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I’m a new student trying to see where to start on the CIMA journey. I think I need to brush up on my maths but don’t know whether students normally find this part of the syllabus challenging.
Any help appreciated
You have to be able to do simple algebra, such as
1 If 3x =12, what is x?
2 If 4x – 7 = x + 11, what is x?
3 If 2(x + 3) = 3(2x – 4) what is x4 What is x if 2/3 x = 3/4?
Sketch the graph y = 7 – 3x
Most mathematical techniques are an extension of these and are introduced in the text. So, I don’t think you should worry too much if you could deal with the examples above.
Answers: 1 4; 2 6; 3 4.5; 5 9/8
Hello! I´ve actually passed both BA1 and BA2, still to do BA3 and BA4.
The maths isn’t really that challenging – maybe a few questions on annuity repayments (interest + capital), and depreciation using logs that got me, but I think that’s just me not revising sufficiently. Enjoyed probability!
In the exams I tended to do all the questions which involved equations last, by that time you´re probably confident how things are going (at this level anyway)..
So don’t be put off by the maths, I´m sure you´ll be fine.
BTW I found the BA1 and BA2 videos excellent!
Hi sir !
I’m having quiet alot of questions to be solved before I attend my BA1 exam this saturday. Hope you will help me to sort them out as soon as possible.(01) A building society adds interest monthly to investors’s accounts even though interest rates are expressed in annual terms. The current quoted rate of interest is 6 percent per annum. An investor deposits $1000 on 1 January. How much interest will have been earned by 30 June?
The answer given is $30.38
How did this answer arrive !(02) How much would need to be invested today at 6% per annum to provide an annuity of $5000 per annum for ten years commencing in five years’ time?
The answer given is $29,150.
How did this answer arrive !(03) G plc plans to borrow $50,000 with a ‘mortage style’ repayment pattern where the same amount os repaid each year. This payment is a mixture of capital ans interest and ensures no additional loan repayment is required at the end. What is the annual repayment on a bank loanbof $50,000 over eight years at 9% ?
The answer given is $9,033.
How did this answer arrive !An educational authority is considering the implementation of a CCTV security system in one of its schools. Details of the proposed project are as follows :
Life of the project 5 years
Initial cost $75,000Annual savings :
Labour costs $20,000
Other costs $5,000NPV at 15% $8,800
What is the internal rate of return for this project?
The answer given is 20%.
How did this answer arrive !A landlord receives a rent of $1000 to be received over ten successive years. The first payment is due now. If interest rates are 8% what is the present value of this income?
The answer given is $7,247
How did this answer arrive !If you use annuity tables (cumulative discount tables), these start at time 1. If you are getting 10 receipts starting NOW then the timing is:
Time 0 + Times 1 – 9
Annuity factor at 8% for 1 – 9 is 6.247
Factor for time 0 = 1So for 0 – 9 the factor is 7.247 , hence 7,247
At IRR, NPV = 0
75,000 = (20,000 + 5,000) x 5 year annuity factor.
The 5 year annuity factor must be 3.
Look along the 5 year row in the tables until you get as near as possible to 3. You will see that is 20%
03
You find mortgage repayments by dividing the initial sum by the appropriate annuity factor. Hence, for 50,000 over 8 years at 9%, the appropriate discount factor is 5.535
50,000/5.535 = 9,033
(02) How much would need to be invested today at 6% per annum to provide an annuity of $5000 per annum for ten years commencing in five years’ time?
The required annuity is for times 5 – 14, ie 10 years.
If it were for times 1 – 10 at 6% the required investment = 5000 x 7.36 = 36,800.
However, the annuity does not start until 4 years later, so use the 4 year single discount rate: 36,800 x 0.792 = 29,146 ie 29,150 when rounded.
HARD: don’t waste time on this.
(01) A building society adds interest monthly to investors’s accounts even though interest rates are expressed in annual terms. The current quoted rate of interest is 6 percent per annum. An investor deposits $1000 on 1 January. How much interest will have been earned by 30 June?
The standard formula is Principal deposited x (1 + annual interest rate/number of times calculated) raised to the power of the number of periods on deposit.
Here the interest is calculated monthly, ie 12 times a year and the amount is on deposit for 6 months:
1,000 x (1 +0.06/12)^6
= 1030.38
so the interest earned is 30.38
Oh god !
I feel so secured with these expainations. Thank you so much sir.At last sir can you just clear me with this question. How do we know when to use the present value table and when to use the cumulative discount table? Im so confused in that.
If it is a once-off receipt or payment, use the present value (single year) table.
If the payments of receipts repeat for several years (and are the same each year), it is usually quicker to use the cumulative tables.
However, cumulative tables are only a short cut. So if you were going to receive 1000 at times 1, 2 and 3 and the discount rate is 10% you could do three calculations each with a single year discount rate being used (one for year 1. 2 and 3) or you can use one calculation using the 1 – 3 cumulative table figure.
The answer will be the same.
It is the 4 year 6% discount rate. We need to move the amounts back 4 years to go from 1 – 10 to 5 – 14
Good Morning,
Overall I feel quite confident for my BA1 exam this Saturday. However, I’m going over my Kaplan revision text book and there is one particular question that I seem to have spent a ridiculous amount of time trying to make sense of and still can’t come to the answer they have provided. Could you please help me to resolve this as soon as possible.
Question: If house prices rise by 20 per cent per annum, find the equivalent percentage price per month
Answer: 1.53 per cent.
How did this answer arrive?
Thank you
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