6. Working with Business Formulas

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From the course by University of London

Quantitative Foundations for International Business

118 оценки

University of London

Quantitative Foundations for International Business

118 оценки

Course 3 of 6 in the Specialization International Business Essentials

This course provides the essential mathematics required to succeed in the finance and economics related modules of the Global MBA, including equations, functions, derivatives, and matrices. You can test your understanding with quizzes and worksheets, while more advanced content will be available if you want to push yourself. This course forms part of a specialisation from the University of London designed to help you develop and build the essential business, academic, and cultural skills necessary to succeed in international business, or in further study. If completed successfully, your certificate from this specialisation can also be used as part of the application process for the University of London Global MBA programme, particularly for early career applicants. If you would like more information about the Global MBA, please visit www.londoninternational.ac.uk/mba This course is endorsed by CMI

From the lesson

Equations

Although financial models are theoretical frameworks, we often use mathematical tools to work with these models. Mathematical models usually consist of a set of equations, which are designed to describe the structure of the model, and whose solution determines the importance of variables. This week, we will look at equations, including the basic terminology, and the rules for solving equations requiring more than one operation.

Equations- An Introduction3:33

1. Variables, Constants and Parameters6:14

2. The Real Number System6:08

3. Basic Rules7:34

4. Like Terms3:12

5. Translate Phrases into Mathematics6:22

6. Working with Business Formulas5:30

7. Ratio and Proportion6:25

Equations- Summary2:42

Meet the Instructors

George Kapetanios
Professor of Finance and Econometrics
King's College London

[MUSIC]

Many of the most useful rules and

procedures in business are given as formulas.

Formulas are equations showing how one number is found from other numbers.

Let us use one of the most important formulas in business so

that it will be easy for us to understand what we are talking about.

The formula we are going to use is the one for simple interest.

Interest = Principle x Rate x Time.

Usually, we use letters as variables for the words in the formula.

Normally the letters used are the first letter in each word of the formula.

For example, Interest =

Principal X Rate X Time becomes

I equal to P times R times T.

For example, use the formula I =

PRT to find I.

If P is equal to $4000 R is equal to 0.05 and

t is equal to 2.

First of all we need to substitute 4000 dollar for p, 0.05 for r and two for t.

Notice that writing P, R and T together as

PRT indicates the product of different letters.

P times R times T.

By substituting the numbers in

place of the letters, we get I=

$4000 times 0.05 times

two which is equal to $200.

Now let's see another example And

we use I equal to pRT to find p.

I = $5000, R = 0.06, and T = 3.

Then we have I = P RT, and

then we have 5000 = P times 0.06 times 3.

First we multiply by P, and we get 5000 = 0.18P.

Secondly, we need to find P by using the operation

which is the inverse of the multiplication.

Thus, we have 5000 divided

by 0.18 equal to 0.18P

divided by 0.18 Then P is

almost equal to 28,000.

Sometimes we need to manipulate formulas in order to solve for

a particular variable.

For example, solve for

T in the formula M = P(1 + RT).

The formula gives the maturity value M in

an initial amount of money P invested at the specific rate R.

In a certain period of time, T.

Then M=P(1+RT),

we start by applying the distributive property on the right hand side.

And then we get M = P plus PRT.

Now, we need to get rid of P on the right-hand side,

and therefore we subtract P from both sides.

M- P is equal to P + PRT- P And

we get M-P=PRT.

Now we need to divide each side by PR and

then we have M-P/PR =

PRT Divided by PR, and

the solution is T = M- P over PR.

[MUSIC]

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