Fundamentals of Business Mathematics and Statistics
Fundamentals of Business Mathematics and Statistics tests quantitative tools for business: percentages, interest, permutations and combinations, probability, descriptive statistics, correlation/regression and index numbers. Show formulas and interpret results.
Core rules
- Percentage change = (new - old)/old x 100. Simple interest = P x r x t. Compound amount = P(1+r)^n; effective annual rate = (1+r/m)^m - 1.
- Permutations order matters: nPr = n!/(n-r)!. Combinations order does not: nCr = n!/(r!(n-r)!).
- Probability lies between 0 and 1; add for mutually exclusive events; multiply for independent events; complement = 1 - P.
- Mean, median and mode measure central tendency; range, variance and standard deviation measure dispersion; coefficient of variation = standard deviation/mean.
- Correlation ranges from -1 to +1 and measures linear association, not causation; regression predicts a dependent variable.
- Index number = current value/base value x 100.
Worked example
INR 10,000 is invested at 10% compounded annually for 2 years. Amount = 10,000(1.10)^2 = INR 12,100; compound interest = INR 2,100. Simple interest would be 10,000 x 10% x 2 = INR 2,000. The extra INR 100 is interest on the first year's interest.
Traps
Match compounding periods to the rate. Do not confuse nominal and effective rates. Use combinations when order is irrelevant and permutations when order matters. The mean is affected by outliers. Correlation does not prove causation. Keep the index base year consistent.