PRACTICE & REVISION KIT

CA SRI LANKA CURRICULUM 2020

BL 2

( English)
 First edition 2020

ISBN 9781 4727 1044 4

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professional advice and every effort has been made to
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©
BPP Learning Media
Ltd 2020

ii
Contents

Page
Question Index iv
Introduction vi
How to use this Practice & Revision Kit vii
Format of the exam ix
Exam techniques x
Action verbs xi
Questions 1
Answers 4
Mock Exam Questions 159
Mock Exam Answers 172
Appendix 195

iii
Contents
 Question index

Time Page
Marks
Title allocated
allocated Question Answer
(Minutes)
Part A:
Chapter 1 Percentages for business
Questions 1 – 17 34 41 1 4
Part B:
Chapter 2 Compounding and
discounting
Questions 18 - 63 92 110 8 15
Chapter 3 Dealing with annuities
and perpetuities
Questions 64 - 91 56 67 25 29
Chapter 4 Loan amortization
Questions 92 - 104 26 31 37 40
Part C:
Chapter 5 Equations
Questions 105 - 117 26 31 46 49
Part D:
Chapter 6 Graphs and algebra for
business
Questions 118 - 153 72 86 54 61
Part E:
Chapter 7 Descriptive statistics
Questions 154 - 184 62 74 71 80
Chapter 8 Dispersion and
measurement
Questions 185 - 203 38 46 89 94

iv
Business Mathematics and Statistics
 Time Page
Marks
Title allocated
allocated Question Answer
(Minutes)
Part F:
Chapter 9 Probability
Questions 204 - 220 34 41 99 103
Chapter 10 Normal Distribution
Questions 221 - 236 32 38 107 110
Part G:
Chapter11 Regression analysis
Questions 237 - 276 80 96 117 128
Chapter 12 Time series forecasting
Questions 277 - 301 50 60 139 149
Mock Exam
Questions 1-50 100 120 159 172

v
Question Index
 Introduction

Welcome to this Practice & Revision Kit for the Institute of Chartered Accountants of
Sri Lanka professional examinations for curriculum 2020.
One of the key criteria for achieving exam success is question practice. There is
generally a direct correlation between candidates who revise all topics and practise
exam questions and those who are successful in their real exams. This Practice &
Revision Kit gives you ample opportunity for such practice in the run up to your
exams.
The Practice & Revision Kit is structured to follow the modules of the Study Text and
comprises banks of objective test questions. Suggested solutions to all questions are
supplied.
We welcome your feedback. If you have any comments about this Practice &
Revision Kit, or would like to suggest areas for improvement, please e-mail
learningdevelopment@casrilanka.org.
Good luck in your exams!

BPP LEARNING MEDIA

vi
Business Mathematics and Statistics
How to use this Practice & Revision Kit

This Practice & Revision Kit comprises banks of practice questions of the style that
you will encounter in your exam. It is the ideal tool to use during the revision phase of
your studies.
Questions in your exam may test any part of the syllabus so you must revise the
whole syllabus. Selective revision will limit the number of questions you can answer
and hence reduce your chances of passing. It is better to go into the exam knowing a
reasonable amount about most of the syllabus rather than concentrating on a few
topics to the exclusion of the rest. You should at all costs avoid falling into the trap of
question spotting, that is trying to predict what are likely to be popular areas for
questions, and restricting your revision and question practice to those.
Practising as many exam-style questions as possible will be the key to passing this
exam. You must do questions under timed conditions and ensure you write full
answers to the discussion parts as well as doing the calculations.
Planning your revision
When you begin your course, you should make a plan of how you will manage your
studies, taking into account the volume of work that you need to do and your other
commitments, both work and domestic.
In this time, you should go through your notes to ensure that you are happy with all
areas of the syllabus and practise as many questions as you can. You can do this in
different ways, for example:
 Revise the subject matter a module at a time and then attempt the questions
relating to that module; or
 Revise all the modules and then build an exam out of the questions in this
Practice & Revision Kit. Review the exam structure and then group together the
relevant number of MCQs and longer questions from different syllabus areas to
create a practice exam.
Using the practice questions
The best approach is to select a question and then allocate to it the time that you
would have in the real exam. All the practice written response questions in this
Practice & Revision Kit have mark allocations, so you can calculate the amount of time
that you should spend on the question.
However, this is an approximate guide: for example, some MCQs are very short and
just require a factual response, which you either know or you don’t, while others are
more complex, requiring calculations, which will inevitably take more time.

vii
Exam techniques
 Using the suggested solutions
Avoid looking at the answer until you have finished a question. It can be very
tempting to do so, but unless you give the question a proper attempt under exam
conditions you will not know how you would have coped with it in the real exam
scenario.
When you do look at the answer, compare it with your own and give some thought to
why your answer was different, if it was.
In multiple choice questions if you did not reach the correct answer make sure that
you work through the explanation or workings provided, to see where you went
wrong. If you think that you do not understand the principle involved, go back to your
own notes or your study materials and work through and revise the point again, to
ensure that you will understand it if it occurs in the exam.
Passing the Business Level I – Business Mathematics and Statistics exam
If you have honestly done your revision then you can pass this exam. What you must
do is remain calm and tackle it in a professional manner. There are a number of
points which you should bear in mind.
 You must read the question properly. Students often fail to read the question
properly and miss some of the information. Time spent reading the question a
second time would be time well spent. Make yourself do this, don't just rush into
it in a panic.
 Stick to the timings and answer all questions. Do not spend too long on one
question at the expense of others. The number of extra marks you will gain on
that question will be minimal, and you could have at least obtained the easy
marks on the next question.
 Avoid attempting large calculations ‘all in one go', instead break the question
down into sub parts and work through each part of the calculation carefully.

viii
Business Mathematics and Statistics
Format of the exam

Mode: Computer based examination

Time: 2 hours
Pass Mark: 50%

The exam comprises of fifty (50) multiple choice, drag & drop, fill in the blanks,
matching questions, etc. of two marks each (including mini scenario based/functional
scenario-based questions).

ix
Exam techniques
 Exam techniques

Using the right techniques in the real exam can make all the difference between
success and failure.
Here are a few pointers:
1. At the start of the exam, skim through the questions and decide in what order
you are going to attempt the exam. You have to write your answers in the
order set out in the exam, but you can attempt the questions in any order that
you like. Some candidates like to attempt the easiest questions first, on the basis
that will enable them to gain the easiest available marks quickly and build up
their confidence.
2. Having established the order that you are going to do the exam, allocate the
time available to the questions and work out at what time you will need to
stop working on one question or batch of questions and move on to the next.
When you reach the end of the allocated time for the question that you are
working on, STOP. It is much easier to gain the straightforward marks for the
next question than to spend a long time working on the previous question in the
hope of gaining one or two final marks.
3. Make sure that you attempt every objective test question. Do not leave any
blank. If you run out of time or are not sure of an answer you should select the
option you think is most suitable. You can come back to the question later if
time permits.
4. Read the question. Read it carefully once, and then read it again to ensure that
you have picked everything up. Make sure that you understand what the
question wants you to do, rather than what you might like the question to be
asking you.
5. If you finish the exam with time to spare, use the rest of the time to review your
answers and to make sure that you answered every objective test question.

x
Business Mathematics and Statistics
Action verbs checklist

Knowledge Process Verb List Verb Definitions

Tier – 1 Remember Define Describe exactly the nature, scope or meaning
Recall important Draw Produce (a picture or diagram)
information
Identify Recognise, establish or select after
consideration
List Write the connected items one below the other

Relate To establish logical or causal connections

State Express something definitely or clearly

Tier – 2 Comprehension Calculate/Compute Make a mathematical computation

Explain important Discuss Examine in detail by argument showing
information different aspects, for the purpose of arriving at
a conclusion
Explain Make a clear description in detail revealing
relevant facts
Interpret Present in understandable terms or to translate

Recognise To show validity or otherwise, using knowledge

or contextual experience
Record Enter relevant entries in detail

Summarise Give a brief statement of the main points (in

facts or figures)

xi
Action verbs checklist
 Knowledge Process Verb List Verb Definitions
Tier – 3 Application Apply Put to practical use
Use knowledge in a setting Assess Determine the value, nature, ability or quality
other than the one in which
it was learned/solve close- Demonstrate Prove, especially with examples
ended problems Graph Represent by means of a graph

Prepare Make ready for a particular purpose

Prioritise Arrange or do in order of importance

Reconcile Make consistent with another

Solve To find a solution through calculations and/or

explanations
Tier – 4 Analysis Analyse Examine in detail in order to determine the
Draw relations among ideas solution or outcome
and to compare and Compare Examine for the purpose of discovering
contrast/solve open-ended similarities
problems
Contrast Examine in order to show unlikeness or
differences
Differentiate Constitute a difference that distinguishes
something
Outline Make a summary of significant features

xii
Business Mathematics and Statistics
Knowledge Process Verb List Verb Definitions
Tier – 5 Evaluate Advise Offer suggestions about the best course of
Formation of judgments and action in a manner suited to the recipient
decisions about the value of Convince To persuade others to believe something using
methods, ideas, people or evidence and/or argument
products
Criticise Form and express a judgment

Evaluate To determine the significance by careful

appraisal
Recommend A suggestion or proposal as to the best course
of action
Resolve Settle or find a solution to a problem or
contentious matter
Validate Check or prove the accuracy

Tier – 6 Synthesis Compile Produce by assembling information collected

Solve unfamiliar problems from various sources
by combining different Design Devise the form or structure according to a plan
aspects to form a unique or
Develop To disclose, discover, perfect or unfold a plan or
novel solution
idea
Propose To form or declare a plan or intention for
consideration or adoption

xiii
Action verbs checklist
xiv
Business Mathematics and Statistics
BL2: Business Mathematics and Statistics

2 CA Sri Lanka
 Questions

1 Percentages for business

1. Calculate the market price of a set of furniture for which a customer pays
Rs 42,975 having received a 5% cash discount.

(LO 1.1.2) (2 marks)

2. A refrigerator was sold for Rs 27,300 yielding a 30% profit on the cost.
Compute the price at which it should be sold in order to yield a 10% profit
on cost.

(LO 1.1.1) (2 marks)

3. Amanthi now earns Rs 25,000 per annum after an annual increase of 2.5%.
Compute her annual salary to the nearest Re before the increase.

(LO 1.1.2) (2 marks)

4. Purchases at G Co are Rs 200,000 in 20X0 and there was a percentage

decrease of 5% in 20X1. Compute the purchases in 20X1.

(LO 1.1.2) (2 marks)

5. An accountant charges Rs x per hour to which sales tax of 17.5% is added. If

her final hourly charge is Rs 235, compute the value of x.

(LO 1.1.2) (2 marks)

CA Sri Lanka 3
BL2: Business Mathematics and Statistics

6. BB Ltd expected to make a profit of Rs 12,500. What is the percentage

change to profit if sales volume increase by 25% and all prices increase by
3%?
Rs
Sales (500  Rs 90) 45,000
Variable costs (500  Rs19) 9,500
Fixed costs 23,000
Profit 12,500
A 76%
B 56%
C 28%
D 25%
(LO 1.1.3) (2 marks)

7. A product was previously sold for Rs 2.60 per kg, but is now sold for Rs 4 for
2 kgs. The percentage reduction per kg is closest to:
A 23
B 30
C 35
D 53
(LO 1.1.3) (2 marks)

8. A store sells oranges either for 39c per kg, or in bulk at Rs 7 per 22 kg bag.
The percentage saving (per kg) from buying a 22 kg bag is closest to:
A 7.2%
B 17.9%
C 18.4%
D 22.6%
(LO 1.1.3) (2 marks)

9. A company uses any one of three machines to produce 'identical' hinges. The
output of hinges from the three machines is in the ratio 6:3:1. The
percentage of defects is 5, 20 and 10 respectively. The overall percentage of
defects is closest to:
A 8
B 9
C 10
D 11
(LO 1.1.3) (2 marks)

4 CA Sri Lanka
 Questions

10. A greengrocer sells apples either for Rs 0.35 per kg, or in bulk at Rs 7 per
25 kg bag. The percentage saving (per kg) from buying a 25 kg bag is closest
to:
A 7.0%
B 8.8%
C 20.0%
D 25.0%
(LO 1.1.3) (2 marks)

11. A trader's total costs are made up of wages and materials. Next month wages
are expected to be Rs 1,000  10% and materials Rs 2,000  20%. Revenue is
predicted to be Rs 4,000  10%. Profit (revenue minus total costs) next
month will be:
A between Rs 100 and Rs 900
B between Rs 100 and Rs 1,900
C Rs 1,000  10%
D Rs 1,000  20%
(LO 1.1.3) (2 marks)

12. Mr Singh, Mr Lal and Mr Brown share the profits from their business so that
Mr Singh receives twice as much as Mr Lal, and Mr Brown receives half as
much as Mr Lal.
The total profit of the business last year was Rs 91,000.
Mr Brown receives Rs
(LO 1.1.2) (2 marks)

13. A company's market value has fallen from Rs 32 billion to Rs 2 billion in four
years. The average annual percentage decline in market value is closest to:
A 20%
B 40%
C 50%
D 100%
(LO 1.1.2) (2 marks)

CA Sri Lanka 5
BL2: Business Mathematics and Statistics

This information relates to the next two questions.

Y and N share out a certain sum of money in the ratio 4:5, and N ends up with
Rs 6m.
14. Compute the original amount to be shared out.

(LO 1.1.2) (2 marks)

15. Compute the amount to be shared out if N had got Rs 6m and the ratio had
been 5:4 instead of 4:5.

(LO 1.1.2) (2 marks)

16. Compute the original selling price if a customer pays Rs 5,000 after receiving
a discount of 12%.

(LO 1.1.2) (2 marks)

17. Compute the total discount received if a customer receives a 10% trade
discount and then a 5% discount for prompt payment, the initial pre-
discount price is Rs 5,000.

(LO 1.1.2) (2 marks)

18. A trader's total costs are made up of wages and materials. Next month wages
are expected to be Rs 1,000  10% and materials Rs 2,000  20%. Revenue is
predicted to be Rs 4,000  10%. Profit (revenue minus total costs) next
month will be:
A between Rs 100 and Rs 900
B between Rs 100 and Rs 1,900
C Rs 1,000  10%
D Rs 1,000  20%
(LO 1.1.3) (2 marks)

6 CA Sri Lanka
 Questions

2 Compounding and Discounting

1. A client wishes to invest Rs 5,000 for five years in a bank account where the
interest is 1.17% per month compounded monthly.
Compute the size of the fund at the end of five years.
A Rs 5,299
B Rs 9,644
C Rs 10,048
D Rs 25,000
(LO 2.1.6) (2 marks)

2. A bank account pays interest of 1.17% per month compounded monthly.

Compute the effective annual interest rate.
A 14.04%
B 14.98%
C 20.14%
D 22.42%
(LO 2.1.5) (2 marks)

3. The managing director of a manufacturing company is considering buying a

piece of machinery which costs Rs 15,000. The machine is to be purchased
by taking a five year loan at 9% per annum which will be paid off in five
equal annual instalments (starting a year after the loan is taken out).
Calculate the size of each instalment to the nearest whole number.

Rs
(LO 2.1.4) (2 marks)

4. An individual won a competition and was given the choice of a cash payment
now of Rs 12,000 or a payment of Rs 15,000 in five years' time. Assume that
interest rates are currently 5%.
Identify which prize the individual should choose.
A Rs 12,000 now
B Rs 15,000 in five years
C Either as he is indifferent between them
D More information is needed to determine the answer
(LO 2.2.2) (2 marks)

CA Sri Lanka 7
BL2: Business Mathematics and Statistics

5. An individual can earn 1% per month calculated on a simple interest basis. If

he invests Rs 5,000 for two years how much interest will he earn?
A Rs 100
B Rs 200
C Rs 1,200
D Rs 2,000
(LO 2.1.4) (2 marks)

6. If the interest was 1% per month on a compound basis how much interest
would he earn?

Rs
(LO 2.1.4) (2 marks)

The following information relates to the next three questions.

A company invested Rs 10,000 for five years. Interest rates were 7% for the first
two years, 8% for the next two years and 9% for the last year. Calculate the
following:
7. The terminal value at the end of the fifth year.
A Rs 14,828
B Rs 14,556
C Rs 14,421
D Rs 14,026
(LO 2.1.6) (2 marks)
8. The average annual yield earned on the investment.
A 45.56%
B 39.00%
C 8.00%
D 7.80%
(LO 2.1.5) (2 marks)
9. The company plans to use the funds to purchase equipment in five years'
time. The equipment will cost Rs 14,000. Calculate the present value of the
funds remaining after the purchase.

Rs
(LO 2.1.6) (2 marks)

8 CA Sri Lanka
 Questions

10. A company need to replace some machinery in four years' time, the
machinery will cost Rs 150,000, and the company has decided to provide for
this future commitment by setting up a sinking fund into which four equal
annual investments will be made, starting one year from now. The fund will
earn interest at 12%.
Calculate the annual investment.

Rs
(LO 2.1.8) (2 marks)

11. A sum of Rs 60,000 is invested for 10 years at 6% per annum. What is its
final value (to two decimal places) if interest is:
Simple Rs

Compound Rs
(LO 2.1.4) (2 marks)

12. A depreciation rate of 20% equates to a value for r of:

A + 20%
B 20%
C + 0.2
D  0.2
(LO 2.1.4) (2 marks)

13. The effective annual rate of interest is the same as the annual percentage
rate which is the same as the compound annual rate.
True 
False 
(LO 2.1.4) (2 marks)

14. An investor has been offered two deals:

Option 1 1.1% compounded every three months
Option 2 3.2% compounded every six months
State the option that offers the best APR:

(LO 2.1.4) (2 marks)

CA Sri Lanka 9
BL2: Business Mathematics and Statistics

15. If S Ltd invests Rs 250 now and a further Rs 250 each year for five more
years at an interest rate of 20%, which of the following are true if the final
investment is calculated using the formula for the sum of a geometric
progression?
A= n=
A Rs 250  1.2 5
B Rs 250  1.2 4
C Rs 250 5
D Rs 250 4
(LO 2.1.7) (2 marks)

16. A shopkeeper wishes to refurbish the store in five years' time. At the end of
five years, the refurbishment will cost Rs 50,000, and the storekeeper has
decided to provide for this future refurbishment by setting up a sinking fund
into which equal annual investments will be made, starting one year from
now. The fund will earn interest at 10%.
Calculate the annual amount of investment.

Rs
(LO 2.1.8) (2 marks)

17. Compute the present value of seven payments of Rs 15,000 starting three
years from now, interest rates are 5%.

Rs
(LO 2.2.2) (2 marks)

18. How much will an investor have after eight years if he invests Rs 2,000 at
12% per annum simple interest?
A Rs 1,920
B Rs 3,680
C Rs 3,920
D Rs 4,952
(LO 2.1.6) (2 marks)

10 CA Sri Lanka
 Questions

19. In four years, an investment of Rs 900 has grown to Rs 1,548. What has been
the monthly rate of simple interest?
A 1.1%
B 1.5%
C 15%
D 18%
(LO 2.1.4) (2 marks)

20. It is estimated that a particular cost will decline by 8% per annum on a

compound basis.
If the cost is now Rs 12,000, by the end of year 3 the cost will be
approximately:
A Rs 8,597
B Rs 9,120
C Rs 9,344
D Rs 10,157
(LO 2.1.4) (2 marks)

21. The effective annual rate of interest of 15% nominal per annum
compounded quarterly is %

(LO 2.1.5) (2 marks)

22. The effective annual rate of interest of 24% nominal per annum
compounded monthly is %

(LO 2.1.5) (2 marks)

23. Rs 8,000 was placed in a bank deposit account for three years. The expected
annual rate of interest is 11%, calculated yearly. Calculate the interest
earned on each investment (correct to the nearest Re).

Rs
(LO 2.1.4) (2 marks)

24. Rs 15,000 was placed in a savings account for five years, with interest added
yearly at 14%. Calculate the interest earned on each investment (correct to
the nearest Re).

Rs
(LO 2.1.4) (2 marks)

CA Sri Lanka 11
BL2: Business Mathematics and Statistics

25. Rs 6,000 was placed in an account for four years where the annual interest
rate is expected to be 10% for the first two years and 15% in years 3 and 4,
with interest added at the end of each year. Calculate the interest earned on
each investment (correct to the nearest Re).

Rs
(LO 2.1.4) (2 marks)

26. Investment A would last for three years and pay interest at a nominal rate of
10.5%. Compound interest would be added every half year. Calculate the
effective annual rate of interest to two decimal places.

%
(LO 2.1.5) (2 marks)

27. Investment B would last for five years, with a nominal interest rate of 12%,
payable monthly. Calculate the effective annual rate of interest to two
decimal places.

%
(LO 2.1.5) (2 marks)

28. Investment C would last for four years, with a nominal interest rate of 12%,
payable quarterly. Calculate the effective annual rate of interest to two
decimal places.

