Business Mathematics – Final Examination

Time Value of Money

Question 1:
Your friend John started college at the age of 18 with $63,450 already saved, because 18 years ago when he
was born, his parents placed money into a special college savings account earning 7.25% per year. How much
money did John’s parents place into his college account? How if the rate is 10% instead?

Net Present Value

Question 2:
CV. Carolina is currently considering a five-year project that has an initial outlay or cost of $140,000. The cash
inflows from its project for years 1 through 5 are the same at $35,000.
CV. Carolina has a discount rate of 10%. What is the NPV for CV. Carolina’s current project? Will it accept the
project? Explain.

Marginal Function

Question 3:
A firm’s demand function is given by:
𝑃 = 100 − 4√𝑄 − 3𝑄
a. Write down an expression for total revenue, TR, in terms of Q
b. Find an expression for the marginal revenue, MR, and find the value of MR when Q = 9.
c. Estimate the change in TR when Q increases by 0.25 units.

Elasticity of Demand

Question 4:
Given the demand function:
𝑄 = 200 − 2𝑃 − 𝑃𝐴 + 0.1𝑌 2
Where P = 10, PA= 15 and Y = 100, find:
a. The price elasticity of demand
b. The cross-price elasticity of demand; substitute or complementary goods?
c. The income elasticity of demand; inferior, normal, or superior goods?

Unconstrained Optimization: Profit Maximization

Question 5:
A firm is a monopolistic producer of two goods G1 and G2. The prices are related to quantities Q 1 and Q2
according to the demand functions.
𝑃1 = 50 − 𝑄1
𝑃2 = 95 − 3𝑄2
If the total cost function is:
𝑇𝐶 = 𝑄12 + 3𝑄1 𝑄2 + 𝑄22
Find the values of Q1 and Q2 which maximize π and deduce the corresponding prices.
 Lagrange Multipliers

Question 6:
Use Lagrange multipliers to find the maximum value of:
𝑧 = 4𝑥𝑦
Subject to the constraint:
𝑥 + 2𝑦 = 40

Definite Integration: Investment Flow

Question 7:
If the investment flow is:
𝐼 (𝑡) = 9000√𝑡
Calculate:
a. The capital formation from the end of the first year to the end of the fourth year;
b. The number of years required before the capital stock exceeds $100,000.

Indefinite Integration: Marginal Function

Question 8:
A firm’s marginal revenue and marginal cost functions are given by:
𝑀𝑅 = 240 − 0.6𝑄2 and 𝑀𝐶 = 150 + 0.3𝑄2
If fixed costs are 50, determine the maximum profit.

Basic Matrix Operations

Question 9:
3 −10 6 4 −3 1 3−2 −1 𝑇
𝐴=[ ], 𝐵=[ ], 𝐶=[ ]
−4 5 2 2 2 5 6 04 −2

Work out each of the following, where possible:

a. A + C b. 2A – CT c. AB d. BA

Matrix Inversion
Question 10:
Find the inverse of the matrix:
2 1 −1
𝐴=[ 1 3 2 ]
−1 2 1