Mathematics for Finance - Finance UG Cluster

Mock Exam Paper

Exam length: 2 hours 15 mins

Instructions to students:
Candidates should answer ALL from Section A and 2 from Section B.

Only your first answers within the rubric will be marked. Do not attempt
additional questions outside of the rubric. For example, if you are asked to
answer 3 from a selection of 5 questions - either in an assessment or a section

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within an assessment - and you answer 4, only the first 3 as they appear in

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your script will be marked, the 4th will be disregarded. Any work you do

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not wish to be taken into consideration should be deleted or clearly crossed

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through.

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If you believe a question to be ambiguous you are advised to make reason-

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able assumptions provided they are consistent with the facts given in the
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question. State any such assumptions clearly in your answer and proceed.
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If you believe there to be an error in the question state this and proceed.
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Only the Casio calculators FX-83 (MS, ES, GT+ or GTX) or FX-85 (MS,
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ES, GT+ or GTX) are permitted in this exam.

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SECTION A - ANSWER ALL QUESTIONS FROM

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THIS SECTION
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Question 1
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Evaluate the limit √ √

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1+x+ 1−x−2
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lim .
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x→0 x2
u

[8 marks]
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Question 2
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Decide if the improper integral is convergent or divergent. If it is convergent,

find which value it converges to.
Z ∞
1 + e−x
dx
1 x

[8 marks]

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Mathematics for Finance - Finance UG Cluster

Question 3
Find the first 5 terms in the Taylor expansion of the function (x − 1)ex ,
around x0 = 1.

[8 marks]

Question 4
If  
a 1 4

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A =  2 1 a2  ,

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1 0 −3

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calculate A2 and |A|.

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[8 marks]

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Question 5
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Consider the matrix
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1 − 21
 
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A= 1 0 −1 
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− 12 −1 3
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a) Write explicitly the corresponding quadratic form x⊤ Ax.

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[4 marks]
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b) Study the character of this quadratic form.

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[4 marks]
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Mathematics for Finance - Finance UG Cluster

SECTION B – ANSWER ANY TWO QUESTIONS

FROM THIS SECTION

Question 6
a) Consider the following system of linear equations

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x1 + 4x2 + 2x3 = 1

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2x1 + 8x2 + 4x3 = 2

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3x1 + 20x2 + 13x3 = 4

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i) Write the system in matrix notation Ax = b.

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ii) Verify whether a solution exists. )-
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iii) In the case in which the system is consistent, solve it
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b) Consider the curve C: 2x − 6x2 y + 3y 3 = 10. Find the slope of the

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tangent line to C in the point (1, 1).

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c) Find the partial derivatives of the following equation

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xy
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y=
sS

x2 + y2
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sin

[Total: 30 marks]
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Question 7
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a) Consider a consumer with utility function

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U (x, y) = x1/4 y 1/4

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where x and y are the quantities of goods consumed with prices per
unit px = 5, py = 8 and a budget of 80.

i) Calculate the optimal bundle of the consumer using implicit dif-

ferentiation.
ii) Verify that your solution is the utility maximizer using the La-
grange multiplier method.
iii) Based on your answer in part (ii), estimate the optimal level of
the utility if the consumer’s budget reduces by 10.

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Mathematics for Finance - Finance UG Cluster

b) Evaluate  
lim 2x e1/x − 1 .
x→∞

c) Solve the indefinite integral

Z
1
dx
1 + ex

[Total: 30 marks]

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Question 8

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a) Consider the function

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f (x, y) = x2 + y 2 + xy − 5y.

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i) Obtain the gradient vector and the Hessian matrix of f .

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ii) Identify the point of minimum. )-
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iii) Suppose the constraint
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x + 2y = 5
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is given. Discuss how this constraint would change the solution

obtained in part (ii).
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b) Evaluate
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Z ln(2)
es

x
(2 + 5x)e 3 dx.
sin

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c) Compute the present and the future values of a constant income stream
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of 1000 pounds over the next ten years if the annual interest rate is
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8%, which is compounded continuously.

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[Total: 30 marks]
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