%
(LO 2.1.5) (2 marks)

29. A firm has arranged a ten-year lease, at an annual rent of Rs 12,000. The first
rental payment has to be paid immediately, and the others are to be paid at
the end of each year.
What is the present value of the lease at 12%?
A Rs 63,936
B Rs 67,800
C Rs 75,936
D Rs 79,800
(LO 2.3.4) (2 marks)

12 CA Sri Lanka
 Questions

30. A one-year investment yields a return of 20%. The cash returned from the
investment, including principal and interest is Rs 3,000. The interest is:
A Rs 300
B Rs 400
C Rs 500
D Rs 600
(LO 2.1.4) (2 marks)

31. House prices rise at 3% per calendar month. The annual rate of increase
correct to one decimal place is:
A 42.6%
B 36.0%
C 14.26%
D 12.36%
(LO 2.1.4) (2 marks)

32. A building society adds interest to investors' accounts monthly even though
interest rates are expressed in annual terms. The current rate of interest is
3% per annum.
An investor deposits Rs 2,000 on 1 July. How much interest will have been
earned by 31 December?
Rs
(LO 2.1.4) (2 marks)

33. A single sum of Rs 10,000 is invested at an interest rate of 1% per quarter.

The amount to which the principal will have grown by the end of year 3 is
approximately (to the nearest Re)
Rs
(LO 2.1.6) (2 marks)

34. It is estimated that, because of productivity improvements, costs will fall by

8% per annum on a compound basis. If annual costs are now Rs 420,000
then by the end of four years they will have fallen, to the nearest Re.
Rs
(LO 2.1.4) (2 marks)

CA Sri Lanka 13
BL2: Business Mathematics and Statistics

35. FL Bank offers depositors a nominal interest rate of 12% per annum, with
interest added to their accounts quarterly. The effective annual percentage
rate, to two decimal places is %
(LO 2.1.5) (2 marks)

36. Rs 400,000 was invested on 1 January 20X1, earning interest of 5% pa. The
value of this investment on 31 December 20X5 will be (to the nearest Re):
A Rs 1,061,319
B Rs 536,038
C Rs 510,513
D Rs 486,203
(LO 2.1.6) (2 marks)

37. A fund of Rs 180,000 will be required in 15 years' time. Rs 5,000 will be

invested at 8% pa at the end of each year for 14 years. Use tables to complete
the following.
Present value of final fund = Rs to the nearest Re.

Present value of annuity = Rs to the nearest Re.

Payment required at time 15 = Rs to the nearest Re.

(LO 2.2.2) (2 marks)

38. Rs 8,000 was invested exactly four years ago, at a guaranteed rate of
compound interest of 6% per annum. Its value now (to the nearest Re) is:
Rs
(L.O 2.3.3) (2 marks)

39. A sum of money invested at compound interest of 7% has grown to

Rs 84,848 after 10 years. The original sum invested, to the nearest Re, was:
Rs
State your answer to two decimal places.
(LO 2.1.6) (2 marks)

40. After 15 years an investment of Rs 2,400 has grown to Rs 54,600. The annual
rate of compound interest applied is % (to two decimal places).
(LO 2.1.5) (2 marks)

14 CA Sri Lanka
 Questions

41. An individual placed a sum of money in the bank and left it there for 12 years
at 8% per annum. The sum is now worth Rs 2,728.90.
Using the compound interest formula, the original principal was found
(to the nearest whole Re.) to be Rs
(LO 2.1.6) (2 marks)

42. A firm buys a material on a long-term contract which stipulates a price

increase per annum of 6% compound. If the current price is Rs 200 per kg,
the price in 5 years will be Rs
(LO 2.1.4) (2 marks)

43. A credit card company states that its APR is 27.6%. How much interest are
they charging customers each month? (to two decimal places)
Rs
(LO 2.1.5) (2 marks)

44. Fred invested 6 annual payments of Rs 100m into an investment fund

earning compound interest of 4% per year. If the first payment was at time
zero, calculate the value of the fund at time 5.
A Rs 663m
B Rs 541m
C Rs 437m
D RS 545m
(LO 2.2.2) (2 marks)

45. Over the past year, prices have risen by 4%. What is the percentage rise in
prices over the past three months?
A 1%
B 0.75%
C 0.985%
D 4%
(LO 2.1.5) (2 marks)

46. A saver has been offered two different deals:

Option 1: 3.1% compounded every three months
Option 2: 4.7% compounded every six months
The APR of the best option is (to two decimal places):
%
(LO 2.1.5) (2 marks)

CA Sri Lanka 15
BL2: Business Mathematics and Statistics

3 Dealing with annuities and perpetuities

The following scenario relates to the questions 1 to 6.
A retailer is facing increasing competition from new shops that are opening in his
area. He thinks that if he does not modernise his premises, he will lose sales. A
local builder has estimated that the cost of modernising the shop will be Rs 40,000
if the work is started now.
The retailer is not sure whether to borrow the money and modernise the premises
now, or to save up and have the work carried out when he has sufficient funds in
the future. Current forecasts show that if he delays the work for three years, the
cost of the modernisation is likely to rise by 4% per annum.
Investigations have revealed that, if he borrows, he will have to pay interest at the
rate of 3% per quarter, but if he saves the money himself he will only earn 2% per
quarter.
The retailer borrows Rs 40,000 at 3% per quarter and repays Rs X at the end of
each quarter for three years.
1. Use tables to find the present value of the repayments as a function of X.

x
(LO 2.2.2) (2 marks)
2. Compute the value of X to the nearest Re.

Rs
If the retailer decides to save money at 2% per quarter so that he has sufficient
funds to carry out the work in three years' time, complete the following shaded
boxes.
(LO 2.2.2) (2 marks)
3. Calculate the cost of modernisation in three years' time correct to
two decimal places.

Rs
(LO 2.1.6) (2 marks)
4. If twelve instalments of Rs Y are invested, the first being paid immediately,
use tables to find the present value of the instalments as a function of Y.

y
(LO 2.2.2) (2 marks)

16 CA Sri Lanka
 Questions

5. Use tables to find the value of Y to the nearest Rs 10.

Rs
(LO 2.2.2) (2 marks)
6. On the basis of the results that you have calculated above, what would you
advise the retailer to do? (Tick as appropriate).

Modernise now

Save and modernise later

(LO 2.2.2) (2 marks)

7. The present value of a six–year receivable annuity which begins in two

years’ time at 5% per annum compound is Rs 83,025. What is the annual
amount of the annuity?
A Rs 18,033
B Rs 17,175
C Rs 13,671
D Rs 17,756
(LO 2.2.2) (2 marks)

8. An annual year-end income of Rs 15,000 is required in perpetuity. Assuming

a fixed rate of interest of 9% each year, and ignoring administrative charges,
the sum required now to purchase the annuity is closest to:
A Rs 13,650
B Rs 135,000
C Rs 150,000
D Rs 167,000
(LO 2.2.2) (2 marks)

9. A company requires a sinking fund of Rs 500,000 in four years' time. They

can invest Rs X at the start of each of the four years at 4%. The value of X
(to the nearest Rs '000) using tables is:
A Rs 125,000
B Rs 118,000
C Rs 154,000
D Rs 113,000
(LO 2.1.8) (2 marks)

CA Sri Lanka 17
BL2: Business Mathematics and Statistics

10. The present value of a five–year receivable annuity which begins in two
years’ time at 7% per annum compound is Rs 52,765. What is the annual
amount of the annuity?
A Rs 14,735
B Rs 13,770
C Rs 10,553
D Rs 37,621
(LO 2.2.2) (2 marks)

11. How much needs to be invested now at 8% per annum to provide an annuity
of Rs 10,000 per annum for 15 years starting in five years’ time (to the
nearest Re)?

Rs
(LO 2.1.8) (2 marks)

12. A fund of Rs 55,000 will be required in 15 years' time. Rs 2,000 will be

invested at 8% pa at the end of each year for 14 years. Use tables to find the
further payment which will be required at time 15, to 3 significant figures.
A Rs 2,660
B Rs 27,000
C Rs 837
D Rs 657
(LO 2.1.8) (2 marks)

13. What is the present value of an annuity of Rs 3,000 per annum discounted at
6% per annum if it starts at the end of the third year and finishes at the end
of the 10th year? Use tables and give your answer to the nearest Re.
A Rs 22,080
B Rs 16,581
C Rs 996
D Rs 14,061
(LO 2.2.2) (2 marks)

18 CA Sri Lanka
 Questions

14. Over a period of 12 months, the present value of the payments made on a
credit card is Rs 10,500 at a discount rate of 3% per month. What is the
equivalent constant monthly amount, to the nearest Re.?
A Rs 875
B Rs 4,371
C Rs 1,055
D Rs 7,361
(LO 2.2.2) (2 marks)

15. How much needs to be invested now at 6% to yield an annual pension

income of Rs 15,000 in perpetuity?

Rs
(LO 2.2.3) (2 marks)

16. An investor has funds to invest now to produce an annuity of Rs 1,494.87

per year for ten years commencing in one year.
The present value of the annuity to the nearest Re is Rs 10,500.
The prevailing interest rate is %
(LO 2.1.5) (2 marks)

17. Joe is to receive a ten-year annuity of Rs X per year, received at the end of
each year. At an interest rate of 8% this annuity has a present value of
Rs 33,550.
The value of Rs X = Rs
State your answer to the nearest Re.
(LO 2.2.2) (2 marks)

18. An investor is to receive an annuity of Rs 19,260 for six years commencing at

the end of year 1. It has a present value of Rs 86,400.
The rate of interest (to the nearest whole percent) is %
(LO 2.1.5) (2 marks)

19. Isabelle is to receive an annuity of Rs 6,529.97 at the end of each of the next
7 years. The present value of the annuity is Rs 33,995.18 at 8%, the relevant
annuity factor (from tables) is
(LO 2.2.2) (2 marks)

CA Sri Lanka 19
BL2: Business Mathematics and Statistics

20. How much should be invested now (to the nearest Rs) to receive Rs 24,000
per annum in perpetuity if the annual rate of interest is 5%?
Rs
(LO 2.2.3) (2 marks)

21. Compute the amount that needs to be invested now at 6.5% to yield an
annual pension income of Rs 15,000 in perpetuity?
Rs
(LO 2.2.3) (2 marks)

22. A company is considering a project which would cost Rs 26,000 now and
would yield Rs 4,200 per annum in perpetuity, starting one year from now.
The cost of finance is 12%.
Present value of perpetuity = Rs to the nearest Re.
Net present value of project = Rs to the nearest Re.
(LO 2.2.3) (2 marks)

23. An investment will generate cashflows of Rs 3,100 each year in years 3 to 7

(ie first amount to be received 3 years from now). The discount rate is 15%
per annum. The present value of the cash flows is:
Rs
Use tables to calculate your answer to the nearest Re.
(LO 2.2.2) (2 marks)

24. Mr N wishes to invest a lump sum at 9% interest per annum. How much
should he invest now in order to have Rs 40,000 at the end of the next
three years?
A Rs 40,000 – (3  0.09  Rs 40,000)
1 1 1
 
2 3
B Rs 40,000 ( 1.09 1.09 1.09 )
C 40,000/(3  1.09)
D 40,000/(1.09)3
(LO 2.1.8) (2 marks)

20 CA Sri Lanka
 Questions

25. Compute the amount that needs to be invested now at 6.5% to yield an
annual pension income of Rs 15,000 for the next 15 years starting one year
from now.
Rs
(LO 2.1.8) (2 marks)

26. A company requires a sinking fund of Rs 800,000 in four years' time. They
can invest Rs X at the start of each of the four years at 4%. The first payment
is now which is the beginning of the first of four years. The value of X (to the
nearest Rs '000) using tables is:
Rs
(LO 2.1.8) (2 marks)

27. A perpetuity is an annuity which lasts for at least 25 years.

True False
(LO 2.2.3) (2 marks)

28 Terry has just bought a van which has a life of eight years. At the end of eight
years a replacement van will cost Rs 27,000 and Terry would like to provide
for this future commitment by setting up a sinking fund into which equal
annual investments will be made, starting now. The fund will earn interest
at 4% per annum.
The equal annual investments to be made = Rs (to two
decimal places)
(LO 2.1.8) (2 marks)

CA Sri Lanka 21
BL2: Business Mathematics and Statistics

4 Loan amortisation
1. A loan of Rs 60,000 is to be repaid by 15 equal year-end payments. If interest
is charged at 9% the value of the annual payment (using tables) correct to
the nearest Rs 10 is:
A Rs 2,050
B Rs 4,000
C Rs 6,830
D Rs 7,440
(LO 2.3.2) (2 marks)

2. Over a period of 12 months, the present value of the payments made on a

credit card is Rs 21,000 at a discount rate of 3% per month. What is the
equivalent constant monthly amount, to the nearest Re?
A Rs 1,750
B Rs 2,110
C Rs 8,743
D Rs 14,721
(LO 2.3.2) (2 marks)

3. A firm has arranged a ten-year lease, at an annual rent of Rs 12,000. The first
rental payment has to be paid immediately, and the others are to be paid at
the end of each year.
What is the present value of the lease at 12%?
A Rs 63,936
B Rs 67,800
C Rs 75,936
D Rs 79,800
(LO 2.3.4) (2 marks)

4. A loan of Rs 60,000 is to be repaid by 15 equal year-end payments. If interest

is charged at 9% the value of the annual payment (using tables) correct to
the nearest Rs 10 is:
A Rs 2,050
B Rs 4,000
C Rs 6,830
D Rs 6,232
(LO 2.3.2) (2 marks)

22 CA Sri Lanka
 Questions

5. A leasing agreement is for five years. Rs 20,000 must be paid at the

beginning of the first year, to be followed by four equal payments at the
beginning of years two, three, four and five. At a discount rate of 8%, the
present value of the four equal payments is Rs 52,992. The total amount to
be paid during the lease period is:
Rs
(LO 2.3.5) (2 marks)

6. A fifteen year loan of Rs 90,000 at 7% has been repaid at the rate of Rs 8,000
at the end of each year. If the loan is to be closed immediately after the
eighth annual payment the amount still outstanding (giving your answer to
the nearest Rs and using discount factor tables) is:
Rs
(LO 2.3.2) (2 marks)

7. A loan offer has been made at 5% fixed rate for five years.
You want to borrow Rs 180,000 for a total term of 23 years. What will be
your monthly repayment during the first year, correct to the nearest Re?
Rs
(LO 2.3.2) (2 marks)

8. A loan of Rs 30,000 is to be repaid by 15 equal year-end payments. If interest

is charged at 9%, the value of the annual payment (using tables) correct to
the nearest Re 10 is:
A Rs 1,020
B Rs 3,720
C Rs 2,000
D RS 3,410
(LO 2.3.2) (2 marks)

9. A loan offer has been made at 4% fixed rate for 5 years and 5.7% on the
remaining balance thereafter.
You want to borrow Rs 250,000 for a total term of 25 years. What will be
your monthly repayment for the first five years, correct to the nearest Re?
Rs
(LO 2.3.2) (2 marks)

CA Sri Lanka 23
BL2: Business Mathematics and Statistics

10. A Rs 100,000 loan, with interest compounded at 11% each year, is to be

repaid by 10 equal year-end payments of Rs X, the first being due one year
after the loan was contracted.

Rs X is closest to Rs
State your answer to the nearest Re.
(LO 2.3.2) (2 marks)

11. A lease involves five equal annual payments to a lessor. Each payment takes
place at the beginning of each year. The lessee has a post-tax cost of
borrowing of 5% per annum.
Which cumulative discount factor should be used to find the present value of
the lease payments?
A 4.546
B 3.546
C 4.330
D 5.330
(LO 2.3.4) (2 marks)

12. A 10 year lease involves the annual payment at the end of each year of
Rs 2.5 million. The asset would cost Rs 17.56 million today if it were bought
outright.
Calculate the annual percentage pre-tax cost of this lease.
A 14%
B 7%
C 42%
D 3%
(LO 2.3.4) (2 marks)

13. A loan of Rs 30,000 for 15 years at 7% has been repaid at the rate of Rs 3,290
at the end of each year. If the loan is to be closed immediately after the
eighth annual payment, use discount factor tables to find the amount still
outstanding, giving your answer to the nearest Re.
A Rs 19,036
B Rs 21,083
C Rs 3,680
D Rs 17,792
(LO 2.3.4) (2 marks)

24 CA Sri Lanka
 Questions

5 Equations
1. A buyer has spent Rs 30,151 on 550 units of a particular item. The first 100
units cost Rs 50 each, the next 150 units cost Rs 8,250 in total, the next
batch cost Rs 11,200 in total and the final 100 cost Rs x each. The value of x
is:
A Rs 57.01
B Rs 107.01
C Rs 139.51
D Rs 169.01
(LO 3.1.2) (2 marks)

2CD
2. In the formula Q = , if C = Rs 20, D = 24,000 and Q = 400, then Ch is
Ch
closest in value to:
A Rs 1.73
B Rs 2.45
C Rs 6.00
D Rs 12.00
(LO 3.1.2) (2 marks)

3. If cost = 3,800 – 24P and revenue = 410P – 22P2, where P = price per unit,
how would you express profit per unit (in terms of price)?
(Profit = Revenue – cost)
A 434P – 22P2 – 3,800
B 434P – 22P2 + 3,800
C 22P2 – 434P + 3,800
D 386P – 22P2 – 3,800
(LO 3.1.4) (2 marks)

4. If demand D = 60 – 5P, how is price (P) expressed in terms of D?

A P = 12 – D
B P = 12 – D/5
C P = 12 + D/5
D P = D/55
(LO 3.1.4) (2 marks)

CA Sri Lanka 25
BL2: Business Mathematics and Statistics

5. The price of a product is determined by the following equation:

P = 1,000 – 0.001Q where Q is the number of units sold. Calculate the total
revenue when the quantity sold is 5,000 units.
Rs
(LO 3.1.4) (2 marks)

6. If the price of a product (P) = 250 – D/1.2 where D = demand of the

product, how is the demand of the product expressed in terms of P, the
price?
A D = 300 + 1.2P
B D = 300 – P
C D = 1.2P – 300
D D = 300 – 1.2P
(LO 3.1.4) (2 marks)

This information relates to the next two questions.

A company makes two products x and y. There are limited resources available
such that there are only 550 kgs of material A and 400 kg of material B available
for the next period. The equations below represent the limited supply of
materials:
Each unit of product x uses 4 kg of material A and 3 kg of material B
Each unit of product y uses 3 kg of material A and 2 kg of material B
7. Identify the equations which express the material resources as equations.
A 4x + 3y = 550, 3x + 2y = 400
B 3x + 4y = 550, 2x + 3y = 400
C 4x + 3y = 400, 3x + 2y = 550
D 3x + 4y = 400, 2x + 3y = 550
(LO 3.1.2) (2 marks)
8. Calculate the quantities of x and y produced assuming the maximum
possible quantities are produced given the materials available.

x y

(LO 3.1.2) (2 marks)

26 CA Sri Lanka
 Questions

This information relates to the next two questions

A vendor sold all his toy wristwatches for a gross income of Rs 875. If he had
sold them for Rs 5 less per watch, he would have sold 20 more for the same
gross income.
9. Compute the price at which each item was sold.
Rs
(LO 3.1.3) (2 marks)
10. Calculate the number of watches that he sold.

(LO 3.1.3) (2 marks)

This information relates to the next two questions.

A company makes two models of CD player known as the Basic and Advanced
models. During the year 2018 it made 4,000 units of Basic and 3,000 of
Advanced, total production costs were Rs 27 million. During 2019 it made 3,000
units of Basic and 5,000 Advanced, total production costs were Rs 34 million.
11. Calculate the production cost for the Advanced model.
Rs
(LO 3.1.2) (2 marks)

12. Calculate the production cost for the Basic model.

Rs
(LO 3.1.2) (2 marks)

13. A company has received revenue of Rs 20,500 from the sale of 500 units of
product X. The first 100 units sold for Rs 50 each, the next 200 units sold
for Rs 8,000 in total, the next batch generated Rs 3,800 in total and the final
100 were sold for Rs P each. The value of x is:
A Rs 50
B Rs 40
C Rs 38
D Rs 37
(LO 3.1.3) (2 marks)

CA Sri Lanka 27
BL2: Business mathematics and statistics

6 Graphs and algebra for business

1. The costs of selling a product are c = x2  2x + 20 where
X = output in batches
C = costs, in Rs'000s
Calculate the volume of output at which total costs would be minimised.

Rs
(LO 4.1.1) (2 marks)

2. Solve the inequality 3(X + 4) < 2X + 1

(LO 4.3.1) (2 marks)

3. The sum of the squares of two positive numbers (x and y) is 890, and the
difference between the two numbers is 4. x is bigger than y. Find a quadratic
equation in terms of either x or y.

(LO 4.3.1) (2 marks)

4. A rectangle has a perimeter of 44 metres and an area of 112 square metres.

Find a quadratic equation in terms of either length 'a' or breadth 'b'.

(LO 4.1.1) (2 marks)

5. The rebate offered to a customer is calculated using the following formula

where x = the number of returns that the customer makes in 1 year. If the
formula calculates a negative number there is no rebate.
Compute the max number of returns the customer can make and still receive
a rebate.
Annual rebate = –3x2 + 6x + 24
x=
(LO 4.1.1) (2 marks)

28 CA Sri Lanka
 Questions

6. The graph of Y = 2X is shown by which of the following lines?

Y A B
5 C

4
3
2 D
1

0
1 2 3 4 5 X

(LO 4.3.2) (2 marks)

2CD
7. In the formula Q = , if C = Rs 20, D = 24,000 and Q = 400, then Ch is
Ch

closest in value to:

A Rs 1.73
B Rs 2.45
C Rs 6.00
D Rs 12.00
(LO 4.1.1) (2 marks)

The following information related to the next four questions.

The optimal order size for inventory is calculated using the formula

where Co is the cost of each order, Ch the cost of holding 1 unit in stock for
1 year and D equals the annual demand.
8. Compute the optimal order size if the cost of each order is Rs 500, the
holding cost is Rs 10 and the annual demand is 120,000.

Rs
(LO 4.1.1) (2 marks)
9. Compute the annual cost of holding inventory assuming that the inventory is
used evenly throughout the year.

(LO 4.1.1) (2 marks)

CA Sri Lanka 29
BL2: Business mathematics and statistics

10. Compute the number of orders during the year (to the nearest order).

(LO 4.1.1) (2 marks)

11. Compute the annual order costs.

Rs
(LO 4.1.1) (2 marks)

12. The following information relates to the next two questions.

The graph below represents the total costs for a company
State the fixed costs for business.
Total Costs Rs million

-8 -4 -2 0 2 4 6 8 X
Output (‘000)

Rs million
(LO 4.3.2) (2 marks)

13. State the variable cost per unit for the business.

(LO 4.3.2) (2 marks)

30 CA Sri Lanka
 Questions

14. The annual buildings insurance on an apartment block needs to be divided

between the owners of the various apartments in the block.
There are nine apartments in all: six three-bedroom apartments and three
two-bedroom apartments. Five of the three-bedroom apartments and one of
the two-bedroom apartments have a garage; the remainder have no garage.
The residents have agreed that the annual premium should be split between
a three-bedroom apartment, a two-bedroomed apartment and a garage in
the ratio 11:10:1. The total annual premium payable is RS 1,364.76.
Calculate the premium payable by the owner of each type of flat.

