is said to be
non-singular.
Non Singular Matrix
A Non-Singular matrix is defined as a square matrix whose determinant is not equal to zero
and is invertible.
Symmetric Matrix
A square matrix “A” of any order is defined as a symmetric matrix if the transpose of the matrix
is equal to the original matrix itself

Skew Symmetric Matrix

A square matrix “A” of any order is defined as a skew-symmetric matrix if the transpose of the
matrix is equal to the negative of the original matrix itself, i.e., AT = -A.
Rank of Matrix
The maximum number of linearly independent columns (or rows) of a matrix is called the rank
of a matrix. The rank of a matrix cannot exceed the number of its rows or columns.
If we consider a square matrix, the columns (rows) are linearly independent only if the matrix
is nonsingular. In other words, the rank of any nonsingular matrix of order m is m. The rank of
a matrix A is denoted by ρ(A).
The rank of a null matrix is zero. A null matrix has no non-zero rows or columns. So, there are
no independent rows or columns. Hence, the rank of a null matrix is zero.