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Laws of Logarithms
Let b be a positive number not equal to 1. Let x and y be any positive number and n be any real
number. Then,
Law 1.
Law 2.
Law 3.
Let a, b, and c be positive real numbers such that b≠1. The logarithm of a with base b is
if and only if .
Reminders:
1. In both the logarithmic and exponential forms, b is the base. In the exponential form, c is
the exponent; this implies that the logarithm is actually an exponent. Hence, logarithmic
and exponential function are inverses.
a.
b.
c.
d.
e.
Answers:
a.
b.
c.
d.
e.
Rewrite the following logarithmic equations in exponential form.
a.
b.
c.
d.
e.
Answers:
a.
b.
c.
d.
e.
● Change-of-base Theorem
.
● Common Logarithm
Base 10 logarithms are the most widely used logarithm because the universal system is the
decimal system. A logarithm to the base 10 is known as common logarithms or Briggsian
logarithm. Common logarithms are used in many physical quantities such as the Richter scale
readings of earthquake, decibels of sound and intensity, and the pH levels of chemical
substances. Like decimal numbers, the base 10 in common logarithm is not written. Thus,
is written as .
● Antilogarithm
If the logarithm of a number is given, and the number is to be found, simply enter the logarithm
of the number, then press SHIFT key and the LOG key one after the other. The number to be
found is called the antilogarithm of the given number.
● Natural Logarithms
Base e logarithms are called natural logarithms or Naperian logarithms. This is in honor of its
a.
b.
Logarithmic equation
and
.
Solution:
>
>
>
>
Guidelines in Solving Logarithmic Equations:
Logarithmic inequality
It is important to note that it is only possible to take the logarithm of a positive number. The
solution to a logarithmic inequality can be written in interval notation.
a.
Solution:
>
>
>
>
Also, . Hence,
In graph: , or
Logarithmic Functions
In the previous lesson, it has been established that an example of exponential function
is increasing all throughout its domain. Thus, the exponential function is a one -
to - one function and its inverse exists.
Note:
● The domain of is .
● The range of is .
● The graph passes through the point (1, 0). The x - intercept is 1.
These properties do not hold only for but also for other
When you borrow money from banks, thru credit cards, or other financing companies, you have
to pay an extra amount called the interest. It is the amount that is to be paid aside from the
initial amount borrowed. Similarly, when people lend money to peers or other people, you can
charge them interest. It is then the amount that is earned for letting other people lend money.
Interest is charged as a percentage of the amount borrowed for a certain fixed amount of time.
● PRINCIPAL P - initial amount borrowed
● Rate of Interest R - amount charged for the use of assets, expressed as a percentage
of the principal
● Term of Interest T - number of payment periods
● Maturity Value A - total amount needed to pay back a loan; called as future value
SIMPLE INTEREST
Example #1:
Irene borrowed P100,000.00 from his uncle for a start up business. Irene agreed to pay a 5%
annual interest rate, to be paid in 2 years. Find the interest and maturity value of the loan.
Step 5: Solve.
I = 10000 A = 110000
Therefore, the interest to be paid by Irene is P10,000 and the total amount to be paid (maturity
value) is P110,000.00.
Notice that if we add the interest to the Principal, the answer will be the maturity value.
Following the given from Example #1, Irene wants to know how much interest she must pay if
the loan period is (a) 10 months and (b) 15 months.
Easy! There are 12 months in one year, so that will be 10 months out of 12 months.
Therefore, t = 10/12
Note: When the term is expressed in months (M), it should be converted to years by t = M/12..
Given:
P = 100000 P = 100000
r = 0.05 r = 0.05
t = 10/12 t = 15/12
Formula for I:
I = Prt I = Prt
= (100000)(0.05)(10/12) = (100000)(0.05)(15/12)
= 4, 166.67 = 6, 250.00
Therefore, Irene must pay P4,166.67 if the loan period is 10 months and P6,250.00 if the loan
period is 15 months.
Example #2:
Ken wishes to have P35,500 after 1 year and 3 months to be used for his educational tour. How
much should he invest in his account today if the interest rate is 6 1/2%?
t = 1 year and 3 months or 1 3/12 years= 1.25 years ( the term of the interest)
Formula for A:
A= P(1+rt)
P = A/(1+rt)
P = 35,500/(1 + (0.065)(1.25))
Step 5: Solve.
P = 35,500/(1 + (0.065)(1.25))
P = 32,832.37
Therefore, Ken should invest P32,832.37 today in order to have P35,500 after 1 year and 3
months.
Ordinary Interest
Example:
Find the ordinary and exact interest for P95,000.00 for 278 days at 6% simple interest, also, find
its maturity value (use A = P + I).
I = Prt I = Prt
= (95000)(0.06)(278/360) = (95000)(0.06)(278/365)
A=P+I A=P+I
Notice that the interest is higher in the ordinary interest. Ordinary interest is more favorable to
lenders while exact interest is more favorable to borrowers.
Example:
Alvin borrowed P18,000.00 with ordinary interest at 8% for 200 days. On the 52nd day, he will
make a partial payment of P5,000.00. How much will he pay on the 200th day?
Step 1: Identify the day of the loan to the first partial payment.
Step 2: Calculate the interest from date of the loan to the date of the first payment.
I = Prt
= (18000)(0.08)(52/360)
I = 208
Step 6: Calculate interest on the last partial payment. Add this to the new balance to
compute the total final payment due.