(LO 4.1.1) (2 marks)

The following information relates to the next three questions.

15. A company has established that the relationship between the selling price
and quantity sold for their product is P = 250 – 0.0001Q.
The variable cost of production is Rs50 per unit and the fixed costs are Rs 20
million.
Compute the selling price that will lead to profit maximisation.
(LO 4.1.2) (2 marks)
16. Compute the total revenue when goods are sold at this price.

Rs
(LO 4.1.2) (2 marks)
17. Compute the profit that the company will make if it sells the product at the
price calculated above.

Rs
(LO 4.1.2) (2 marks)

18. If q units of a product are sold at a price of p Rs a unit, then p = 600 – 0.15q.
What value or values of q will give total revenue of
Rs 450,000?

(LO 4.1.2) (2 marks)

CA Sri Lanka 31
BL2: Business mathematics and statistics

The following information relates to the next six questions.

The total cost of producing a batch of a given product is assumed to follow a
quadratic relationship. Batches of 10, 20 and 40 units of the product cost Rs 700,
Rs 400 and Rs 1,600 respectively.
19. Determine the precise form of the relationship, which is the total cost
function.
(LO 4.1.2) (2 marks)
20. Draw a graph of the total cost function for batches of sizes 0 to 50 units.
(LO 4.1.1) (2 marks)
21. From the graph, determine the batch size that minimises total cost.
The product sells for Rs 30 per unit.
(LO 4.1.2) (2 marks)
22. Draw, on the same graph as before, the revenue function.
(LO 4.1.2) (2 marks)
23. Find from the graph the range of batch sizes over which the product makes a
profit.
(LO 4.1.2) (2 marks)
24. Determine the precise form of the profit function.
(LO 4.2.1) (2 marks)

The following information is for the next three questions.

Your firm has been investigating the cost and revenue curves for a product and
1 3
has discovered that the total cost curve for the product is TC = x –5x2 +5x+140
3
where TC is total cost and x is output.
Total revenue, TR, is given by TR = –5x2 +86x
25. If profit is total revenue minus total cost, find the equation of the profit
function.
(LO 4.2.1) (2 marks)
26. Using differential calculus find the firm's profit maximising and minimising
outputs.
(LO 4.2.1) (2 marks)

32 CA Sri Lanka
 Questions

27. Find the values of total revenue, total cost and profit at the maximising
output.
(LO 4.3.1) (2 marks)

The following information is for the next two questions.

A company manufactures a product for which the fixed costs are Rs 10,000, the
labour costs are Rs 6 per unit and other variable costs are Rs 14 per unit. The
selling price is fixed at Rs 40 per unit.
28. Find the sales level at which the company makes neither profit nor loss (the
breakeven point).
(LO 4.2.1) (2 marks)
29. Find the level of sales which will produce a profit of Rs 2,200.
(LO 4.2.1) (2 marks)

30. For the graph of a function with a dome shape, which of the following
statements is true?
A The gradient is constant at any point on the line
B Before the peak, the line has a negative gradient; at the peak, the
gradient is zero; after the peak, the line has a positive gradient.
C Before the peak, the line has a positive gradient; at the peak, the
gradient is 1; after the peak, the line has a negative gradient.
D Before the peak, the line has a positive gradient; at the peak, the
gradient is zero; after the peak, the line has a negative gradient.
(LO 4.1.2) (2 marks)

31. The following information is relevant for the next three questions.
A company has established that the relationship between the selling price
and quantity can be expressed by the following equation:
P = 1,000 – 0.0003Q
The variable costs are Rs 300 per unit and the fixed costs are Rs 100 million
The company would like to set a price that maximises total revenue
Compute the number of units that need to be sold to maximise revenue

(nearest whole units)

(LO 4.2.1) (2 marks)

CA Sri Lanka 33
BL2: Business mathematics and statistics

32. Compute the total maximum revenue.

Rs
(LO 4.2.1) (2 marks)

33. Compute the contribution when revenue is maximised.

Rs
(LO 4.2.1) (2 marks)

34. The profits of a company are described by the function y = 800x – 4x2 –
15,000, where y = profit and x = sales level. At what sales level are profits
maximised?
A 20 units
B 50 units
C 100 units
D 200 units
(LO 4.2.1) (2 marks)

35. The costs of selling a product are c = 3x2  4x + 150 where

X = output in batches
C = costs, in Rs’000s
What is the volume of output at which total costs would be minimised?
A 1 batch
B 1.5 batches
C 2 batches
D 2.5 batches
(LO 4.2.1) (2 marks)

34 CA Sri Lanka
 Questions

7 Descriptive statistics
1. The following times taken to produce a batch of 100 units of Product X have
been noted.
21 mins, 17 mins, 24 mins, 11 mins, 37 mins, 27 mins,
20 mins, 15 mins, 17 mins, 23 mins, 29 mins, 30 mins,
24 mins, 18 mins, 17 mins, 21 mins, 24 mins, 20 mins,
What is the median time?

minutes
(LO 5.1.5) (2 marks)

2. The following scores are observed for the times taken to complete a task, in
minutes.
12, 34, 14, 15, 21, 24, 9, 17, 11, 8
What is the median score?
A 14.00
B 14.10
C 14.50
D 14.60
(LO 5.1.5) (2 marks)

3. In a histogram, one class is two thirds the width of the other classes.
If the score in that class is 20, the correct height to plot on the histogram is:
A 13.33
B 21.00
C 30.00
D 33.33
(LO 5.1.2) (2 marks)

4. A histogram uses a set of bars to represent a grouped frequency table.

To be correctly presented, the histogram must show the relationship of the
rectangles to the frequencies by reference to the:
A Diagonal of each bar
B Area of each bar
C Width of each bar
D Height of each bar
(LO 5.1.2) (2 marks)

CA Sri Lanka 35
BL2: Business mathematics and statistics

5. The graph below is an ogive showing the value of invoices selected in a

sample.

Which of the following statements is true?

A There are 100 sales with values of Rs 60
B There are more than 100 sales with values of Rs 60 or more
C There are 100 sales with values of less than Rs 60
D There are more than 100 sales with values of Rs 60 or more and there
are 100 sales with values of less than Rs 60
(LO 5.1.2) (2 marks)

The following data relate to the next four questions.

The distribution of average weekly wages paid to direct labour employees at the
factory of Parrots Co is as follows.
Weekly average Number of Frequency density Cumulative
wage employees frequency
Rs
51 and < 61 13 A
61 and < 66R 12 B
66 and < 71 16 C
71 and < 76 21 E
76 and < 81 25 F
81 and < 86 20
86 and < 91 14
91 and < 101 9 D G

36 CA Sri Lanka
 Questions

6. Using a standard interval size of Rs 5, calculate the frequency densities

corresponding to the letters A, B, C and D.

A=

B=

C=

D=

(LO 5.1.3) (2 marks)

7. Illustrate the data given above by means of a histogram. (Note. You won’t be
required to draw a histogram in the real assessment.)

(LO 5.1.3) (2 marks)

8. Calculate cumulative frequencies corresponding to the letters E, F and G as

shown in the table above.

E =

F =

G =
(LO 5.1.3) (2 marks)

CA Sri Lanka 37
BL2: Business mathematics and statistics

9. Illustrate the data given above by means of an ogive. (Note. You won’t be
asked to draw an ogive in the real assessment.)

(LO 5.1.2) (2 marks)

10. Over a period, a firm made purchases of Rs 800, Rs 1,000, Rs 1,100 and
Rs 1,200 on items, the unit cost of which were Rs 5.00, Rs 6.25, Rs 5.50 and
Rs 6.00 respectively.
To the nearest Re, the mean price paid per item was:
A Rs 5.69
B Rs 5.70
C Rs 5.71
D Rs 5.72
(LO 5.1.5) (2 marks)

11. The following scores are observed for the times taken to complete a task, in
minutes.
24, 68, 28, 30, 42, 48, 18, 34, 22, 16
The median score is:
A 26
B 28
C 29
D 32
(LO 5.1.5) (2 marks)

38 CA Sri Lanka
 Questions

12. The arithmetic mean of nineteen numbers is 10. When a twentieth number,
x, is added the overall mean becomes 11. What is the value of x?
A 15
B 20
C 25
D 30
(LO 5.1.5) (2 marks)

13. The sales of colour televisions on each of 40 days was as follows.

Daily sales Frequency Mid-point
f x fx
>0 3 8
>3 6 16
>6 9 12
> 9  12 4
40
Fill in the gaps in the table above.
The variables in the table are discrete/continuous.

The arithmetic mean of the data =

(LO 5.1.5) (2 marks)

14. Journey times to work of employees of a company were as follows.

Time No of employees
Minutes
less than 10 14
10 but " " 20 26
20 " " 30 64
30 " " 40 46
40 " " 50 28
50 " " 60 16
60 " " 80 8
80 " " 100 4
Calculate the mean journey time, giving your answer correct to two correct
decimal places.

minutes
(LO 5.1.5) (2 marks)

CA Sri Lanka 39
BL2: Business mathematics and statistics

15. In a histogram in which one class interval is one and a half times as wide as
the remaining classes, the height to be plotted in relation to the frequency
for that class is:
A  0.67
B  0.75
C  1.00
D  1.50
(LO 5.1.3) (2 marks)

16. The common class width in a histogram is Rs 20. One class has a non-
standard class width and an actual frequency of 100. If the score plotted is
80, what is the width of the non-standard class?
A Rs 4
B Rs 16
C Rs 20
D Rs 25
(LO 5.1.3) (2 marks)

17. The following table shows the typical sales in five different regions of a
country.
Area Typical sales
Rs
South-east 21,500
Midlands 20,800
North-east 18,200
North-west 17,500
South-west 16,700
The best diagram to draw to highlight the differences between areas is:
A A pie diagram
B A multiple bar chart
C A percentage component bar chart
D A simple bar chart
(LO 5.1.3) (2 marks)

40 CA Sri Lanka
 Questions

18. You have just calculated for the last two six-monthly periods, the running
costs of a factory, broken down into five categories. You are using a
computer package which can produce ogives, pie-charts, time series graphs
and scatterplots, amongst others. The graphics to illustrate best the relative
sizes of the cost categories in this situation will be:
A Ogives
B Pie-charts
C Time series graphs
D Scatterplots
(LO 5.1.3) (2 marks)

19. A company has recorded the following data on days lost through employee
sickness in a year.
Days lost per employee Number of
employees
At least Less than
0 6 18
6 8 30
8 10 18
10 14 12
Which of the following histograms represents the data most accurately?
Graph A Graph B

36 Histogram 1 36 Histogram 2

30 30
Number of employees

Number of employees

24 24

18 18

12 12

6 6

2 4 6 8 10 12 14 2 4 6 8 10 12 14
Days lost per employee Days lost per employee

Graph C Graph D
36 Histogram 3 36 Histogram 4

30 30
Number of employees

Number of employees

24 24

18 18

12 12

6 6

2 4 6 8 10 12 14 2 4 6 8 10 12 14
Days lost per employee Days lost per employee

(LO 5.1.3) (2 marks)

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BL2: Business mathematics and statistics

20. An ogive is:

A a graph of a cumulative frequency distribution
B a chart showing a non-linear relationship
C another name for a histogram
D a chart showing any linear relationship
(LO 5.1.3) (2 marks)

21. In a histogram, one class is two thirds of the width of the remaining classes.
If the score in that class is 25, the correct height to plot on the histogram is:
A 16.67
B 25.00
C 37.50
D 41.67
(LO 5.1.3) (2 marks)

22. A survey of heights of lampposts is carried out to find out if there is any
variation across the country.
What sort of data is being collected in such a survey?
A Quantitative Discrete
B Qualitative Discrete
C Quantitative Continuous
D Qualitative Continuous
(LO 5.1.2) (2 marks)

The following information relates to the next six questions.

The transfer times of data from a CPU, in microseconds, are as follows.
Time (microseconds) Frequency %
10 and less than 20 6 A
20 and less than 30 12 B
30 and less than 35 9 C
35 and less than 40 12 D
40 and less than 45 9 E
45 and less than 55 9 F
55 and less than 65 3 G

42 CA Sri Lanka
 Questions

23. Express each frequency as a percentage of the total frequency and tabulate
these data against each class.
A
B
C
D
E
F
G
(LO 5.1.2) (2 marks)
24. Find the mean of the data.

(LO 5.1.5) (2 marks)

25. Find the median of the data

(LO 5.1.5) (2 marks)

26. The following scores are observed for the times taken to complete a task, in
minutes.
12, 34, 14, 15, 21, 24, 9, 17, 11, 8
The median score is:
A 14.00
B 14.10
C 14.50
D 16.50
(LO 5.1.5) (2 marks)

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BL2: Business mathematics and statistics

27. Sales for the first five months of the year averaged Rs 8,200 per month.For
the last four months of the year sales averaged Rs 8,500 per month.
If sales for the year totalled Rs 102,000, the average for the sixth, seventh
and eighth months must be:
A Rs 8,500
B Rs 9,000
C Rs 9,500
D Rs 10,200
(LO 5.1.5) (2 marks)
28. The median of the scores 34, 23, 78, 12, 56, 43, 28, 9, 24 and 87 is:
A 26
B 28
C 31
D 34
(LO 5.1.5) (2 marks)

29. When the mean purchase price of 10 units at Rs 50, 10 units at Rs 70, and 20
units at Rs X is 80c, the value of X is:
A 60
B 67
C 75
D 100
(LO 5.1.5) (2 marks)

30. The arithmetic mean of the following ten invoice values is Rs 20:
Rs X, Rs 15, Rs 22, Rs 14, Rs 21, Rs 15, Rs 20, Rs 18, Rs 27, Rs X.
Therefore Rs X equals:
A Rs 15
B Rs 19
C Rs 24
D Rs 48
(LO 5.1.5) (2 marks)

44 CA Sri Lanka
 Questions

31. A factory employs staff in four departments for which the average (mean)
wage per employee per week is as follows.
Department W X Y Z
Mean wage Rs 50 Rs 100 Rs 70 Rs 80
Number of employees 20 5 10 5
The average (mean) wage per employee per week in this factory is:
A Rs 50
B Rs 65
C Rs 70
D Rs 75
(LO 5.1.5) (2 marks)

CA Sri Lanka 45
BL2: Business mathematics and statistics

8 Dispersion and measurement

1. A distribution where the mode has a lower value than the median and the
median is less than the mean is known as:
A positively skewed distribution
B normal distribution
C negatively skewed distribution
D continuous distribution
(LO 5.2.3) (2 marks)

2. In a positively skewed distribution:

A the mean is larger than the median
B the mean is smaller than the median
C the mean is the same as the median
D the mean lies between the median and the mode
(LO 5.2.3) (2 marks)

3. A distribution where the mode is greater than the median and the median is
greater than the mean is known as a:
A positively-skewed distribution
B normal distribution
C negatively-skewed distribution
D continuous distribution
(LO 5.2.3) (2 marks)

4. Quality control of four independent production processes reveals the length

of certain parts (in mm) to be as follows.
Process Mean Standard
deviation
W 100 10
X 40 5
Y 80 8
Z 150 12
The process(es) with the largest relative variation, as measured by the
coefficient of variation, is/are:
A X only
B Z only
C X and Y
D W and Y
(LO 5.2.6) (2 marks)

46 CA Sri Lanka
 Questions

5. The number of new orders received by five sales staff last week is as follows.
2, 4, 6, 8, 10
The variance of the number of new orders received is:
A 1.33
B 2.83
C 6
D 8
(LO 5.2.5) (2 marks)

6. Which of the following sets of data have the widest spread?

A B C D
Mean 150 175 200 250
Standard deviation 25 20 25 30

A Data A
B Data B
C Data C
D Data D
(LO 5.2.5) (2 marks)

7. Quality control of four independent production processes reveals the length

of certain parts (in mm) to be as follows.
Process Mean Standard deviation
W 100 10
X 40 5
Y 80 8
Z 150 12
The process(es) with the smallest relative variation, as measured by the
coefficient of variation, is/are:
A X only
B Z only
C X and Y
D W and Y
(LO 5.2.2) (2 marks)

8. The weights of three items, A, B and C vary independently and have the
following means and standard deviations.
Mean weight Standard deviation
kg kg
A 120 20
B 100 20
C 80 10

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BL2: Business mathematics and statistics

The three items are sold together in a single packet.

What is the mean weight of a packet of one unit each of A, B and C, and the
standard deviation of the weights of packets?
Mean Standard deviation
kg kg
A 100 30
B 100 900
C 300 30
D 300 900
(LO 5.2.5) (2 marks)

9. The coefficient of variation is used to measure:

A the correlation between two variables
B the percentage variation in one variable caused by variation in another
C the strength of a relationship between two variables
D relative dispersion
(LO 5.2.2) (2 marks)

10. The average savings of 150 people surveyed was found to be Rs 16,000. The
standard deviation was found to be Rs 2,400. The coefficient of variation is
A 0.15
B 6.67
C 22.50
D 1,000.00
(LO 5.2.2) (2 marks)

11. The following has been calculated for a frequency distribution.

(f) =100
(fx) =2,000
(fx2) =175,000
The value of the standard deviation (to one decimal place) is:
A 9.3
B 17.7
C 36.7
D 41.8
(LO 5.2.5) (2 marks)

48 CA Sri Lanka
 Questions

The following information applies to the next three questions.

The time when a computer is out of action due to breakdown or failure is called
'downtime'. The following data show the total downtimes in minutes of computer
A for the last 70 working days.

Downtime Cumulative number of days

Minutes
0 10
Less than 10 24
Less than 20 44
Less than 30 54
Less than 40 62
Less than 60 68
Less than 120 70
12. Find the arithmetic mean for computer A over the last 70 working days.
(LO 5.1.5) (2 marks)
13. Find the standard deviation for computer A over the last 70 working days.
(LO 5.2.2) (2 marks)
14. Find the coefficient of variation for computer A over the last 70 working
days.
(LO 5.2.2) (2 marks)

The following information applies to the next three questions.

The cost accountant of Ware Howser Ltd has calculated standard costs for
handling items of inventory in a warehouse. The costs are based on the labour
time required to deal with inventory movements and are as follows.

Time required for job of handling Standard cost

inventory
Minutes Rs
Less than 10 9
 10 and up to 20 11
 20 and up to 40 13
 40 and up to 60 15
 60 and up to 90 23
 90 and up to 120 29
 120 and up to 180 38
The warehouse operates a working day of seven hours, and a five-day week. There
are 12 people employed.

CA Sri Lanka 49
BL2: Business mathematics and statistics

An examination of the time sheets for a typical week showed that the following
costs had been incurred.
Standard cost Frequency
Rs
9 240
11 340
13 150
15 120
23 20
29 20
38 10
15. Estimate the mean handling time for inventory movement.
(LO 5.1.5) (2 marks)
16. Estimate the total number of hours in the week spent actively moving items
of inventory.
(LO 5.2.4) (2 marks)
17. Calculate the average number of jobs handled by each employee per week if
each job is dealt with by one person.
(LO 5.2.4) (2 marks)

The following information relates to the next two questions.

The manager of a repairs depot is reviewing the price charged to customers for
repairs. An analysis of the time required to carry out repairs over a typical one-
month period is as follows.
Repair Number of
time occasions
Hours
Less than 2 3
2 and < 4 8
4 and < 6 21
6 and < 8 37
8 and < 10 62
10 and < 12 38
12 and < 14 20
14 and < 16 8
16 and < 18 3
18. Calculate the mean.
(LO 5.1.5) (2 marks)
19. Calculate the standard deviation of repair times.
(LO 5.2.5) (2 marks)

50 CA Sri Lanka
 Questions

9 Probability
1. A sample of 100 companies has been analysed by size and whether they pay
invoices promptly. The sample has been cross-tabulated into large/small
against fast payers/slow payers. 60 of the companies are classified as large
of which 40 are slow payers. In total, 30 of all the companies are fast payers.
The probability that a company chosen at random is a fast paying small
company is:
A 0.10
B 0.20
C 0.30
D 0.40
(LO 6.1.4) (2 marks)

2. Next year, sales may rise, fall or remain the same as this year, with the
following respective probabilities: 0.56, 0.23 and 0.21.
The probability of sales remaining the same or falling is:
A 0.05
B 0.12
C 0.13
D 0.44
(LO 6.1.4) (2 marks)

3. In a group of 100 students, 30 are male, 55 are studying for the First Level
and six of the male students are not studying for the First Level. A student
chosen at random is female. What is the probability that she is not studying
for the First Level?
A 0.70
B 0.56
C 0.20
D 0.45
(LO 6.1.7) (2 marks)

4. In a survey of a village, 30% of tenants had satellite television and 80% had
mobile phones. The probability that a household chosen at random had
either satellite television or a mobile phone is:
A 0.24
B 0.30
C 0.80
D 0.86
(LO 6.1.4) (2 marks)

CA Sri Lanka 51
BL2: Business mathematics and statistics

5. Invoices produced within a firm are known to contain errors: 3% contain a

very serious error, 6% a serious error and 12% a minor error.
The probability that a randomly-chosen invoice will have a serious error, or
a minor error is:
A 0.21
B 0.18
C 0.09
D 0.06
(LO 6.1.4) (2 marks)

6. A company recommends its employees to have free influenza vaccinations

but only 50% do so. The effectiveness of the vaccine is known to be 90%. The
probability of any non-vaccinated employee getting influenza by chance is
0.3. An employee catches influenza.
What is the probability that she was vaccinated?
A 0.05
B 0.10
C 0.25
D None of the values
(LO 6.1.7) (2 marks)

7. Three sales representatives , J, K and L, rate their (independent) chances of

achieving certain levels of sales as follows.
Possible sales Rs 10,000 Rs 20,000 Rs 30,000
J Probability 0.3 0.5 0.2
K Probability 0.3 0.4 0.3
L Probability 0.2 0.6 0.2
(For example, J rates her chances of selling Rs 20,000 worth of business as
'fifty-fifty' and K has a 30% chance of selling Rs 30,000 worth.)
On this evidence, the highest expected sales will be from:
A J alone
B K alone
C L alone
D K and L
(LO 6.1.4) (2 marks)

52 CA Sri Lanka
 Questions

8. A company must decide between two projects – Project A and Project B. The
profits that might be generated from each project are as follows.
Project A Project B
Probability Profit Probability Profit/(loss)
Rs Rs
0.45 4,000 0.64 8,000
0.55 2,000 0.36 (1,000)
Which project should be chosen and what is the associated expected value of
profit?
Project Expected profit
Rs
A A 2,900
B A 3,000
C B 4,760
D B 5,480
(LO 6.1.4) (2 marks)

9 With reference to events A and B, how would you best describe mutually
exclusive outcomes?
A A and B are dependent events
B A and B are independent events
C The occurrence of event A excludes the possibility of event B from
happening
D Events A and B happen at the same time
(LO 6.1.6) (2 marks)

10 Which of the following formulae represent the general rule of multiplication?

A P(A and B) = P(A)  P(B|A)
B P(A and B) = P(A)  P(B)
C P(A or B) = P(A) + P(B) – P(A and B)
D P(A or B) = P(A) + P(B)
(LO 6.1.6) (2 marks)

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BL2: Business mathematics and statistics

11. A company has a security system comprising four electronic devices (A, B, C
and D) which operate independently. Each device has a probability of failure
of 0.1. The four electronic devices are arranged so that the whole system
operates properly if at least one of A or B functions, and at least one of C or D
functions.
What is the probability that the whole system operates properly?

P
(LO 6.1.7) (2 marks)

The following information relates to the next three questions.

A plate manufacturer has three assembly lines (X, Y and Z) producing decorative
plates. An inspector samples finished plates from the assembly lines in the ratio
1X, 2Y, 3Z.
Analysis of past inspection records suggests that the defective rates from the
assembly lines are:
X Y Z
5% 10% 30%
During a shift the inspector examines 240 plates.
12. Calculate how many plates the inspector examines from each assembly line.
(LO 6.1.7) (2 marks)
13. Calculate the probability that a plate sampled is defective.
(LO 6.1.7) (2 marks)
14. Calculate the probability that a plate sampled comes from Assembly Line Z,
given that it is defective.
(LO 6.1.7) (2 marks)

The following information relates to the next three questions.

The following table shows the average weekly gross wages earned by a group of
300 employees in a factory
Weekly gross wages Number of employees
> Rs 160 300
> Rs 180 280
> Rs 200 250
> Rs 220 200
> Rs 240 120
> Rs 260 70
> Rs 280 40
> Rs 300 10
> Rs 320 10
> Rs 340 0

54 CA Sri Lanka
 Questions

Calculate the following probabilities.

15. The probability that the average weekly gross wages of an employee selected
at random from the group are more than Rs 260.
(LO 6.1.4) (2 marks)
16. The probability that the average weekly gross wages of three employees
selected at random from the group are each more than Rs 240. (Assume that
once selected the employee does not rejoin the group).
(LO 6.1.4) (2 marks)
17. The probability that the average weekly gross wages of an employee selected
at random from the group are either less than Rs 180 or more than Rs 320.
(LO 6.1.4) (2 marks)

CA Sri Lanka 55
BL2: Business mathematics and statistics

10 Normal Distribution
The following information relates to the next four questions.
A parcel delivery service keeps records of the weight of all the parcels that it
delivers. These records show that the mean weight of parcels is 95 kilograms with
a standard deviation of 20 kilograms. Parcel weights are normally distributed.
1. Calculate the probability that the weight of a parcel (selected at random) will
be more than 100 kilograms.
(LO 6.3.5) (2 marks)
2. Calculate the probability that the weight of a parcel (selected at random) will
weigh less than 50 kilograms.
(LO 6.3.5) (2 marks)
3. Calculate the probability that the weight of a parcel (selected at random) will
be between 80 and 100 kilograms.
(LO 6.3.5) (2 marks)
4. Calculate the probability that the weight of a parcel (selected at random) will
be between 60 and 70 kilograms.
(LO 6.3.5) (2 marks)

5. The weights of elephants are normally distributed. The mean weight is 5,200
kg and the probability of an elephant weighing over 6,000 kg is 0.0314. What
is the standard deviation of the weights of elephants?
A 186 kg
B 215 kg
C 372 kg
D 430 kg
(LO 6.3.4) (2 marks)

6. A normal distribution has a mean of 60 and a standard deviation of 3.8.

The probability of a score of 56 or less is:
A 85%
B 50%
C 35%
D 15%
(LO 6.3.5) (2 marks)

56 CA Sri Lanka
 Questions

7. In a normal distribution with a standard deviation of 90, 28.23% of the

population lies between the mean and 900. The mean is:
A 860
B 850
C 840
D 830
(LO 6.3.5) (2 marks)

8. A normal distribution has a mean of 200 and a variance of 1,600.

Approximately 20% of the population is above which of the following
values?
A 234
B 240
C 251
D 278
(LO 6.3.5) (2 marks)

9. Consider the following normal distribution.

Which area represents the probability that:

(a) x  120
(b) x is between 120 and 150
(c) x  150
(d) x  120
(LO 6.2.2) (2 marks)

CA Sri Lanka 57
BL2: Business mathematics and statistics

The following information relates to the next five questions.

A company produces batteries whose lifetimes are normally distributed with a
mean of 100 hours. It is known that 96% of the batteries last at least 40 hours.
Throughout this question all answers should be given correct to one decimal
place.
10. If P(z > a) = 0.96, use normal distribution tables to find the value of 'a'.
a=
(LO 6.3.5) (2 marks)
11. Estimate the standard deviation lifetime.

hours (to one decimal place)

(LO 6.3.4) (2 marks)

12. Calculate the percentage of batteries that will last less than 57 hours.

% (to one decimal place)

The company is liable to replace any battery which lasts for less than 40
hours. The company wishes to reduce the percentage of defective batteries
from the current level of 4% to 2%.
(LO 6.3.5) (2 marks)
13. Use normal tables to find the value 'b' such that P(z < b) = 2%.

(LO 6.3.5) (2 marks)

14. The company can use a chemical procedure which changes the values of the
mean and standard deviation. If the standard deviation is set at 35 hours,
find the mean lifetime which will reduce the percentage of defectives to 2%
(to one decimal place).

(LO 6.3.5) (2 marks)

15. Central limit Theorem states that the mean of the sample is the same as the
mean of the population.

True

False

(LO 6.3.1) (2 marks)

58 CA Sri Lanka
 Questions

16. The average salary paid to farm workers in 20X0 was Rs 7,000 with a
standard deviation of Rs 1,000.
If a sample of 10 farm workers were asked what their salary was what
proportion would say it was less than Rs 6,500?

(LO 6.3.6) (2 marks)

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BL2: Business mathematics and statistics

11 Regression analysis
1. If x = 440, y = 330, x² = 17,986, y² = 10,366, xy = 13,467 and n = 11,
then the value of r, the coefficient of correlation, to two decimal places, is:

(LO 7.1.5) (2 marks)

2. A company's weekly costs (Rs C) were plotted against production level (P)
for the last 50 weeks and a regression line calculated to be C = 1,000 + 250P.
Which statement about the breakdown of weekly costs is true?
A Fixed costs are Rs 1,000. Variable costs per unit are Rs 5.
B Fixed costs are Rs 250. Variable costs per unit are Rs 4.
C Fixed costs are Rs 250. Variable costs per unit are Rs 1,000.
D Fixed costs are Rs 1,000. Variable costs per unit are Rs 250.
(LO 7.1.4) (2 marks)

3. The following four data pairs have been obtained: (1, 5), (2, 6), (4, 9), (5, 11).
Without carrying out any calculations, which of the following product
moment correlation coefficients best describes the relationship between x
and y?
A –0.98
B –0.25
C 0.98
D 0.25
(LO 7.1.5) (2 marks)

4. Monthly sales of overcoats (Y in Rs'000s) are found to be related to the

average monthly daytime temperature (X in degrees C) by the regression
equation Y = 32 – 1.6X. Which of the following is true?
A When temperature increases by 1 degree, sales fall by Rs 3,200
B When temperature increases by 1 degree, sales fall by Rs 1,600
C When temperature increases by 1 degree, sales fall by Rs 1.60
D When temperature increases by 1 degree, sales increase by Rs 1,600
(LO 7.1.4) (2 marks)

60 CA Sri Lanka
 Questions

5. The value of the correlation coefficient between x and y is 0.9. Which of the
following is correct?
A There is a weak relationship between x and y.
B x is 90% of y.
C If the values of x and y were plotted on a graph, the line relating them
would have a slope of 0.9.
D There is a very strong relationship between x and y.
(LO 7.1.6) (2 marks)

6. The correlation coefficient between advertising expenditure and sales

revenue is calculated to be 0.85. Which of the following statements is true?
A There is a weak relationship between advertising expenditure and
sales revenue.
B 85% of the variation in sales revenue can be explained by the
corresponding variation in advertising expenditure.
C 72% of the variation in sales revenue can be explained by the
corresponding variation in advertising expenditure.
D Sales revenue will increase by 85% more than advertising expenditure
will increase.
(LO 7.1.6) (2 marks)

7. If x = 12, y = 42, x2 = 46, y2 = 542, xy = 157 and n = 4, find the
correlation coefficient (to two decimal places).

(LO 7.1.5) (2 marks)

8. If X denotes advertising expenditure in one period and Y denotes sales

revenue in the next period, the regression equation linking X and Y has been
found to be Y = 40 + 10X. Interpret the value '40'.
A When advertising expenditure increases by Rs 1, sales will increase by
Rs 40 on average.
B If nothing is spent on advertising, sales will be Rs 40 on average.
C If Rs 10 is spent on advertising, sales will be Rs 40 on average.
D When advertising increases by Rs 1, sales increase on average by
Rs 40/10 = Rs 4.
(LO 7.1.4) (2 marks)

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9. Relationships between variables in the regression equation linking x and y is

y = 5x – 24. Which of the following is correct?
I The slope of the equation if plotted on a graph is 5
II The line cuts the y-axis at –24 if plotted on a graph
III The slope of the equation if plotted on a graph is –24
IV The line cuts the y-axis at 4.8 if plotted on a graph
A I only
B I and II only
C I, II and III only
D I, II, III and IV
(LO 7.1.4) (2 marks)

10. Using data from twelve European countries, it has been calculated that the
correlation between the level of car ownership and the number of road
deaths is 0.73. Which of the statements shown follow from this?
I High levels of car ownership cause high levels of road deaths.
II There is a strong relationship between the level of car ownership and
the number of road deaths.
III 53% of the variation in the level of road deaths from one country to the
next can be explained by the corresponding variation in the level of car
ownership.
IV 73% of the variation in the level of road deaths from one country to the
next can be explained by the corresponding variation in the level of car
ownership.
A I and II only
B I and III only
C II and III only
D II and IV only
(LO 7.1.9) (2 marks)

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 Questions

11. 20 pairs of values of (X, Y) with X ranging from 15 to 45 were used to obtain
the regression equation Y = 480 – 5X. The correlation coefficient is –0.95. It
has been estimated that when X = 10, Y = 430. Which of the following
reduces the reliability of the estimate?
A Sample size
B The magnitude of the correlation coefficient
C X = 10 being outside the range of the sample data
D The correlation being negative
(LO 7.1.7) (2 marks)

12. The relationship between expenditure in Rs on advertising (X) in one time

period and sales (in Rs) (Y) in the next period has been found to be Y = 50 +
7X. Which of the following interprets the value '7' correctly?
A For every Re 1 spent on advertising, sales increase by Rs 7 on average
B For every Re 1 increase in sales, Rs 7 must on average be spent on
advertising
C For every Re 1 spent on advertising, sales increase by Rs 8
D When advertising is zero, sales are Rs 50/7
(LO 7.1.7) (2 marks)

13. In calculating the regression equation linking two variables, the standard
formulae for the regression coefficients are given in terms of X and Y. Which
of the following is true?
A X must be the variable which will be forecast.
B It does not matter which variable is which.
C Y must be the dependent variable.
D Y must be the variable shown on the vertical axis of a scattergraph.
(LO 7.1.7) (2 marks)

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BL2: Business mathematics and statistics

14. The linear relationship between advertising in thousands of dollars (X) and
sales in tens of thousands of dollars (Y) is given by Y = 5 + 2X. Which of the
following are correct?
I For every Rs 1,000 spent on advertising, sales revenue increases by
Rs 50,000 on average
II When nothing is spent on advertising, the average level of sales is
Rs 50,000
III For every extra Rs 1,000 spent on advertising, sales revenue increases
by Rs 20,000 on average
IV When nothing is spent on advertising, the average level of sales is
Rs 20,000
A I and II only
B II and III only
C II and IV only
D III and IV only
(LO 7.1.4) (2 marks)

15. The regression equation Y = 3 + 2X has been calculated from 6 pairs of

values, with X ranging from 1 to 10. The correlation coefficient is 0.8. It is
estimated that Y = 43 when X = 20. Which of the following are true?
I The estimate is not reliable because X is outside the range of the data.
II The estimate is not reliable because the correlation is low.
III The estimate is reliable.
IV The estimate is not reliable because the sample is small.
A I and II only
B I and III only
C II and IV only
D I and IV only
(LO 7.1.7) (2 marks)

64 CA Sri Lanka
 Questions

16. The regression equation linking sales revenue (Y) with advertising
expenditure (X) has been found to be Y = 30 + 5X. Which of the following are
correct?
I When nothing is spent on advertising, sales revenue will increase on
average by Rs 6.
II When advertising expenditure increases by Rs 1, sales revenue
increases on average by Rs 5.
III When nothing is spent on advertising, sales revenue will on average be
Rs 5.
IV When nothing is spent on advertising, sales revenue will be Rs 30 on
average.
A I and II
B II and III
C I and IV
D II and IV
(LO 7.1.4) (2 marks)

17. Monthly sales of overcoats (Y in Rs'000s) are found to relate to the average
monthly daytime temperature (X in degrees C) by the equation Y = 54 – 3X.
Which of the following statements are true?
I Sales are zero when the temperature is 18C.
II Sales are positive when the temperature is below 54C.
III Sales are negative when the temperature is greater than 18C.
IV Sales are Rs 54,000 when the temperature is 0C.
A I and II only
B I and III only
C I and IV only
D I, II and III only
(LO 7.1.4) (2 marks)

18. If X = 100, Y = 400, X2 = 2,040, Y2 = 32,278, XY = 8,104 and n = 5 the
correlation coefficient (to two decimal places) is:

(LO 7.1.5) (2 marks)

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BL2: Business mathematics and statistics

19. If X = 100, Y = 400, X2 = 2,040, Y2 = 32,278, XY = 8,104 and n = 5
which of the following values for a and b are correct in the formula Y = a +
bX?
a b
A 28 –2.6
B 28 +2.6
C –28 –2.6
D –28 +2.6
(LO 7.1.4) (2 marks)

20. The coefficient of determination (R2) explains the percentage variation in the
independent variable which is explained by the dependent variable.

True

False
(LO 7.1.10) (2 marks)

21. In a forecasting model based on Y = a + bX, the intercept is Rs 248. If the

value of Y is Rs 523 and X is 25, then the value of the slope, to two decimal
places, is
(LO 7.1.4) (2 marks)

The following information is to be used for the next two questions.

A scatter diagram shows the weekly total costs of production (Rs) in a certain
factory plotted against the weekly outputs (units). A broadly linear pattern is
evident, with r = 0.9. The regression equation is
Costs = 1,500 + (15  output)
Fifty data points have been included in the analysis, with output ranging from 100
units to 1,000 units. Output next week is planned to be 500 units.
22. Which of the following statements about estimates is/are true, all other
things being equal? (Tick as appropriate).
Weekly fixed costs are approximately Rs 1,500.
Variable costs are approximately Rs 15 per unit on average.
Next week's production costs are likely to be about Rs 9,000.
(LO 7.1.4) (2 marks)

66 CA Sri Lanka
 Questions

23. Which one of the following is justified?

Read the following statements:
(i) There is very little correlation between weekly costs of production and
production level.
(ii) 90% of the variation in weekly costs is attributable to the amount
produced.
(iii) Given the information, any forecast using the regression equation is
likely to be very unreliable.
A (ii) only
B (i) and (iii) only
C (ii) and (iii) only
D None of them
(LO 7.1.9) (2 marks)

24. Which of the following could have a value of –2 (minus 2)?

A Correlation coefficient
B Slope of a regression line
C Variance
(LO 7.1.9) (2 marks)

25. The regression equation linking x and y is y = 4x – 15. Which of the following
is correct? (Tick as appropriate).

The slope of the equation if plotted on a graph is –15

The line cuts the y-axis at 3.75 if plotted on a graph

The slope of the equation if plotted on a graph is 4

The line cuts the y-axis at –15 if plotted on a graph

(LO 7.1.9) (2 marks)

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BL2: Business mathematics and statistics

26. For a set of six data pairs for the variable x (profit) and y (sales) the
following values have been found.
x = 2
y = 15
x2 = 30
y2 = 130
xy = 14
The correlation coefficient is to two decimal places.
(LO 7.1.5) (2 marks)

27. What is the equation of the least-squares regression line of y on x for the
following four data pairs?
x y
1 4
2 6
3 10
4 10
10 30
y=
(LO 7.1.4) (2 marks)

28. If the coefficient of determination is high, this proves that variations in one
variable cause variations in the other.

True

False
(LO 7.1.10) (2 marks)

68 CA Sri Lanka
 Questions

29. What is the equation of the least-squares regression line of y on x for the
following five data pairs?
y x
9 2
10 3
9 1
8 1
9 2

y=
State each value to two decimal places.
(LO 7.1.4) (2 marks)

30. A company's weekly costs (Rs) were plotted against production level (P) for
the last 50 weeks and a regression line calculated to be C = 200 + 30P. Which
statement about the breakdown of weekly costs is true?
A Fixed costs are Rs 200. Variable costs per unit are Rs 30.
B Fixed costs are Rs 30. Variable costs per unit are Rs 200.
C Fixed costs are Rs 30. Variable costs per unit are Rs 6.67.
D Fixed costs are Rs 200. Variable costs per unit are Rs 6.67.
(LO 7.1.4) (2 marks)

31. The correlation coefficient between two variables, x and y, is +0.68. The
proportion of variation in x that is explained by variation in y is
(to four decimal places)
(LO 7.1.6) (2 marks)

32. If Y = a + bX, it is best to use the regression of Y upon X where X is the

dependent variable and Y is the independent variable.

True

False
(LO 7.1.1) (2 marks)

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BL2: Business mathematics and statistics

33. The coefficient of determination, r2, must always fall within the range:

Lowest value =

Highest value =
(LO 7.1.10) (2 marks)

34. An ice-cream supplier has recorded some sales data which he believes show
a relationship between temperature and sales. The results shown below are
for ten sample days in the summer.
Temperature
in degrees Celsius Cartons sold
x y
13 10
16 11
17 14
19 15
20 16
21 19
23 24
26 25
27 26
28 27
Intermediate totals are as follows.
x = 210
y = 187
x2 = 4,634
y2 = 3,865
xy = 4,208
The correlation coefficient of temperature and sales is (to two
decimal places).
(LO 7.1.5) (2 marks)

70 CA Sri Lanka
 Questions

The following information relates to the next two questions.

A company has a fleet of vehicles and is trying to predict the annual
maintenance costs per vehicle. The following data have been supplied for a
sample of vehicles.
Vehicle number Age in years Maintenance cost per annum Rs  10
(x) (y)
1 2 60
2 8 132
3 6 100
4 8 120
5 10 150
6 4 84
7 4 90
8 2 68
9 6 104
10 10 140
35. Using linear regression analysis, calculate the values of a and b in the
equation:
y = a + bx
b= (to two decimal places)
a= (to two decimal places)

(LO 7.1.4) (2 marks)

36. The equation to use for predicting the likely maintenance cost per vehicle
per annum is
where

y=

x=
(LO 7.1.7) (2 marks)

37. If the correlation coefficient for two variables is –0.8, the coefficient of
determination for the same two variables is:

(LO 7.1.10) (2 marks)

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BL2: Business mathematics and statistics

38. The value of b in the regression equation:

A Cannot be negative
B Equals one when there is perfect correlation
C Measures the scatter of points around the regression line
D Measures the increase in the y variable for unit increase in x
(LO 7.1.4) (2 marks)

39. The value of a in the regression equation:

A Cannot be negative
B Measures the value of the independent variable
C Is the value of the dependant variable when the value of the
independent variable is zero
D Must be positive
(LO 7.1.5) (2 marks)

40. A correlation coefficient with a value of 0.9:

A Indicates that x causes y
B Indicates that y causes x
C Indicates that the relationship between x and y is too strong to have
been caused by chance
D Shows that x and y have something in common
(LO 7.1.6) (2 marks)

72 CA Sri Lanka
 Questions

12 Time series forecasting

1. A company is building a model in order to forecast total costs based on the
level of output. The following data is available for last year.