I = Prt
P = 13,208
r = 0.08
t = 148/360
I = (13208)(0.08)(148/360)
I = 434.4
Compound Interest
- Interest calculate on the initial principal, including all of the accumulated interest from
previous deposits or loans “interest on interest”
- investment earns interest on a growing basis since each interest will be added to the
original amount invested when subsequent interests are calculated
- A = P (1 + r/k)^kt or A = P (1 + i)^n
Compounding periods:
Annually - K = 1 Quarterly - K = 4
Semi-annually - K = 2 Monthly - K = 12
Note: "F" or "A" can both be used to represent the maturity (future) value.
Example #1:
Given:
= 0.09/2 = (5)(2)
= 0.045 = 10
A = P(1 + i) ^ n
A = (40000)(1 + 0.045) ^ 10
= (40000)(1.55)
A = 62000
Therefore, the future value of P40,000 at 9% compounded semi-annually for 5 years is P62,000.
Rate: r = k [(A/P)^1/kt - 1]
Simple Annuity
- an insurance product that produces a guaranteed income stream to you for retirement in
exchange for regular premium payments during your working life. There are several
different types of annuities, each with its own benefits and risks. It is a fixed sum of
money paid to someone at regular intervals, subject to a fixed interest rate.
- an investment that offers a guaranteed income for a certain period of time as a result of
a substantial sum paid up front
● Simple Annuity - annuity where compounding period is equal to the payment interval
● General Annuity - annuity where compounding period is not equal to the payment
interval.
Types of Annuities:
● Ordinary Annuity - annuity in which the payments are made at the end of a covered
term. Payments are usually made monthly, quarterly, semi-annually and annually.
● Annuity Due - Annuity in which payments are made at the beginning of a covered term.
Simple Annuity:
Definition of terms:
Future Value (FV) - the total accumulation of the payments and interest earned.
Present Value (PV) - the principal that must be interested to provide regular payments.
LESSON 7: STOCKS, BONDS, and LOANS
Stocks
- Some corporations may raise money for their expansion by issuing stocks. Stocks are
shares in the ownership of the company. Owners of stocks or the stockholders may be
considered as part owners of the company. There are two types of stocks: common
stock and preferred stock. Both will receive dividends or share of earnings of the
company. Dividends are paid first to preferred shareholders. Stocks can be bought or
sold at its current price called the market value. When a person buys some shares, the
person receives a certificate with the corporation's name, owner's name, number of
shares and par or face value per share.
● Stock Certificate - a paper issued to a shareholder which shows on its face the number
of shares it represents
● Dividend - earnings distributed to shareholders of corporation
● Par Value- face value of a stock or bond
● Market Price - price at which a stock or bond is sold
● Preferred stock - stockholders get first choice in distributed profits
● Common stock - ordinary stock of a corporation, paying no specified rate or amount of
dividend
● Initial Public Offering IPO - stock sold before it is available on a stock exchange
● Stock Market Index - a measure of a portion of stock market
Bonds
- Bonds are interest bearing security which promises to pay an amount of money on a
certain maturity date as stated in the bond certificate. Unlike the stockholders,
bondholders are lenders to the institution which may be a government or private
company. Some bond issuers are the national government, government agencies,
government owned and controlled corporations, non-bank corporations, banks and
multilateral agencies. Bondholders do not vote in the institution's annual meeting but are
the first to claim in the institution's earnings. On the maturity date, the bondholders will
receive the face amount of the bond. Aside from the face amount due on the maturity
date, the bondholders may receive coupons (payments/interests), usually done
semi-annually, depending on the coupon rate stated in the bond certificate.
● Bond Holder - one who holds a corporation or government bonds
● Bond Certificate -paper issued to a bondholder which shows on its face the number of
shares it represents
● Brokerage fee -fee charged by a broker for their services
● Yield - rate of income ; yield= annual income / investment
● Bond coupon - referring to a bond’s interest payment and when it will be due
● Bond Market Index - a measure of a portion of the bond market
Loans
Some elements that play important role in business and consumer loans are:
Logic
- is the study of the techniques and principles used to differentiate accurate reasoning
from inaccurate reasoning. Logic is important in making real-life decisions.
Propositions
Simple proposition
Examples:
A: I am a student.
Compound proposition
1. Conjunction
If any two propositions can be combined by the word "and", then we can create a new
proposition called a compound proposition. This proposition is called the conjunction of the
original propositions. The symbol for the connective "and" is "Λ" (inverted v or inverted wedge)
2. Disjunction
If any two propositions can be combined by the word "or" to form a new proposition called the
disjunction of the original propositions. The symbol for the connective "or" is "V" (wedge).
3. Negation
A negation is a denial. The negation of a proposition is formed by stating "It is not the case
that..." or "It is false that..." or if possible by inserting the word "not". The symbol for negation of
a proposition is "∼" (tilde).
TRUTH TABLE
Conjunction - truth value of the conjunction of propositions is TRUE only when both p and q
are true.
p q pΛq Interpretation
T T T
when p is true, q is true; "p and q" is TRUE
T F F
when p is true, q is false; "p and q" is FALSE
F T F
when p is false, q is true; "p and q" is FALSE
F F F
when p is false, q is false; "p and q" is FALSE
Disjunction - The truth value of the disjunction of propositions is TRUE only when either p or q
or both "p and q are true.
p q pVq Interpretation
T T T
when p is true, q is true; "p or q" is TRUE
T F T
when p is true, q is false; "p or q" is TRUE
F T T
when p is false, q is true; "p or q" is TRUE
F F F
when p is false, q is false; "p or q" is FALSE
Negation - when p is false, "∼p" is TRUE; INVERSE
p ~p Interpretation
T F
when p is true, "∼p" is FALSE
F T
when p is false, "∼p" is TRUE