Month Output Costs

'000 Rs'000
units
(X) (Y)
January 16 170
February 20 240
March 23 260
April 25 300
May 25 280
June 19 230
July 16 200
August 12 160
September 19 240
October 25 290
November 28 350
December 12 200
Plot a scatterplot of costs on output using the axes provided below.
(LO 7.1.2) (2 marks)

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BL2: Business mathematics and statistics

2. Based on the last seven periods, the underlying trend of sales is y = 690.24 –
2.75x. If the eigth period has a seasonal factor of –25.25, assuming an
additive forecasting model, then the forecast for that period, in whole units is:

A 643
B 646
C 668
D 671
(LO 7.2.7) (2 marks)

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 Questions

3. Which of the following are necessary if forecasts obtained from a time series
analysis are to be reliable?
I There must be no seasonal variation
II The trend must be increasing
III The model used must fit the past data
IV There must be no unforeseen events
A I and III only
B I and IV only
C II and III only
D III and IV only
(LO 7.2.7) (2 marks)

4. The results of an additive time series model analysing production are shown
below.
Weekly
production
'000 units
Week 1 –4
Week 2 +5
Week 3 +9
Week 4 –6
Which of the following statements is/are true in relation to the data shown
in the table above?
I Production is on average 9,000 units above the trend in week 3.
II Production is on average 4% below the trend in week 1.
III Production is on average 5% above the trend in week 2.
IV Production in week 4 is typically 6% below the trend.
A I only
B I and II only
C I and III only
D II and IV only
(LO 7.2.7) (2 marks)

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BL2: Business mathematics and statistics

5. A time series was analysed using a multiplicative model. The seasonal

variations given by actual value  trend, are adjusted so that they total 4.
Quarter
1 2 3 4
Unadjusted average 1.09 0.93 1.17 0.78
The correct adjusted average is:
A Quarter 1 adjusted average = 1.0975
B Quarter 2 adjusted average = 0.96
C Quarter 3 adjusted average = 1.1400
D Quarter 4 adjusted average = 0.7725
(LO 7.2.6) (2 marks)

6. In a time series analysis, the multiplicative model is used to forecast sales

and the following seasonal variations apply.
Quarter 1 2 3 4
Seasonal variation 0.45 1.22 1.31 ?
The seasonal variation for quarter 4 is:
A 0.02
B 1.02
C 1.98
D 2.98
(LO 7.2.6) (2 marks)

7. In 20X8, seasonal variations and trend values in quarters 1-4 are as follows.
Quarter Seasonal variation Trend
1 0.6 4,500
2 0.4 4,800
3 1.2 5,200
4 1.0 5,300
Match the sales values forecast with the correct quarters shown below
assuming the multiplicative model.
Quarter Sales forecast 20X9
1 6,591
2 7,489
3 2,364
4 3,358
(LO 7.2.7) (2 marks)

76 CA Sri Lanka
 Questions

8. The regression equation of a linear trend is given by T = 52 + 6.3t where time

t = 1 in the first quarter of 2006. What is the trend for the third quarter of
2010 (giving your answer to three significant figures)?

(LO 7.2.7) (2 marks)

9. A time series for weeks 1 to 12 has been analysed into a trend and seasonal
variations, using the additive model. The trend value is 84 + 0.7w, where w
is the week number. The actual value for week 9 is 88.7. What is the
seasonal variation for week 9?
A –1.6
B –0.9
C +0.9
D +1.6
(LO 7.2.6) (2 marks)

10. A time series analysis has been performed on data for weeks 1 to 20. The
trend line is given by 3,150 + 72X, where X is the week number. The average
seasonal variation (using the additive model) for weeks whose numbers are
divisible by 4 (i.e. weeks 4,8,12 etc) is – 47. The actual figure for week 12
was 4,000. What was the residual for that week?
A –61
B –14
C +19
D +33
(LO 7.2.6) (2 marks)

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BL2: Business mathematics and statistics

The following information is relevant for the next four questions.

The accountant at Hopwood Trends Co has carried out a time series analysis of
quarterly sales, calculating the moving average trend and average seasonal
variations using the additive method. She has only partially completed this
analysis. The calculations carried out so far are shown in the following table.
Moving Moving
total of average of
4 quarters' 4 quarters' Seasonal
Year Quarter Sales sales sales Trend variation
20X2 1 200
2 110
870 217.5
3 320 219 +101
884 221.0
4 240 222 +18
892 223.0
20X3 1 214 225 –11
906 226.5
2 118 229 –111
926 231.5
3 334 232 +102
932 233.0
4 260 234 +26
938 234.5
20X4 1 220 235 –15
A C
2 124 E F
B D
3 340
4 278
11. Complete the table by finding the missing values indicated by the letters. All
answers should be correct to the nearest whole number except for C and D
which should be correct to one decimal place.

A=
B=
C=
D=
E=
F=
(LO 7.2.7) (2 marks)

78 CA Sri Lanka
 Questions

12. Complete the following table to calculate the seasonal components. Find the
values represented by letters, giving your answers to one decimal place
throughout.
Quarter
Year 1 2 3 4 Total
20X2 .. ..
20X3 .. .. .. ..
20X4 .. ..
Average seasonal variation .. .. .. .. G
Adjustment H .. .. .. ..
Adjusted seasonal variation I J K L

G =
H =
I =
J =
K =
L =
(LO 7.2.7) (2 marks)
13. Seasonally adjust the sales for the fourth quarter of 20X4.

(LO 7.2.7) (2 marks)

14. If the predicted trend for the first quarter in 20X5 is 245, forecast the actual
sales.

(LO 7.2.7) (2 marks)

15. In a time series analysis, the trend equation for a particular product is given by
Trend = 0.0004*YEAR2 + 0.2*YEAR + 80.2
Due to the cyclical factor, the forecast for 2006 is estimated at 1.87 times
trend.
In whole units, the forecast for 2006 is:
A 3,877
B 3,878
C 3,900
D 3,910
(LO 7.2.7) (2 marks)

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BL2: Business mathematics and statistics

16. Over an 18-month period, sales have been found to have an underlying
linear trend of y = 7.112 + 3.949x, where y is the number of items sold and x
represents the month. Monthly deviations from trend have been calculated
and month 19 is expected to be 1.12 times the trend value.
The forecast number of items to be sold in month 19 is approximately:
A 91
B 92
C 93
D 94
(LO 7.2.8) (2 marks)

17. Based on the last 15 periods the underlying trend of sales is y = 345.12 –
1.35x. If the 16th period has a seasonal factor of –23.62, assuming an
additive forecasting model, then the forecast for that period, in whole units,
is:
A 300
B 301
C 324
D 325
(LO 7.2.7) (2 marks)

18. A company's management accountant is analysing the reject rates achieved

by 100 factory operatives working in identical conditions. Reject rates, Y%,
are found to be related to months of experience, X, by this regression
equation: Y = 20 – 0.25X. (The correlation coefficient was r = –0.9.)
Using the equation, the predicted reject rate for an operative with 12
months' experience is closest to:
A 17%
B 19%
C 20%
D 23%
(LO 7.2.7) (2 marks)

80 CA Sri Lanka
 Questions

19. A product has a constant (flat) trend in its sales and is subject to quarterly
seasonal variations as follows.

Quarter Q1 Q2 Q3 Q4
Seasonality +50% +50% –50% –50%
Sales last quarter, Q2, were 240 units.

Assuming a multiplicative model for the time series, predicted unit sales for
the next quarter, Q3, will be closest to:

A 80
B 120
C 160
D 320
(LO 7.2.7) (2 marks)

20. What is the purpose of seasonally adjusting the values in a time series?
A To obtain an instant estimate of the degree of seasonal variation
B To obtain an instant estimate of the trend
C To ensure that seasonal components total zero
D To take the first step in a time series analysis of the data
(LO 7.2.6) (2 marks)

21. The following data represents a time series:

X 36 Y 41 34 38 42
A series of three point moving averages produced from this data has given
the first two values as 38 39
What are the values of (X, Y) in the original time series?
A (38, 39)
B (38, 40)
C (40, 38)
D (39, 38)
(LO 7.2.4) (2 marks)

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BL2: Business mathematics and statistics

22. Using an additive time series model, the quarterly trend (Y) is given by Y =
65 + 7t, where t is the quarter (starting with t = 1 in the first quarter of
20X5). If the seasonal component in the fourth quarter is –30, forecast the
actual value for the fourth quarter of 20X6, to the nearest whole number.
A 63
B 546
C 85
D 91
(LO 7.2.7) (2 marks)

23. 22.10 The trend for monthly sales (Rs Y) is related to the month (t) by the
equation Y = 1,500 – 3t where t = 1 in the first month of 20X8. The forecast
sales (to the nearest whole number) for the first month of 20X9 if the
seasonal component for that month is 0.92 using a multiplicative model is:
A Rs 1,377
B Rs 17,904
C Rs 1,344
D Rs 1,462
(LO 7.2.7) (2 marks)

82 CA Sri Lanka
 Questions

The following data relates to the next two questions.

The managers of a company have observed recent demand patterns of a particular
product line in units. The original data, which have been partially analysed, are as
follows.
Year Quarter Data Sums of Sums of
fours twos
20X3 2 31

3 18
94
4 20 190
96
20X4 1 25 193
97
2 33 195
98
3 19 197
99
4 21 198
99
20X5 1 26 198
99
2 33 199
100
3 19 201
101
4 22
20X6
1 27

You have been commissioned to undertake the following analyses. Work to three
decimal places.
24. Calculate the underlying four-quarterly moving average trend.
(LO 7.2.4) (2 marks)
25. Calculate the seasonally-adjusted demand for each quarter based on the
multiplicative model if the seasonal factors are as follows.
Quarter 1 1.045
Quarter 2 1.343
Quarter 3 0.765
Quarter 4 0.847
(LO 7.2.7) (2 marks)

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BL2: Business mathematics and statistics

84 CA Sri Lanka
BL2: Business Mathematics and Statistics

86 CA Sri Lanka
 Answers

1 Percentages for business

1. Rs 45,237
42,975/0.95 = 45,237

2. Rs 23,100
27,300  110/130 = Rs 23,100

3. Rs 24,390
%
salary before increase (original) 100.0
salary increase 2.5
salary after increase (final) 102.5
102.5% = Rs 25,000 (final salary)
100% (original salary before increase) = 25,000  100/102.5 =
GHS24,390 (to nearest Rs)

4. Rs 190,000
%
Purchases – 20X0 (original) 100
Percentage decrease –5
Purchases – 20X1 (final) 95
If 100% = 200,000
 95% = 200,000  95 =190,000

5. Rs 200
Initial fee, X = 100%
Sales tax = 17.5%
Final fee = 117.5% = 235
Initial fee = 235  100/117.5 = 200

6. A
Rs
Sales (500  1.25  Rs 90  1.03) 57,938
Variable costs (500  1.25  Rs19  1.03) 12,231
Fixed costs 23,000  1.03 23,690
Profit 22,017
The increase in profit is Rs 22,017 – Rs 12,500 = Rs 9,517
As a percentage 9,517/12,500 = 76%

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BL2: Business Mathematics and Statistics

7 A Price = Rs 4 for 2 kgs

Price per kg = Rs 2
Original price per kg = Rs 2.60
Absolute reduction per kg = (2.60 – 2.00) = 0.60
Percentage reduction per kg = 0.60/2.60  100% = 23%
Option B is incorrect since the percentage reduction has been
calculated by comparing the change in price (Rs 2) with the final price
(Rs 2) ie, (2.6 – 2)/2  100% = 30% which is not correct.
Options C and D are incorrect because they do not account for the new
price of Rs 2 per kg but interpreted the new price as Rs 4 per kg (and
not per 2 kg).

8 C 22kg costs Rs 7.00

 1kg costs Rs 7.00/22 = Rs 0.3182
0.39  0.3182
 Percentage saving =  100% = 18.4%
0.39
Option A is incorrect since it represents the saving in pence, ie 39.0c –
31.8c = 7.2c and not a percentage saving.
Option B is also incorrect since it has been calculated using a cost per
kg of Rs 0.32 instead of Rs 0.3182, ie a percentage saving of
0.39  0.32
 100% = 17.9%.
0.39
Option D is wrong because the incorrect denominator has been used in
the calculation.
0.39  0.3182
Percentage saving   100%  22.6%
0.3182

9 C Number of defects per 10 hinges = (6  0.05) + (3  0.2) + (1  0.1) =

0.3 + 0.6 + 0.1 = 1
1 defect in 10 is equivalent to 10% (1/10  100% = 10%).

10 C 25 kg costs Rs 7.00
7.00
 1 kg costs = Rs 0.28
25
0.35  0.28
 Percentage saving =  100% = 20%
0.35

88 CA Sri Lanka
 Answers

11 B Wages will vary between (1,000  1.1) and (1,000  0.9) = 1,100 and
900
Materials will vary between (2,000  1.2) and (2,000  0.8) = 2,400 and
1,600
Revenue will vary between (4,000  1.1) and (4,000  0.9) = 4,400 and
3,600
Minimum profit = minimum revenue – maximum wages – maximum
materials = (3,600 – 1,100 – 2,400) = 100
Maximum profit = maximum revenue – minimum wages – minimum
materials = (4,400 – 900 – 1,600) = 1,900
 Profit will be between Rs 100 and Rs 1,900.
You should have been able to eliminate options C and D immediately
since the answers are not absolute values.
Option A is incorrect because it assumes that profit will be based on the
maximum costs and the maximum revenue, ie costs of 3,500
((1,000 + 10%) + (2,000 + 20%)) and revenue of 4,400 (4,000 + 10%).

12 If Mr Lal receives Rs x
91,000 = 2x + x + 0.5x
91,000 = 3.5x
x = 26,000
Mr Brown receives half as much as Mr Lal = 26,000/2 = Rs 13,000

13 C 50%
If 32  (1 – r)4 = 2
2
(1 – r)4 =
32
2
1–r = 4
32
2
r = 1– 4
32
r = 1 – 0.5
r = 0.5 or 50%

14 Rs 10.8m
WORKINGS
N's share = Rs 6m = five parts
Therefore one part is worth Rs 6mn  5 = Rs 1.20mn
Total of nine parts shared out originally
Therefore total was 9  Rs 1.20mn = Rs 10.80mn

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15 Rs 13.50mn
WORKINGS
N's share = Rs 6 = 4 parts
Therefore one part is worth Rs 6  4 = Rs 1.50mn
Therefore original total was 9  Rs 1.50mn = Rs 13.50mn

16 Rs 5,682
WORKINGS
5,000  100/88 = Rs 5,682

17 Rs 725
WORKINGS
Trade discount 10%  Rs 5,000 = 500
Prompt payment 5%  (Rs 5,000 – Rs 500) = 225
Total discount Rs 725

18 B Wages will vary between (Rs 1,000  1.1) and (Rs 1,000  0.9) =
Rs 1,100 and Rs 900
Materials will vary between (Rs 2,000  1.2) and (Rs 2,000  0.8) =
Rs 2,400 and Rs 1,600
Revenue will vary between (Rs 4,000  1.1) and (Rs 4,000  0.9) =
Rs 4,400 and Rs 3,600
Minimum profit = minimum revenue – maximum wages – maximum
materials
= Rs (3,600 – 1,100 – 2,400) = Rs 100
Maximum profit = maximum revenue – minimum wages – minimum
materials
= Rs (4,400 – 900 – 1,600) = Rs 1,900
 Profit will be between Rs 100 and Rs 1,900.
You should have been able to eliminate options C and D immediately
since the answers are not absolute values.
Option A is incorrect because it assumes that profit will be based on the
maximum costs and the maximum revenue, ie costs of Rs 3,500
((Rs 1,000 + 10%) + (Rs 2,000 + 20%)) and revenue of Rs 4,400
(Rs 4,000 + 10%).

90 CA Sri Lanka
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2 Compounding and Discounting

1. C Bank account paying 1.17% per month compounded monthly
After five years, there will have been 60 interest payments
Fund = 5,000  (1.0117)60 = Rs 10,048

2. B 1.17% a month compounded monthly

1 + EAR = (1.0117)12
EAR = 14.98%

3. Rs 3,857
The loan instalments are paid at each year-end with a payment of RS x
The present value of the payments = Rs 15,000
Then 15,000 = x (0.917 + 0.842 + 0.772 + 0.708 + 0.650)
15,000
x  Rs 3,857
3.889

4. A The present value of Rs 15,000 = 0.784  15,000 = 11,760

This is less than the cash alternative now of Rs 12,000 therefore he
should choose to take the cash now.

5. C On a simple interest basis the interest is Rs 5,000  0.01  24 months =

Rs 1,200

6. Rs 1,349
If the interest was on a compound basis then the future value would be
5,000  (1.01)24 = Rs 6,349
The interest is therefore Rs 6349 – Rs 5,000 = Rs 1,349

7. B The terminal value = 10,000  (1.07)2  (1.08)2  (1.09) = 14,556

The total interest is 14,556 – 10,000 = Rs 4,556

8. D The five year yield is therefore 4,556/10,000 = 45.56%

The average annual yield is therefore
1 + EAR = (1.4556)1/5
EAR = 7.8%

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9. Rs 382
The terminal value is Rs 14,556 so the surplus funds will be Rs 556
The present value of this will be
Rs 556  1/(1.07)2  1/(1.08)2  1/(1.09) = Rs 382

10. Rs 31,385
This is a geometric progression with
A=A
R = 1.12
n=4
The value of the sinking fund at the end of year 4 is Rs 150,000 (given
in the question) therefore

150,000 

A 1.124  1 
1.12  1
150,000 = 4.779328A
150,000
A
4.779328
A = 31,385
Therefore, four investments, each of Rs 31,385 should be made.

11. Rs 96,000 simple

Rs 107,450.8 compound
6
60,000 + (10   60,000) = 96,000 simple
100
60,000  (1.06) 10 = 107,450.86 compound
= 107,450.8

12. D A depreciation rate of 20% equates to a negative rate of interest of

20% where r = 0.2.

13. True
Effective annual rate = APR = CAR

92 CA Sri Lanka
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14. Option 2
APR of option 1 = (1+ 0.011)4 –1
= 0.0447
= 4.47%
APR of Option 2 = (1 + 0.032)2 – 1
= 0.065
= 6.50%
Option 2 therefore offers the best APR.

15. A S

A Rn  1 
R 1
Where
A = the first term
= Rs 250  1.2 (as investment is made now)
n = 5 years (the number of periods)

16. Rs 8,189.87

Using S 

A Rn  1 
R 1

Where
S = final value of fund = Rs 50,000
A = annual investment = ?
R = common ratio = 1.1
n = number of periods = 5

Rs 50,000 

A 1.15  1 
1.1  1

Rs 50,000  1.1  1
A 
1.15  1

= Rs 8,189.87

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17. Rs 78,735
The discount factor for an annuity from time 1 to 9 = 7.108
The discount factor for an annuity from time 1 to 2 = 1.859
Therefore the discount factor for a cash flow from time 3 to 9
(= 7 payments) = 7.108 – 1.859 = 5.249
The PV is therefore 5.249 x Rs 15,000 = Rs 78,735

18. C S = X + nrX
= 2,000 + (8  0.12  2,000)
= 2,000 + 1,920
= Rs 3,920
If you selected option A, you calculated the interest element only and
forgot to add on the original capital value.
If you selected option B, you used n = 7 instead of n = 8.
If you selected option D, you used the compound interest formula
instead of the simple interest formula.

19. B If S = X + nrX
S – X = nrX (note S – X = interest element)
1,548 – 900 = nrX
4 years =4  12 = 48 months = n
 648 = 48 r  900
648
r=
48  900

R =0.015 or 1.5%
If you selected option C, you misinterpreted 0.015 as 15% instead
of 1.5%.
If you selected option D, you calculated the annual rate of interest
instead of the monthly rate.

94 CA Sri Lanka
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20. C If a cost declines by 8% per annum on a compound basis, then at the

end of the first year it will be worth 0.92 the original value.
Now = 12,000
End of year 1 = 12,000  0.92
End of year 2 = 12,000  0.922
End of year 3 = 12,000  0.923
 At the end of year 3, Rs 12,000 will be worth
Rs 12,000  (0.92)3 = Rs 9,344
If you selected option A, you calculated the value after four years, not
three.
If you selected option B, you have assumed that the cost will decline by
8%  3 = 24% over three years therefore leaving a value of Rs 12,000 –
(Rs 12,000  24%) = Rs 12,000 – Rs 2,880 = 9,120.
If you selected option D, you calculated the value after two years, not
three.

21. 15.87%
WORKING
15% per annum (nominal rate) is 3.75% per quarter. The effective
annual rate of interest is
4
[1.0375 – 1] = 0.1587 = 15.87%

22. 26.82%
WORKING
24% per annum (nominal rate) is 2% per month. The effective annual
rate of interest is
[1.0212 – 1] = 0.2682 = 26.82%

23. Rs 2,941
WORKING
Value after three years = 8,000  1.113 = 10,941
 Interest = 10,941 – 8,000
= Rs 2,941

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24. Rs 13,881
WORKING
Value after five years = 15,000  1.145 = 28,881
 Interest = 28,881 – 15,000
= Rs 13,881

25. Rs 3,601
WORKING
Value after four years = 6,000  1.12  1.152 = 9,601
 Interest = 9,601 – 6,000
= Rs 3,601

26. 10.78%
WORKING
Rate of interest = 5.25% every six months
 Six monthly ratio = 1.0525
 Annual ratio = 1.05252
= 1.1078
Effective annual rate = 10.78% (to two decimal places)

27. 12.68%
WORKING
Rate of interest = 1% every month
 Monthly ratio = 1.01
 Annual ratio = 1.0112
= 1.1268
 Effective annual rate = 12.68% (to two decimal places)

28. 12.55%
WORKING
Rate of interest = 3% per quarter
 Quarterly ratio = 1.03
 Annual ratio = 1.034
= 1.1255
 Effective annual rate = 12.55% (to two decimal places)

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29. C Present value of the lease for years 1 – 9 = 12,000  5.328

Present value of the lease for years 0 – 9 = 12,000  (1 + 5.328)
= 12,000  6.328
= Rs 75,936
If you selected option A, you calculated the PV of the lease for years
1–9 only. If the first payment is made now, you must remember to add
1 to the 5.328.
Option B represents the PV of the lease for years 1–10 (the first
payment being made in a one year's time), ie Rs 12,000  5.650 = Rs
67,800.
Option D is incorrect because it represents the PV of the lease for years
1–10 plus an additional payment now (ie Rs 12,000  (1 + 5.650) = Rs
79,800.

30. C 3,000 = 120% of the original investment

100
 Original investment =  Rs 3,000
120
= 2,500
 Interest = Rs 3,000 – Rs 2,500
= Rs 500
Make sure that you always tackle this type of question by establishing
what the original investment was first.
If you selected option D, you simply calculated 20% of Rs 3,000 which
is incorrect.

31. A If house prices rise at 3% per calendar month, this is equivalent to

(1.03)12 = 1.426 or 42.6% per annum
If you selected option B, you forgot to take the effect of compounding
into account, ie 3%  12 = 36%.
If you selected option C, you incorrectly translated 1.426 into 14.26%
instead of 42.6% per annum.
If you selected option D, you forget to raise 1.03 to the power of 12,
instead you multiplied it by 12.

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32. Rs 30.19
Current rate is 3% pa payable monthly.
 Effective rate is 3/12% = 1/4% compound every month
 In the six months from July to December, interest earned
= (Rs 2,000  (1.0025)6) – Rs 2,000
= Rs 30.19

33. Rs 11,269
There are 12 quarters in a three-year period, so n = 12
Future value = Rs 10,000  (1.01)12 = Rs 11,269

34. Rs 300,885
If costs fall by 8% per annum on a compound basis then at the end of
the year they will be worth 0.92 of the value at the start of the year.
Therefore, at the end of four years, costs will have fallen to Rs 420,000
 (0.92)4 = Rs 300,885.

35. 12.55%
Nominal interest rate = 12% pa
12%
= = 3% compound payable four times per year
4
APR = [(1 + r)12/n – 1]
= (1 + 0.03)4 – 1
= 12.55% pa
If you selected one of the other options you used the APR formula
incorrectly – make sure you go back and revise this topic.

36. Rs 510,513
Rs 400,000  (1.05)5 = Rs 510,513

37. Present value of final fund = Rs 56,700 to the nearest Rs

Present value of annuity = Rs 41,220 to the nearest Rs
Payment required at time 15 = Rs 49,143 to the nearest Rs
From PV tables, at 8% and at time 15, discount factor = 0.315.
 PV of final fund = Rs 180,000  0.315 = Rs 56,700
PV of annuity
Annuity =
Annuity factor

Annuity = Rs 5,000

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Annuity factor = 8.244 (14 years)

 PV of annuity = Annuity  CDF
= Rs 5,000  8.244 = Rs 41,220
PV of final payment = PV final amount – PV annuity
= Rs 56,700 – Rs 41,220 = Rs 15,480
However, we need to know the value of Rs 15,480 at time 15 (from
tables, discount factor = 0.315)
 Payment required at time 15 = 15,480/0.315 = Rs 49,143

38. Rs 10,100
Using the formula S = X(1 + r)n
where X = Rs 8,000
r = 0.06
n=4
S = Rs 8,000  (1 + 0.06)4
= Rs 10,099.82
= Rs 10,100

39. Rs 43,132.42
Using the formula S = X(1 + r)n
where S = Rs 84,848
n = 10
r = 7% = 0.07
Rs 84,848 = X(1 + 0.07)10
$84,848
X=
1.0710
X = Rs 43,132.42 (to two decimal places)

40. 23.16%
Using the formula S = X(1 + r)n
where S = Rs 54,600
n = 15
X = Rs 2,400
Rs 54,600 = Rs 2,400  (1 + r)15
54,600/2,400 = (1 + r)15

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54,600
15 1r
2,400

1.2316 = 1 + r
r = 1.2316 – 1
= 0.2316
= 23.16%
The annual rate of interest is 23.16% to two decimal places.

41. Rs 1,084
Using the compound interest formula, V = X(1 + r)n, we have
V = Rs 2,728.90, r = 0.08, n = 12
2,728.90 = X(1 + 0.08)12
2,728.90
 = X = Rs 1,083.68
1  0.0812
 The original principal to the nearest Rs = Rs 1,084

42. 267.65
Rs 200  (1.06)5 = Rs 267.65

43. 2.05%
(1 + r)12 = 1.276
1+r= 12
1.276
1 + r = 1.0205
r = 2.05%

44. A Future value of annuity = A 

R n

1

R  1
where A = Rs 100
n=6
R = 1 + 0.04 = 1.04

Future value of annuity = Rs 100 

1.04  1 6

1.04  1
= Rs 100  6.63
= Rs 663
If you selected option B, you used the correct formula but used n = 5
instead of n = 6.

100 CA Sri Lanka

 Answers

If you selected option C, you seem to have confused the interest rate
and the number of time periods in the formula.
If you selected option D, you have calculated the future value of the
annuity, Rs 663 and then discounted it using the present value tables,
ie Rs 633  0.822 = Rs 545. This is obviously incorrect as the question
asked for the future value of the annuity.

45. C 1 + AER = 1.04 = (1 + 3-month ratio)4

1 + 3 month ratio = 4 1.04 = 1.00985
The percentage rise in prices is therefore (1.00985 – 1) × 100% =
0.985%

46. 12.99%
(1 + R) = (1+ r)n
Option 1: r = 0.031, n = 4
1 + R = 1.0314
1 + R = 1.1299
R = 12.99%
Option 2: r = 0.047, n = 2
1 + R = 1.0472
1 + R = 1.0962
R = 9.62%

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3 Dealing with annuities and perpetuities

1. 9.954X
The bank pays out the loan now so the present value of the loan is
Rs 40,000.
The annuity is the amount that needs to be paid at the end of each
quarter.
The annuity factor can be found in the cumulative present value tables;
the cost of finance is 3%, and the number of time periods we are
concerned with is found as follows.
Now End of year 1 End of year 2 End of year 3

0 1 2 3 4 1 2 3 4 1 2 3 4
Quarter
Number of time periods = 12 quarters
Annuity factor = 9.954
Present value of repayments = 9.954X

2. Rs 4,018
Rs 40,000 = 9.954X
X = Rs 4018

3. Rs 44,994.56
In three years' time, the amount of money required to modernise the
premises will be:
40,000  (1.04)3 = 44,994.56

4. 10.787Y
The instalments consist of a payment Y now plus an annuity of
11 payments at 2% per time period. The annuity factor at 2% for
11 periods is 9.787 and hence the present value is Y + 9.787Y =
10.787Y.

5. Rs 3,290
The present value of Rs 44,994.56 at time 12 discounted at 2% =
Rs 44,994.56  0.788.
 10.787Y = 44,994.56  0.788
Y = 35,456/10.787
= Rs 3,290 (to the nearest Rs 10)

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6. Save and modernise later

7. B Present value = Annuity (DF year 7– DF year 1)

83,025 = Annuity (5.786 – 0.952)
Annuity = 83,025/4.834 = Rs 17,175
If you chose option A you have used the discount factors for years 8
and 2 instead of years 7 and 1.
Remember that the cumulative present value table shows the present
value at the end of each year.

1
8. D PV 
r
15,000
PV 
0.09
= Rs 166,666.67
= Rs 167,000

9. D From present value tables, the relevant discount factor for four years at
4% is 0.855.
 Present value of Rs 500,000 = Rs 500,000  0.855
= Rs 427,500
From cumulative present value tables, the relevant annuity factor is
2.775 for years 1-3 at 4%. Since investments are taking place at the
beginning of the years, we take account of time 0 by adding 1 to the
annuity factor (1 + 2.775 = 3.775).
Present value
Annuity =
CDF
427,500
=
3.775
= Rs 113,245
= Rs 113,000 (to the nearest Rs'000)
If you selected option A, you forgot to allow for the 4% growth per year
and have simply divided Rs 500,000 by 4.
If you selected option B, you forgot to take account of the fact that the
payments take place at the beginning of each year and not at the end.
If you selected option C, you forgot to take the first payment (at time 0)
into account and only accounted for payments at the beginning of
years 1-3.

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10. B Present value = Annuity (DF year 6 – DF year 1)

52,765 = Annuity (4.767 – 0.935)
Annuity = 52,765/3.832
= Rs 13,770
If you chose option A you have used the discount factors for years 7
and 2 instead of years 6 and 1. Remember that the cumulative present
value table shows the present value at the end of each year.

11. Rs 62,920
Present value = Annuity (DF year 19 – DF year 4)
= Rs 10,000 (9.604 – 3.312)
= Rs 62,920

12. A From PV tables, at 8% and at time 15, discount factor = 0.315.

 PV of final fund = Rs 55,000  0.315
= Rs 17,325
PV of annuity
Annuity =
Annuity factor

Annuity = Rs 2,000
Annuity factor = 8.244 (14 years)
 PV of annuity = Annuity  CDF
= Rs 2,000  8.244
= Rs 16,488
PV of final payment = PV final amount – PV of annuity
= Rs 17,325 – Rs 16,488
= Rs 837
However, we need to know the value of Rs 837 at time 15 (from tables,
discount factor = 0.315).
 Payment required at time 15 = 837/0.315
= Rs 2,660 (to 3 significant figures)
If you selected option B, you have failed to account for the growth of
the fund at 8%, ie Rs 55,000 – (14  Rs 2,000) = Rs 27,000.
If you selected option C, you have forgotten to convert the present
value of the final payment (Rs 837) into the value of the actual
payment that will be required at time 15.

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 Answers

If you selected option D, you have assumed that Rs 2,000 will be paid
for 15 years (it should be 14 years) so you have carried out the correct
method but used an incorrect annuity factor of 8.559 instead of 8.244.

13. B The present value of an annuity from time 3-10 = present value of
annuity from time 1-10 minus the present value of annuity from
time 1-2.
 PV annuity = Rs 3,000  (7.360 – 1.833)
= Rs 3,000  5.527
= Rs 16,581
If you selected option A, you forgot to subtract the present value of
years 1-2.
If you chose option C, you used the PV tables instead of the cumulative
PV tables and subtracted the PV at time 10 from time 2.
If you selected option D, you have used the correct method but you
have subtracted the PV of time1-3 instead of the PV of time 1-2.

14. C The payments made on a credit card are an annuity of Rs x per month.
From cumulative present value tables (3%, 12 periods) the annuity
factor is 9.954.
PV of annuity
If Annuity =
Annuity factor
Annuity = 10,500/9.954
= Rs 1,055
If you selected option A, you have simply divided Rs 10,500 by 12
without any reference to discounting.
If you selected option B, you have misread the cumulative present
value tables (and used the annuity factor for 12% and 3 periods
instead of 12 periods and 3%).
If you selected option D, you have calculated the present value of Rs
10,500 in 12 time periods at a discount rate of 3% instead of finding
the monthly annuity whose present value over 12 months at 3% gives
Rs 10,500.

15. Rs 250,000
1
The perpetuity formula is PV =
r
1
Amount to invest now = Rs 15,000  = Rs 250,000
0.06

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16. 7%
Present value of an annuity = PV
Annuity = a
Using the formula a = PV/CDF
1,494.87 = 10,500/CDF
 Annuity factor = 7.024
An annuity factor of 7.024 corresponds to a period of 10 years at an
interest rate of 7% (from cumulative present value tables).

17. Rs 5,000
 1 
PV = annuity   1  
 1  r n 
 1  1 
33,550 = Rs X   1  
 0.08 
 1  0.08  
10  

33,550
Rs X =
6.71
Rs X = Rs 5,000

18. 9%
Annuity = PV/CDF
86,400
Annuity factor = = 4.486
19,260
From tables, this annuity factor corresponds to an interest rate of 9%
over six years.

19. 5.206
Don't get caught out by the irrelevant information given to you in this
question. You simply need to look up 8% over 7 periods in the
cumulative present value tables which is 5.206.

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20. Rs 480,000
The present value of a perpetuity is:
a
PV =
r
Where a = annuity = Rs 24,000
r = cost of capital as a proportion = 5% = 0.05
24,000
 PV =
0.05
= Rs 480,000

21. Rs 230,769
The PV = perpetuity discount factor x perpetuity
PV = Rs 15,000  1/0.065 = Rs 230,769

22. Rs 7,855
Present value of perpetuity = Rs 35,000 to the nearest Rs
Net present value of project = Rs 9,000 to the nearest Rs
a
The present value of a perpetuity =
r
where a = Rs 4,200
r = 12% = 0.12
PV of cash inflows = 4,200/0.12 = Rs 35,000
The net present value = Rs 35,000 – the initial investment
Rs 35,000 – Rs 26,000 = Rs 9,000

23. Using cumulative present value tables:

We require the 15% factor for years 3 – 7.
Cumulative discount factor for years 1 – 7 at 15%
Less: cumulative discount factor for years 1 – 2 at 15%
Cumulative discount factor for years 3 – 7 at 15%
Annuity = = PV/CDF
PV
Rs 3,100 =
2.534
 PV = Rs 3,100  2.534
= Rs 7,855.4
= Rs 7,855

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24. D We need to find the present value of Rs 40,000 received in three years'
time. Using the discounting formula (where x = present value).
1
X=S
1+r  n

X = = 40,000/(1.09)3

25. Rs 141,045
1 1
Cumulative discount factor = –
0.065 0.065(1 + 0.065)15

= 9.403
Amount to invest = 9.403 x Rs 15,000 = Rs 141,045

26. Rs 181,000
From present value tables, the relevant discount factor for four years at
4% is 0.855. The PV of Rs 800,000 at time 4 = 800,000  0.855 =
684,000
From cumulative present value tables, the relevant annuity factor is
2.775 for years 1 – 3 at 4%. Since investments are taking place at the
beginning of the years, we take account of time 0 by adding 1 to the
annuity factor (1 + 2.775 = 3.775).
Annuity = 684,000/3.775
= Rs 181,192
= Rs 181,000 (to the nearest Rs'000)

27. False
A perpetuity is an annuity which lasts forever.

28. Rs 2,817.56
The value of the fund at the end of eight years is a geometric
progression with:
A = Rs A  1.04
R =1.04
n=8
The value of the sinking fund at the end of eight years is Rs 27,000

 Rs 27,000 =

A  1.04 1.048 – 1
1.04 – 1
A = 27,000  0.04/(1.04(1.048 -1)
=1,080/0.38331
= Rs 2,817.56

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4 Loan amortization
1. D Let A = annual repayments
These repayments, A are an annuity for 15 years at 9%.
PV of annuity
Annuity (A) =
Annuity factor
PV of loan = 60,000
Annuity factor = 8.061 (9%, 15 years from CDF tables)
60,000
 Annuity =
8.061
= Rs 7,440
If you selected option A you have confused loans with sinking funds
and have calculated the PV of the loan as if it occurred at time 15
instead of time 0.
If you selected option B you have forgotten to take account of the
interest rates (ie 9% for 15 years). You have simply divided GHS60,000
by 15.
If you selected option C, you have not taken into account the fact that
the repayments happen at the year end and that the first repayment is
in one year's time and not now.

2. B The payments made on a credit card are an annuity of x per month.

From cumulative present value tables (3%, 12 periods) the annuity
factor is 9.954.
PV of annuity
If Annuity =
Annuity factor
21,000
Annuity =
9.954
= Rs 2,110
If you selected option A, you have simply divided Rs 21,000 by 12
without any reference to discounting.
If you selected option C, you have misread the cumulative present
value tables (and used the annuity factor for 12% and 3 periods instead
of 12 periods and 3%).
If you selected option D, you have calculated the present value of
Rs 21,000 in 12 time periods at a discount rate of 3% instead of finding
the monthly annuity whose present value over 12 months at 3% gives
Rs 21,000.

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3. C Present value of the lease for years 1 – 9 = Rs 12,000  5.328

Present value of the lease for years 0 – 9 = Rs 12,000  (1 + 5.328)
= Rs 12,000  6.328
= Rs 75,936
If you selected option A, you calculated the PV of the lease for years 1-9
only. If the first payment is made now, you must remember to add 1 to
the 5.328.
Option B represents the PV of the lease for years 1-10 (the first
payment being made in a one year's time), ie Rs 12,000  5.650 =
Rs 67,800.
Option D is incorrect because it represents the PV of the lease for years
1-10 plus an additional payment now (ie Rs 12,000  (1 + 5.650) =
Rs 79,800.

4. D Let A = annual repayments

These repayments, A are an annuity for 15 years at 9%.
PV of annuity
Annuity (A) =
Annuity factor

PV of loan = Rs 40,000
Annuity factor = 6.418 (9%, 10 years from CDF tables)
 Annuity = 40,000/6.418
= Rs 6,232 (to the nearest Rs 10)

5. Rs 84,000
Year Payment Discount factor Present value
Rs 8% Rs
0 20,000 1 20,000
1 x 0.926 0.926x
2 x 0.857 0.857x
3 x 0.794 0.794x
4 x 0.735 0.735x
3.312x
The present value of the four equal payments is Rs 52,992.
52,992
Therefore, each payment = x = = Rs 16,000.
3.312
The total amount to be paid during the lease period is therefore
(Rs 20,000 + (4  Rs 16,000)) = Rs 20,000 + Rs 64,000 = Rs 84,000

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6. Rs 72,564
Repayments of Rs 8,000 = annuity for fifteen years at 7%
PV of annuity = Rs 90,000
Loan is to be closed immediately after the eighth annual repayment.
PV of annuity = PV of Rs 8,000 at 7% for eight years + amount
outstanding at time 8 at 7%.
Rs 90,000 = (Rs 8,000  5.971) + (amount outstanding  0.582)
Rs 90,000 = Rs 47,768 + (amount outstanding  0.582)
Rs 42,232 = amount outstanding  0.582
 Amount outstanding = Rs 42,232/0.582
= Rs 72,564

7. Rs 1,112.05

1  1 
Annuity factor =  1– 
1.05  1.0523 

= 13.489
Alternatively, this can be obtained from the tables
PV
Annuity =
CDF
= 180,000/13.489
= 13,344.63
Monthly repayment = 13,344.63/12
= Rs 1,112.05

8. B Let A = annual repayments

These repayments, A, are an annuity for 15 years at 9%.
Annuity (A) = Present value of loan/CDF
Present value of loan = Rs 30,000
Annuity factor = 8.061 (9%, 15 years from CDF tables)
 Annuity = Rs 30,000/8.061
= Rs 3,720 (to the nearest Rs 10)
If you selected option A, you seem to have confused loans with sinking
funds and have calculated the present value of the loan as if it occurred
at time 15 instead of time 0.

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If you selected option C, you have forgotten to take account of interest

rates (ie 9% for 15 years). You have simply divided Rs 30,000 by 15.
If you selected option D, you have not taken account of the fact that the
repayments happen at the year end and that the first repayment is in
one year's time, not now.

9. Rs 1333.58

1  1 
Annuity factor =  1– 
1.04  1.0425 

= 15.622
Alternatively, this can be obtained from the tables
Annuity = PV/CDF
= 250,000/15.622
= 16,002.99
Monthly repayment = 16,002.99/12
= Rs 1,333.58

10. Rs 16,980
Final value of loan = Rs 100,000  (1.11)10
= Rs 283,942
The final value of the loan must equal the sum of the repayments.
The sum of the repayments is a geometric progression with
X = X (annuity)
R = 1.11
n = 10

Rs 283,942 =

X 1.1110 –1 
1.11 –1

283,942 x 0.11 = X (1.1110 – 1)

X = Rs 16,980

11. A The annuity continues until the end of year 4 but includes an
immediate (T0) payment. The cumulative discount factor for 4 years at
5% is 3.546 but then 1.000 should be added in order to take the initial
payment into account.

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12. B If a = the cumulative discount factor for 10 years at the effective

interest rate, then Rs 2.5 million  a = Rs 17.56 million.
The relevant cumulative discount factor would be 7.024 (ie 17.56/2.5).
In your tables in the 10 year discount factors this is the CDF for 7%.

13. D Repayments of Rs 3,290 = annuity for fifteen years at 7%

Present value of annuity = Rs 30,000
Loan is to be closed immediately after the eighth annual repayment.
PV of annuity = PV of Rs 3,290 at 7% for eight years + amount
outstanding at time 8 at 7%
Rs 30,000 = (Rs 3,290  5.971) + (amount outstanding  0.582)
Rs 30,000 = Rs 19,645 + (amount outstanding  0.582)
RS 10,355 = Amount outstanding  0.582
 Amount outstanding = 10,355/0.582
= Rs 17,792
If you selected option A, you have found the amount outstanding at
time 9 instead of time 8.
If you selected option B, you have found the amount outstanding
immediately before the eighth payment instead of immediately after it.
If you selected option C, you have forgotten to take into account any
interest due Rs 30,000 – (8  Rs 3,290) = Rs 3,680

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5 Equations

1. A Total cost 30,151 = (100  50) + 8,250 + 11,200 + 100x

30,151 = 24,450 + 100x
100x = 30,151 – 24,450 = 5,701
5,701
X = = Rs 57.01
100
If you selected option B, then you forgot to include the 100 units at
Rs 50 each.
30,151 = 8,250 + 11,200 + 100x
30,151 = 19,450 + 100x
100x = 30,151 – 19,450
10,701
x =
100
x = 107.01
Option C is incorrect because it does not take account of the batch
costing Rs 8,250.
30,151 = (100  50) + 11,200 + 100x
30,151 = 5,000 + 11,200 + 100x
100x = 30,151 – 5,000 – 11,200
13,951
x =
100
= 139.51
Option D is incorrect because it does not take account of the batch
costing Rs 11,200.
30,151 = 5,000 + 8,250 + 100x
30,151 = 13,250 + 100x
100x = 30,151 – 13,250
100x = 16,901
16,901
x =
100
= 169.01

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2CoD
2. C Q =
Ch
2  20  24,000
400 =
Ch
Square both sides
2  20  24,000
4002 =
Ch
2  20  24,000
Ch =
400  400

Ch = Rs 6
If you selected one of the other options A, B or D then work through
the solution again remembering that if you do anything to one side of
an equation, you must make sure you do the same to the other side of
the equation as well!

3. A If profit = revenue – cost

profit = 410P – 22P2 – (3,800 – 24P)
= 410P – 22P2 – 3,800 + 24P
= 434P – 22P2 – 3,800
Option B is incorrect – you have got the sign of 3,800 wrong (it should
be negative, not positive).
Option C is incorrect – you have calculated profit as cost – revenue
(instead of revenue – cost).
Option D is incorrect since you have not changed the –24P units to
+24P when subtracting costs of 3,800 – 24P.

4. B If D = 60 – 5P
D – 60 = –5P
5P = 60 – D
60 D
P = 
5 5
P = 12 – D/5
Option A is incorrect since you have divided the 60 by 5 but not the D.
Option C is incorrect since you have forgotten to change the sign of
the D from positive to negative when you took it to the other side of
the equation. 5P = 60 – D, 5P  60 + D.
Option D is also incorrect since you have incorrectly calculated that D
= 60 – 5P is D = 55P. This would only be the case if there were
brackets as such (D = (60 – 5)P).

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5. Rs 5,025,000
Total revenue = P  Q = (1,000 – 0.001Q)  Q
TR = 1,000Q – 0.001Q2
TR = (1,000  5,000) – (0.001  5,0002)
TR = Rs 5,025,000

6. D If P = 250 – D/1.2
P – 250 = –D/1.2
D
= 250 – P
1.2
D = 1.2(250 – P)
D = 300 – 1.2P
If you incorrectly selected Option A, you have got the incorrect sign
for 1.2P (it should be negative, not positive).
Option B is wrong because you forgot to multiply –P by 1.2.
Option C is also incorrect. You have forgotten to change the signs so
that P – 250 becomes –P + 250 (or 250 – P) when changing –D/1.2 to
D/1.2.

7. A Material A 4x + 3y = 550
Material B 3x + 2y = 400

8.
X Y
100 50
4x + 3y = 550

Rearrange : x = 1/4  (550 – 3y)

3x + 2y = 400

Rearrange: x = 1/3  (400 – 2y)

Combine the above:

1/4 x (550 – 3y) = 1/3 (400 – 2y)

3 (550 – 3y) = 4 (400 – 2y)

1,650 – 9y = 1,600 – 8y

x = 50

Substitute in earlier formula

x = ¼  (550 – 3y) = ¼ x (550 – 150) = 100

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9. P = Rs 17.5
We need to express the revenue as an equation.

Total revenue = P  Q = 875

If the price falls by Rs 5 the quantity increases by 20 and so this time

TR = (P – 5)  (Q + 20) = 875

This can be expanded as follows

PQ – 5Q +20P – 100 = 875

As PQ = 875 this can be simplified as follows

875 +20P – 5Q = 975

20P – 5Q = 100

Combining with PQ = 875 ie Q = 875/P

20P – (5  875/P) = 100

20P – 4,375/P = 100

20P2 – 4,375 = 100P

20P2 – 100P – 4,375 = 0

This quadratic equation can now be solved using the formulae

− ±√ −4
=
2

100 ± 100 − (4  20  4,375)

=
2  20
P = 700/40 (negative price can be ignored)

P = Rs 17.5

10. Q = 50
As P  Q = 875

Q = 875/17.5 = 50

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11. Rs 5
This can be expressed as two equations

4,000B + 3,000A = 27,000

3,000 B + 5,000 A = 34,000

Rearranging the first equation

B = (27,000 – 3,000A)/4,000

Substitute in the first equation

[3000  (27,000 – 3,000A)/4,000 ] + 5,000A = 34,000

20,250 – 2,250A + 5,000A = 34,000

2,750 A = 13.750

A=5

12. Rs 3
Substitute into the first equation

4,000 B + (3,000  5) = 27,000

B=3

13. Rs 37
20,500 = (100  50) + (8,000) + (3,800) + (100  P)

20,500 = 5,000 + 8,000 +3,800 +100P

100P = 3,700

P = Rs 37

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6 Graphs and algebra for business

1. c = x2  2x + 20
dc/dx = 2x – 2

This is a minimum point when 2x – 2 = 0

2x = 2
x=1

2. 3(X + 4) < 2X + 1
3X + 12 < 2X + 1 (multiply out the brackets)
3X < 2X – 11 (subtract 12 from both sides)
X < – 11 (subtract 2X from both sides)

3. x2 – 4x – 437 = 0 or y2 + 4y – 437 = 0
WORKINGS
Let the two positive numbers be x and y.
x2 + y2 = 890 (1)
x – y = 4 (2)
y = x – 4 (3) (from (2)).
Substituting in (1) we get
x2 + (x – 4)2 = 890
x2 + (x2 – 8x + 16) = 890
2x2 – 8x – 874 = 0
x2 – 4x – 437 = 0
Alternatively, x = y + 4 (3)
and hence
(y + 4)2 + y2 = 890
y2 + 8y + 16 + y2 = 890
2y2 + 8y – 874 = 0
y2 + 4y – 437 = 0

4. b2 + 22b 112 = 0 or a2 + 22a 112 = 0

or
2 2
b 22b +112 = 0 or a 22a + 112 = 0

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WORKINGS
Let the length and breadth of the rectangle be a and b.
2a + 2b = 44
a+b = 22 (1)
ab = 112 (2)
From (1) we get a = 22 – b
Substituting in (2) we get
b(22 – b) = 112
–b2 + 22b – 112 = 0
By symmetry the same equation:
–a2 + 22a – 112 = 0
can be solved for 'a'.

5. 3

WORKINGS
– 3x2 + 6x + 24 = 0
This can be solved using:

b± b2  4ac
x=
2a
Where a = –3, b = 6, c = 24

6± (62  4 ×  3 × 24)

x =
2 × 3
6± 324)
=
(6)

= [ 6 ± 18]
( 6)

= –2 or +4
Ignore negative values.
So with 4 returns there is no rebate, the maximum number of returns
that would still give a rebate would therefore be 3.

6. B If x = 0, y = 0
If x = 2, y = 2  2 = 4
 The line goes through (0,0) and (2,4)
 It is line B.

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2CD
7. C Q=
Ch

2×20×24,000
400 =
Ch

Square both sides

4002 = 2× 20 × 24,000
Ch

2×20×24,000
Ch =
400×400
Ch = Rs 6
If you selected one of the other options A, B or D then work through the
solution again remembering that if you do anything to one side of an
equation, you must make sure you do the same to the other side of the
equation as well!

8. 3,464
WORKINGS

2 x 500 x 120,000
=
10

Q = 3,464

9. Rs 17,320
The average inventory held = 3,464/2 = 1,732
The cost of holding 1,732 units on average = 1,732  Rs 10 = Rs 17,320

10. 35 orders
If annual demand is 120,000 there will be 120,000/3,464 = 34.6 orders
per year.

11. Rs 17,500
The cost of each order is Rs 500 The annual order costs will therefore
be 35  Rs 500 = Rs 17,500

12. Rs 2 million
The fixed costs are Rs 2 million as this is the intercept on the vertical
axis.

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13. The gradient of the graph represents the variable costs of the business.
Be careful with the units, comparing the total costs at 0 units and 4,000
units
Change in costs = 3 million (5m – 2m)
Change in output = 4,000 (4,000 – 0)
Therefore, the variable cost = Rs 3 million/4,000 units = Rs 750

14.
Type Proportion Number Shares
3 bed apartment and garage 11 + 1 = 12 5 60
3 bed apartment, no garage 11 = 11 1 11
2 bed apartment and garage 10 + 1 = 11 1 11
2 bed apartment, no garage 10 = 10 2 20
102
Total premium of Rs 1,364.76 is divided by 102. Each share is therefore
worth Rs 13.38.
The premium per apartment is therefore Rs 13.38  proportion.
RS
3 bed apartment and garage 12  Rs 13.38 = 160.56
3 bed apartment, no garage 11  Rs 13.38 = 147.18
2 bed apartment and garage 11  Rs 13.38 = 147.18
2 bed apartment, no garage 10  Rs 13.38 = 133.80
Check
Number Total
Rs RS
160.56  5 802.80
147.18  1 147.18
147.18  1 147.18
133.80  2 267.60
1,364.76

15. Rs 150
P = 250 – 0.0001Q
TR = PQ = 250Q – 0.0001Q2
MR = 250 -0.0002Q
MC = 50
For profit max MR = MC
50 = 250 – 0.0002Q
Q = 200/0.0002 = 1,000,000
P = 250 – (0.0001  1,000,000) = 150 Rs

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16. Rs 150 million

The total revenue is therefore 150  1,000,000 = Rs 150 m
17. Rs 80 million
The profit = [1,000,000  (150 – 50)] – 20 million = Rs 80 million

18. Total revenue = pq = 600q – 0.15q2 = 450,000

–0.15q2 + 600q –450,000 = 0
q= [– 600 ± (6002 – 4  0.15 x 450,000)]/(2  –0.15)
= [– 600 ± 90,000]/(–0.3)
= [– 600 ± 300]/(–0.3)
= 1,000 or 3,000 units.

19. The general form of a quadratic equation is ax2 + bx + c = 0

We are given the following information.
Let x = size of batch.
When x = 10, cost = Rs 700 (1)
x = 20, cost = Rs 400 (2)
x = 40, cost = Rs 1,600 (3)

We can substitute these values into ax2 + bx + c = cost to determine the

values of a, b and c.

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Using (1) 100a + 10b + c = 700 (i)

Using (2) 400a + 20b + c = 400 (ii)
Using (3) 1,600a + 40b + c = 1,600 (iii)
400a + 40b + 4c = 2,800 (iv)(4  (i))
20b + 3c = 2,400 (v)((iv) – (ii))
1,600 a + 160b + = 11,200 (vi)(4  (iv))
16c
120b + 15c = 9,600 (vii)((vi) –
(iii))
120b + 18c = 14,400 (viii)(6  (v))
3c = 4,800 (viii) – (vii)
c = 1,600
120b = 14,400 – Sub into (viii)
28,800
b = –120
100a – 1,200 + = 700 Sub into (i)
1,600
100a = 300
a = 3

20. The relationship is cost = 3x2 – 120x + 1,600

Substitute different values for x (batch size) into the equation above to
determine the cost for different batch sizes.
Batch size Cost
x RS
0 1,600
10 700
15 475
20 400
25 475
30 700
40 1,600
50 3,100

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21. From the graph, the batch size which minimises total cost is 20 (the x
co-ordinate of the lowest point on the cost function curve).
22. Let x = quantity sold and y = revenue
If x = 0, y = 0
If x = 10, y = 10  30 = Rs 300
If x = 50, y = 50  30 = Rs 1,500
We can plot the revenue function on the graph using these values.
23. The product makes a profit when total revenue is greater than total
cost. Revenue is greater than cost in the shaded region on the graph.
The product therefore makes a profit if the batch size is between
approximately 15 and 35 units.
24. Profit = revenue – cost
Revenue function is y = 30x because for every increase in x (quantity
sold), revenue increases by Rs 30.

 Profit = 30x – (3x2 – 120x + 1,600)

= 30x – 3x2 + 120x – 1,600

= –3x2 + 150x – 1,600

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25. Profit (P) = total revenue – total cost, so P = TR – TC

P = –5x2 + 86x – (1/3x3 – 5x2 + 5x + 140)

P = –1/3x3 + 81x – 140

dP
dx
= –x2 + 81 = 0 at maximum or minimum output.
26.

x2 = 81
x =9
x=9
(–9 is impossible).
27. When x = 9, TR = (–5  9  9) + (86  9) = Rs 369

and TC = (1/3  9  9  9) + (–5  9  9) + (5  9) + 140 = Rs 23

P = TR – TC = Rs (369 – 23) = Rs 346
28. Let q = quantity sold
Profit = revenue – costs
= 40q – (6q + 14q + 10,000)
= 20q – 10,000
At breakeven point, profit = 0
 20q – 10,000 = 0
20q = 10,000
q = 500
29. If a profit of Rs 2,200 is made
 20q – 10,000 = 2,200
20q = 12,200
q = 610
30 D Where a function is a quadratic equation which is a dome when
graphed, ie it is a parabola with a peak, then before the peak, the line
has a positive gradient; at the peak, the gradient is zero; and after the
peak, the line has a negative gradient.

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31. 1,666,667
Total revenue = PQ = 1,000Q – 0.0003Q2
For revenue max MR = 0
MR = 1,000 – 0.0006Q
1,000 = 0.0006Q
Q = 1,666,667 units
32. Rs 833,333,500
The revenue at this quantity is calculated as
PxQ
P = 1,000 – 0.0003Q =1,000 – (0.0003  1,666,667) = Rs 500
P x Q = 500  , 1,666,667 =Rs 833,333,500
33. Rs 333,333,400
Contribution = 500 – 300 = Rs 200
1,666,667  200 = Rs 333,333,400
dy
34 C If y = 800x – 4x2 – 15,000 then = 800 – 8x
dx
so for the maximum point, we need 800 – 8x = 0.
Adding 8x to both sides gives 800 = 8x, so x = 100 units.
dc
35. B = 6x – 4
dx
This is a maximum or minimum point when 6x – 4 = 0
6x = 4
x = 1.5

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7 Descriptive statistics
1. 21 mins
The times can be arranged as follows.
11, 15, 17, 17, 17, 18, 20, 20, 21, 21, 23, 24, 24,
24, 27, 29 30, 37
There are eighteen items which is an even number, therefore the
median is the arithmetic mean of the two middle items (ie ninth and
tenth items) = 21 mins.

2. C The first thing to do is to arrange the scores in order of magnitude.

8, 9, 11, 12, 14, 15, 17, 21, 24, 34

There are ten items, and so median is the arithmetic mean of the fifth
and sixth items.
14  15 29
= = = 14.50
2 2
The correct answer is therefore C.
You could have eliminated options B and D straight away. Since there
are ten items, and they are all whole numbers, the average of the fifth
and sixth items is either going to be a whole number (14.00) or
'something and a half' (14.50).

20
3. C Height of histogram = = 30
2
3
If you selected option A, you multiplied 20 by 2/3 instead of dividing it
by 2/3.
Option B is incorrect because it represents the score in the class under
consideration.
Option D represents the score in the class (20) plus 2/3 of 20 = 20 +
13.33 = 33.33.

4. B A histogram is a chart that looks like a bar chart except that the bars
are joined together. On a histogram, frequencies are presented by the
area covered by the bars.

5. C An ogive represents a cumulative frequency distribution which shows

the cumulative number of items with a value less than or equal to, or
alternatively greater than or equal to, a certain amount. This is a 'less
than' ogive.

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6. A = 6.5
B = 12
C = 16
D =4.5
7.
Weekly average wage Number of employees Frequency density
Rs
51 and <61 13 6.5
61 and <66 12 12
66 and <71 16 16
71 and <76 21 21
76 and <81 25 25
81 and <86 20 20
86 and <91 14 14
91 and <101 9 4.5
Number of Histogram of average weekly wages
employees
120

100

80

60

40

20

0
51 61 66 71 76 81 86 91 96 101 Average weekly wage

WORKINGS
The first and last intervals have widths of Rs 10, ie twice the standard
width. Their frequencies must therefore be halved in order to calculate
the frequency density. In all other cases, the frequency density is the
same as the frequency (or number of employees).

8. E = 62
F = 87
G = 130

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9.

10. A
x fx f
Rs Rs
Rs 5.00 800 800  5.00 160
Rs 6.25 1,000 1,000  6.25 160
Rs 5.50 1,100 1,100  5.50 200
Rs 6.00 1,200 1,200  6.00 200
4,100 720
 fx 4,100
x= = = Rs 5.69
f 720

11. C In order of magnitude, scores are

16 18 22 24 28 30 34 42 48 68
10  1
Position of median is = 5 21 and therefore the median is the
2
average of the fifth and sixth items, ie of 28 and 30. The median is
therefore 29.

12. D Arithmetic mean =  x

n
x
 10 =
19
x = 10  19
= 190

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Let x = twentieth number

190 + x = 20  11
190 + x = 220
x = 220 – 190
= 30

13.
Daily sales Frequency Midpoint
f x fx
>03 8 2 16
>36 16 5 80
>69 12 8 96
> 9  12 4 11 44
40 236
The variables in the table are discrete. The arithmetic mean of the data =
 fx 236
 = 5.9 televisions per day
f 40

14. 32.67 minutes

WORKINGS
Times Midpoint Frequency
x f fx
0 – 10 5 14 70
10 – 20 15 26 390
20 – 30 25 64 1,600
30 – 40 35 46 1,610
40 – 50 45 28 1,260
50 – 60 55 16 880
60 – 80 70 8 560
80 – 100 90 4 360
206 6,730
 fx 6,730
Mean x = = = 32.67 minutes
f 206

15. A Frequency is indicated by the area covered by the block on a histogram,

rather than by the block's height. If the width of the block is one and a
half the standard width, we must divide the frequency by one and a
half, i.e. multiply by 0.67 (1/1.5 = 1/3/2 = 2/3 = 0.67).

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16. D When a distribution has unequal class intervals, the heights of the bars
have to be adjusted for the fact that the bars do not have the same
width.
Adjustment = 0.8 (100  0.8 = 80)
 The width of the non-standard bar must be 20/0.8= Rs 25
If the common class width is Rs 20, then a class with a non-standard
class width will not also be Rs 20. Option C can therefore be eliminated.
If the frequency of one bar is 80% (80/100) of the standard frequency,
we must divide the common class width by 80%, not multiply it by
80% (80%  Rs 20 = Rs 16). Option B is therefore also incorrect.

17. D The best diagram to draw to highlight the differences between areas is
a simple bar chart.
A simple bar chart is a chart consisting of one or more bars, in which
the length of each bar indicates the magnitude of the corresponding
data items. This is the best diagram to draw to highlight the differences
of typical sales in different areas.
We are not interested in showing the breakdown of the total sales,
therefore a percentage component bar chart is not really appropriate.
A multiple bar chart is a bar chart in which two or more separate bars
are used to present sub-divisions of data. The data available relating to
sales is not subdivided and this type of chart is therefore not
appropriate in this situation.

18. B Pie charts illustrate the way in which one or more totals are broken
down into their components.

19. Graph B
Since the class intervals are different, adjusted frequencies need to be
calculated. The adjusted frequencies are calculated as follows.
(Standard class width is taken as 2.)
Class Size of Frequency Adjustment Height of
interval interval bar
0-6 6 18  2/6 6
6-8 2 30  2/2 30
8-10 2 18  2/2 18
10-14 4 12  2/4 6
The histogram which represents the above bar heights correctly is
Graph B.
The other graphs are incorrect because the class intervals need to be
adjusted to take account of unequal class widths (as shown above).

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20. A An ogive is a graph of a cumulative frequency distribution.

21. C If a distribution has unequal class intervals, remember that the heights
of the bars must be adjusted for the fact that the bars do not have the
same width. Thus, if one class is two thirds the standard width, you
need to divide the frequency by 2/3, ie 25  2/3 = 37.5.
If you selected option A then you multiplied the frequency by 2/3
instead of dividing it by 2/3.
Option B represents the unadjusted frequency of the class under
consideration, which is incorrect; an adjustment needs to be made.
If you selected option D you incorrectly took 2/3 of 25 (= 16.67) and
added this to the unadjusted class frequency of 25. 25 + 16.67 = 41.67.

22. C The heights of lampposts is an example of quantitative data as they

can be measured. Since the lampposts can take on any height, the data
is said to be continuous.
You should have been able to eliminate options B and D immediately
since qualitative data are data that cannot be measured but which
reflect some quality of what is being observed.

23. Total observations = 60

Time (microseconds) %
10 and less than 20 A=10
20 and less than 30 B=20
30 and less than 35 C=15
35 and less than 40 D=20
40 and less than 45 E=15
45 and less than 55 F=15
55 and less than 65 G=5

24.
Class Midpoint Frequency
x f fx
10 - 20 15.0 6 90.0
20 - 30 25.0 12 300.0
30 - 35 32.5 9 292.5
35 - 40 37.5 12 450.0
40 - 45 42.5 9 382.5
45 - 55 50.0 9 450.0
55 - 65 60.0 3 180.0
60 2,145.0
xf
x =  = 2,145= 35.75 minutes
f 60

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25. 37.5
Median = as there are an even number, the mean is the average of the
30th and 31st term, these are both in the 35 – 40 time and so the
median is the midpoint of the group ie 37.5

26. C In order of magnitude scores are

8 9 11 12 14 15 17 21 24 34
10  1
Position of median is = 5½ and therefore the median is the
2
average of fifth and sixth items, that is of 14 and 15. The median is
therefore 14.5.
You should also have been able to eliminate option D immediately
since it does not represent an actual score, and if it were the average of
two scores, they would be 16 and 17. The scores do not include a 16
and therefore this option does not appear to be valid.

27. B
Total sales for first five months = Rs 8,200  5 = Rs 41,000
Total sales for last four months = Rs 8,500  4 = Rs 34,000
So total sales for remaining 3 months = Rs (102,000 – 41,000 – 34,000)
= Rs 27,000, giving an average of
27,000/3 = Rs 9,000

28. C The median is the middle value in order of magnitude.

9 12 23 24 28 34 43 56 78 87
In this case there are two middle values, 28 and 34, and so the median
is their average = (28 + 34)/2 = 31.
Options B and D represent the two middle values and are therefore
incorrect. The average of the two middle values must be calculated
when establishing the median of a set of scores.
Option A is incorrect since it represents the average between the
fourth and fifth items (24 and 28) which is 26.

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(10 50) (10  70) (20  X)

29. D 80 =
10  10  20
80  40 = 500 + 700 + 20X
3,200 – 1,200 = 20X
2,000 = 20X
100 = X
You would need to do a full calculation before you would be able to
select the correct option since none of the distracters are obviously
wrong. Remember in a question such as this, however, that you must
calculate a weighted average.

30. C Total of invoices = average  10 = 20  10

15 + 22 + 14 + 21 + 15 + 20 + 18 + 27 = 152
2X + 152 = 200
2X = 200 – 152 = 48
X = Rs 24
Option B is incorrect because it represents the arithmetic mean of the
values (excluding the Xs), ie 152  8 = 19. It also represents the median
of the values shown.
If you selected option D then this indicates that you only accounted for
one Rs X instead of two.
Option A (Rs 15) represents the mode and is therefore incorrect.

31. B To calculate a mean factory wage we need to determine total wages

and total number of employees.
Number
Department Mean of Total
wage employees wage
Rs Rs
W 50  20 = 1,000
X 100  5 = 500
Y 70  10 = 700
Z 80  5 = 400
40 2,600
Mean factory wage = Rs 2,600/40 = Rs 65
Option A represents the most frequently occurring wage (Rs 50) or the
mode and is therefore incorrect.
Option C represents the second most frequently occurring wage
(Rs 70) and is also incorrect.
Option D is simply the average of the mean wages (an unweighted
average), ie 50 + 100 + 70 + 80 = 300  4 = 75. This option is also
incorrect.

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8 Dispersion and measurement

1. A Properties of a positively skewed distribution.
 Its mean, mode and median all have different values
 The mode has a lower value than the median
 The mean has a higher value than the median
 It does not have two halves which are mirror images of each other

2. A Properties of a positively skewed distribution

 Its mean, mode and median all have different values
 The mode will have a lower value than the median
 Its mean will have a higher value than the median
 It does not have two halves which are mirror images of each other

3. C Negatively-skewed distribution
Properties of a negatively-skewed distribution:
 Its mean, median and mode all have different values
 The mode will be higher than the median
 The mean will have a lower value than the median (and than most of
the distribution)

Standard deviation
4. A The coefficient of variation =
Mean
The coefficients of variation are calculated as follows:
10
W:  100 = 10%
100
5
X:  100 = 12½%
40
8
Y:  100 = 10%
80
12
Z:  100 = 8%
150
The correct answer is therefore A, X only, since X has the largest
coefficient of variation.

x
5. D x =
n
2  4  6  8  10
=
5

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= 30/5
= 6
(x  x)2
Variance =
n
x 2 4 6 8 10
(x – x ) –4 –2 0 2 4
(x – x )2 16 4 0 4 16
16  4  0  4  16
Variance =
5
40
= =8
5
If you selected option A, you calculated the coefficient of variation
(standard deviation  mean = 8  6 = 1.33).
Option B is the standard deviation of the data. The question asked you
to calculate the variance.
If you selected option C, you calculated the arithmetic mean (and also
the median).

6. A
A B C D
Mean 150 175 200 250
Standard deviation 25 20 25 30
Coefficient of variation* 0.167 0.114 0.125 0.120
Standard deviation
*Coefficient of variation =
Mean
The bigger the coefficient of variation, the wider the spread. The largest
coefficient of variation is for that of data set A. The correct answer is
therefore A.
The formula for calculating the coefficient of variation is not provided
in your examination – you must therefore know it by heart so that you
can answer questions such as this easily.

Standard deviation
7. B The coefficient of variation =
Mean
The coefficients of variation are calculated as follows:
10
W:  100 = 10%
100
5 1
X:  100 = 12 %
40 2
8
Y:  100 = 10%
80

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12
Z:  100 = 8%
150
The correct answer is therefore B, since Z has the smallest coefficient of
variation.

8. C Mean of A + B + C = (120 + 100 + 80)kg = 300 kg

Variance of A + B + C = (202 + 202 + 102) = 900kg
(However, don't forget to calculate the square root of 900 in order to
calculate the standard deviation as required by the question.)

Standard deviation = variance

= 900 = 30kg
Packets of one of each of A, B and C have a mean weight of 300kg and a
standard deviation of 30kg.
If you selected option A, you forgot that the overall means should have
been added together.
If you selected option B you forgot to add the means together, and you
also forgot to take the square root of the variance in order to calculate
the standard deviation.
If you selected option D, you forgot to take the square root of the
variance in order to calculate the standard deviation.

9. D Relative dispersion
The spreads of two distributions can be compared by using the
coefficient of variation (or the coefficient of relative dispersion).

Standard deviation
10. A Coefficient of variation =
Mean
2,400
=
16,000
= 0.15

Σfx2  fX
11. C Standard deviation =  x 2 where x =
Σf f
2
175,000  2000 
=  
100  100 

= 1,750 - 202
= 1,350
= 36.7

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12.
Downtime Frequency Midpoint
Minutes F x fx fx2
0 10 0 0 0
> 0, <10 14 5 70 350
10, <20 20 15 300 4,500
20, <30 10 25 250 6,250
30, <40 8 35 280 9,800
40, <60 6 50 300 15,000
60, <120 2 90 180 16,200
70 1,380 52,100
 fX 1,380
x= = = 19.71 minutes
f 70

13. SD =  fx2 - x2
f

52,100
 (19.71)2
= 70 = 355.80 =18.86 minutes

SD 18.86
14. Coefficient of variation = = = 0.96
x 19.71

15. The frequency distribution of inventory movements per week is given

below.
Handling time Mid-
point
At least Less x f fx
than
0 10 5 240 1,200
10 20 15 340 5,100
20 40 30 150 4,500
40 60 50 120 6,000
60 90 75 20 1,500
90 120 105 20 2,100
120 180 150 10 1,500
900 21,900
36  Y  41
Mean x =
3
= 24.33 minutes

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16. Using the mid-points of the class intervals, the estimated total number
of minutes spent each week in moving items of inventory is 21,900
( fx).
21,900
In hours, this is = 365 person hours per week.
60

17. The average number of jobs handled by each employee per week is

Expectednumber of jobs 900

  75
Number of people 12

18.
Mid-point
x f fx fx2
1 3 3 3
3 8 24 72
5 21 105 525
7 37 259 1,813
9 62 558 5,022
11 38 418 4,598
13 20 260 3,380
15 8 120 1,800
17 3 51 867
200 1,798 18,080

x = 1,798
200
= 8.99, say 9

18,080
19. The standard deviation is  (8.99)2
200

= 90.4 80.8201
= 3.10
The repair times have a mean of 9 hours and a standard deviation of
3.1 hours.

140 CA Sri Lanka

 9 Probability
1. A
Large Small Total
Fast payers 20* 10** 30
Slow payers 40 30**** 70***
60 40 100
* 60 – 40 ** 30 – 20 *** 100 – 30 **** 70 – 40
P(fast paying small company) = 10/100 = 0.1

2. D
Probability of A or B occurring = P(A) + P(B), provided A and B cannot
both be true, so P(sales remaining the same or falling) = P(same) +
P(falling) = 0.21 + 0.23 = 0.44.

3. B
Number of female students = 100 – 30 = 70
100 55 45
P(not studying for Knowledge Level) = =
100 100
45 6 39
P(female and not studying for Knowledge Level) = =
70 70
= 0.56
Option A is incorrect since it is the probability that a student is female.
Option C is not correct because it represents the probability that a
student is male and is not studying for Knowledge Level (6/30 = 0.20).
Option D is incorrect because it represents the probability that a
student is not studying for the Knowledge Level.

4. D P(household has either satellite or a mobile phone)

= P(satellite) + P(phone) – P(both satellite and phone)
= 0.3 + 0.8 – (0.3  0.8)
= 0.3 + 0.8 – 0.24
= 0.86
Option A is incorrect because it is the probability that a household has
both satellite and a phone instead of satellite or a phone.
Option B is the probability that a household has just satellite television.
Option C is the probability that a household has just a mobile phone.

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5. B P(serious error or a minor error) = P(serious error) + P(minor error)

= 0.06 + 0.12
= 0.18

6. C Assume all people are exposed to the virus and that there are 1,000
employees.
Vaccinated Non-vaccinated Total
Get flu (10%  500) 50 (30%  500) 150 200
No flu (90%  500) 450 (70%  500) 350 800
500 500 1,000
Probability employee was vaccinated given that she caught influenza =
50
= 0.25
200
Option A represents the probability that an employee catches influenza
and was vaccinated (as opposed to catching influenza given that she
was vaccinated). Option A is therefore incorrect.
There is a 10% chance (probability of 0.1) that the vaccine is not
effective, ie option B, which is incorrect.

7. D The expected sales are given by

J: 10,000  0.3 + 20,000  0.5 + 30,000  0.2 = 19,000
K: 10,000  0.3 + 20,000  0.4 + 30,000  0.3 = 20,000
L: 10,000  0.2 + 20,000  0.6 + 30,000  0.2 = 20,000
The correct answer is therefore D since K and L have the highest
expected sales.

8. C The expected value for each project is as follows.

Project A (0.45  Rs 4,000) +
(0.55  (Rs 2,000) = Rs 1,800 + Rs 1,100
= Rs 2,900
Project B (0.64  Rs 8,000) +
(0.36  (Rs 1,000)) = Rs 5,120 – Rs 360
= Rs 4,760
Project B has a higher expected value of profit which means that it
could offer a better return than A, so Project B should be chosen (with
an expected profit of Rs 4,760).
Options A and B are incorrect because project A does not have the
highest expected value.
If you selected option D, you forgot to take account of the expected loss
of Rs 1,000 and treated it as a profit instead.

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9. C If A and B are mutually exclusive outcomes, then the occurrence of A

excludes the possibility of B happening. It is therefore impossible to
have both A and B occurring at the same time.

10. A The general rule of multiplication is P(A and B) = P(A)  P(B|A).

If you selected option B, you incorrectly chose the simple
multiplication law.
Option C is the general rule of addition.
Option D represents the simple addition law.

11. The whole system will operate properly if at least one of A and B
functions and at least one of C and D functions. The possibilities
meeting this condition are as follows.
Probability
A, B, C, D all work 0.94 = 0.6561

A, B, C
A, C, D work 4(0.9)3 (0.1) = 0.2916
A, B, D
B, C, D

A, C
A, D work 4(0.9)2 (0.1)2 = 0.0324

B, C
B, D
0.9801
So, the probability that the whole system operates properly is 0.9801.
Alternatively, the answer could be reached as follows. The pairs are A
and B, and C and D.
P (at least one of a pair works) = 1 – P (both in a pair fail) = 1 – (0.1 ×
0.1) = 1 – 0.01 = 0.99.

P (each pair has at least one working) = 0.992 = 0.9801

12. The inspector samples finished plates from the assembly lines X, Y and
Z in the ratio 1:2:3, and he will therefore examine the following
quantities.
1
Assembly X =  240 = 40 plates
(123)
2
Assembly Y =  240 = 80 plates
(123)
3
Assembly Z =  240 = 120 plates
(123)

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13.
Assembly line
X Y Z Total
Defective 2 8 36 46
Not 38 72 84 194
defective
40 80 120 240
From the contingency table above, we can calculate the probability that
a plate sampled is defective, as follows.
Total number of defective plates 46
= = 0.192 (to 3d.p.)
Total number of plates 240

14. The contingency table in (b) is also the easiest way to calculate
conditional probabilities. We can calculate the probability that a plate
sampled comes from Assembly Line Z given that it is defective as
follows.
36
P (plate sampled comes from Assembly Line Z/defective) = = 0.783
46
(to 3 d.p.)

15. P(wages > Rs 260) = (70)/300 = 7/30 = 23.3%

16. By simple rule of multiplication:

P(wages employee 1 > Rs 240 and wages employee 2 > Rs 240 and
wages employee 3 > Rs 240)
= P(wages employee > Rs 240)  P(wages employee 2 > Rs 240) 
P(wages employee 3 > Rs 240)
= 120/300  119/299  118/298 = 6.3%

17. By simple rule of addition:

P(wages either < Rs 180 or > Rs 320)
= P(wages < Rs 180) + P(wages > Rs 320)
= 20/300 + 10/300 = 30/300 = 1/10 = 10%

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 10 Normal Distribution
1. 0.4013 or 40.13%
100 kilograms is 5 kilograms higher than the population mean weight
of 95 kilograms. This is 5/20 = 0.25 standard deviations above the
mean.
From normal distribution tables, the probability of an item having a
value between the population mean and 0.25 standard deviations
above the mean is 0.0987.
0.5 – 0.0987 = 0.4013

2. 0.0122 or 1.22%

50 kilograms is 45 kilograms lower than the population mean weight of

95 kilograms. This is 45/20 = 2.25 standard deviations below the
mean.
From normal distribution tables, the probability of an item having a
value between the population mean and 2.25 standard deviations
below the mean is 0.4878.
0.5 – 0.4878 = 0.0122

3. 0.3721 or 37.21%.
80 kilograms is 15 kilograms lower than the population mean weight of
95 kilograms. This is 15/20 = 0.75 standard deviations below the
mean.
From normal distribution tables, the probability of an item having a
value between the population mean and 0.75 standard deviations
below the mean is 0.2734.
The probability of having a weight between 95 and 100 kilograms is
0.0987 (see answer to question 1 of this chapter.).
The probability of having a weight between 80 and 100 kilograms is
therefore 0.2734 + 0.0987 = 0.3721.

4. 0.0655 or 6.55%.

60 kilograms is 35 kilograms lower than the population mean weight of

95 kilograms. This is 35/20 = 1.75 standard deviations below the
mean.
From normal distribution tables, the probability of an item having a
value between the population mean and 1.75 standard deviations
below the mean is 0.4599.
70 kilograms is 25 kilograms lower than the population mean weight of
95 kilograms. This is 25/20 = 1.25 standard deviations below the
mean.

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From normal distribution tables, the probability of an item having a

value between the population mean and 1.25 standard deviations
below the mean is 0.3944.
The probability of having a weight between 60 and 70 kilograms is
therefore 0.4599 – 0.3944 = 0.0655

Probability of shaded
area = 0.0314%

5,200 kg 6,000 kg

5. D P(elephants weigh between 5,200 kg and 6,000 kg) = 0.5 – 0.0314

= 0.4686
From normal distribution tables, 0.4686 corresponds to a z value of
1.86.
x μ
If z =
σ
6,000  5,200
1.86 =
σ
6,000  5,200
 =
1.86
= 430 kg
The correct answer is therefore D.
6. D Make sure that you draw a sketch of the area that you are interested in
when answering an objective test question such as this. It will help to
clarify exactly what you are trying to do.

56 µ = 60

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We are interested in the shaded area of the graph above, which we can
calculate using normal distribution tables.
x μ
Z=
σ
56  60
=
3.8
= 1.05
A z value of 1.05 corresponds to a probability of 0.3531.
The shaded area has a corresponding probability of 0.5 – 0.3531 =
0.1469 or 0.15 or 15%.
Option A is incorrect because it represents the probability of getting a
score of 56 or more.
Option B represents the probability of getting a score of 60 or less, i.e.
50% (the mean represents the point below which 50% of the
population lie and above which 50% of the population lie).
If you selected option C, you forgot to deduct your answer from 0.5.
7. D 28.23% of the population lies between 900 and the mean. Therefore
0.2823 corresponds to a z value of 0.78 (from normal distribution
tables).
x μ
If z =
σ
900  μ
0.78 =
90
0.78  90 = 900 – 
70.2 = 900 – 
 = 900 – 70.2
1. = 829.8 or 830
Draw a sketch of the area we are concerned with in this question if you
had difficulty understanding the answer.

50% 30% 20%

200 z

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8. A We need to find the point z standard deviations above the mean such
that 20% of the frequencies are above it and 30% (50% – 20%) of the
frequencies lie between the point z and the mean.
From normal distribution tables, it can be seen that 30% of frequencies
lie between the mean and the point 0.84 standard deviations from the
mean.
x μ
If z =
σ
x  200 x  200
0.84 = =
1,600 40

33.6 = x – 200
x = 200 + 33.6
= 233.6 or 234 (to the nearest whole number)
If you selected option B, you incorrectly added one standard deviation
to the mean instead of 0.84 standard deviations.
If you selected option C you have added 1.28 standard deviations to the
mean instead of 0.84 standard deviations.
If you selected option D, you have found 200 + (1.96  40) which
accounts for 47.5% of the area from 200 to point z.
9. (a) 1

(b) 2 + 3

(c) 4

(d) 2 + 3 + 4 = 2 + 0.5

10. –1.75

WORKINGS

0.46 0.5

(i) a z=0

The normal distribution graph above shows the point a above which
96% of the population lies.

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Normal distribution tables show that, a z value of 1.75 corresponds to a

probability of 0.46. Since a is less than 0, its value is –1.75.

11. 34.3 hours

WORKINGS

Area we are
interested in = 0.96

(ii) 40 100

x μ
Using z = σ
Where z = 1.75
x = 40
 = 100
40  100
1.75 =
σ
40  100
=
1.75
= 34.3 hours (to one decimal place)
12. 10.6%
WORKINGS

Area we are
interested in

(iv) 57 100

x μ
Using z = σ
57  100
z = 34.3
z = 1.25

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When z = 1.25, the proportion of batteries lasting between 57 and 100

hours is 0.3944 (from normal distribution tables). The area that we are
interested in is the area to the left of 57 hours (shaded area on the
graph) = 0.5 – 0.3944 = 0.1056 = 10.6% (to one decimal place).
13. –2.05

WORKINGS

2% 0.48

b z=0

The area between b and 0 = 48% (0.48), and so from normal

distribution tables, the value of b shown in the graph above is –2.05.

2%

40 100

14. 111.8
We want 2% of batteries to last for less than 40 hours. From normal
distribution tables, this corresponds to a z value of –2.05.
x 
If z =

40  μ
–2.05 =
35
(–2.05  35) = 40 – 
–71.75 = 40 – 
1.  = 40 + 71.75
2. = 111.75
= 111.8 (to one decimal place)

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15. False
The mean of the sample means will approximate the mean of the
population.
16. Z = ( x -)/(p/√n)

= (6,500 – 7,000)/ 1,000/√10) = 1.58

Using tables Z=1.58 gives 44.29%
The proportion less than 6,500 will be 50% –44.29% = 5.71%

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11 Regression analysis
1. 0.63
n  XY   X  Y

r =
(n  X2  ( X)2 )(n  Y2  ( Y)2 )

(11×13,467)  (440×330)

=
((1117,986)  (440)2 )((11  10,366)  (3302 ))

= 2,937
= 0.63
(4,246  5,126)

The above formula is provided in your exam. If you failed to get the
correct answer, rework the calculations carefully. Questions such as
this are an easy source of marks as all of the information required to
answer it correctly are given to you in the question – you just need to
plug the numbers into the formula provided.

2. D If C = 1,000 + 250P, then fixed costs are Rs 1,000 and variable costs are
Rs 250 per unit.

3. C From the data given, it is clear that the correlation is positive and
strong.
The correlation coefficient describing a positive strong relationship is
0.98.

4. B If temperatures increase by one degree, X is replaced by (X + 1)

If X = X + 1
Y= 32 – 1.6 (X + 1)
Y = 32 – 1.6X – 1.6
Y = 30.4 – 1.6X
ie sales have now fallen by Rs 32,000 – Rs 30,400 = Rs 1,600
If you selected option C, you have forgotten that sales are given in
Rs'000s.
If you selected option D, you have forgotten that a negative sign in the
regression equation means that as X increases, Y decreases.

5. D The correlation coefficient of 0.9 is very close to 1 and so there is a very

strong relationship between x and y.

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6. C Correlation coefficient, r = 0.85

Coefficient of determination, r2 = 0.852 = 0.72
The coefficient of determination tells us that 72% of the variation in
sales revenue can be explained by the corresponding variation in
advertising expenditure.

7. 0.98
The formula for the correlation coefficient is provided in your exam.
There are no excuses for getting this question wrong.
n  XY   X  Y
Correlation coefficient, r =
[n  X2  ( X)2 ][n  Y2  ( Y)2 ]

(4 157) (12 42)

(a) =
[4  46  122 ][4 542  422 ]

(b) = 628  504

(184  144)  (2,168  1,764)

(c) = 124
40  404)

(d) = 124
127.12
(e) = 0.98 (to two decimal places)

8. B X = advertising expenditure
If X = 0
(i) Y = 40 + 10X
(ii) Y = 40 + (10  0)
(iii) Y = 40
Therefore if nothing is spent on advertising, sales revenue will be Rs 40
on average.

9. B I When an equation has the form y = a + bx, b gives the slope which
is 5 in the equation y = 5x – 24.
II When an equation has the form y = a + bx, a gives the intersection
on the y axis which is –24 in the equation y = 5x – 24.
III The slope of the equation is 5. The intercept on the y axis is 24.
IV The line cuts the y axis at –24. The line cuts the x axis at 4.8.
I and II are correct and the answer is therefore B.

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10. C I High levels of correlation do not prove that there is cause and
effect.
II A correlation coefficient of 0.73 would generally be regarded as
indicating a strong linear relationship between the variables.
III The coefficient of determination provides this information and is
given by squaring the correlation coefficient, resulting in 53% in
this case.
IV The coefficient of determination provides this information and
not the correlation coefficient. Remember that you must square
the correlation coefficient in order to obtain the coefficient of
determination.
Statements II and III are relevant and the correct answer is therefore C.

11. C The value X = 10 does not lie between 15 and 45 so we do not know
whether or not the relationship between the variables still holds for
this value of X. We therefore cannot rely upon the estimate.
The sample size is quite large for this type of analysis and will provide
reliable estimates. Option A will not therefore reduce the reliability of
the estimate.
The correlation coefficient is very close to –1, indicating a very strong
relationship between the variables which will provide reliable
estimates. Option B will not therefore reduce the reliability of the
estimate.
The fact that the correlation coefficient is negative tells us that Y
decreases as X increases but it says nothing about the strength of the
relationship between the variables nor the reliability of the estimates.
Option D is therefore an incorrect answer.

12. A Y = 50 + 7X
If we increase expenditure on advertising by Re 1, we replace X with
(X + 1)
Y = 50 + 7(X + 1)
Y = 50 + 7X + 7
Y = 57 + 7X
Therefore, sales are now Rs 57 on average, compared with Rs 50
previously. Sales increase by Rs 7 on average.
If advertising costs are increased by Rs 7
Y = 50 + 7(X + 7)
Y = 50 + 7X + 49
Y = 99 + 7X

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Sales are increased by Rs 49 on average.

Option B is therefore incorrect.
If Y = 50 + 7X
when advertising is zero, X = 0
∴ Y = 50 + (7  0)
(i) Y = 50 + 0
(ii) Y = 50
Therefore, option D is incorrect.

13. C The independent variable is denoted by X and the dependent one by Y.

The variable to be forecast must always be Y. Option A is therefore
incorrect.
In calculating the correlation coefficient, it does not matter which variable
is X and which is Y, and a totally different regression line equation will
result if X and Y are interchanged. Option B is therefore incorrect.
The scatter diagram is used to show whether or not there is a
relationship between X and Y and it does not matter which variable is
associated with a particular axis. Option D is therefore incorrect.

14. B If nothing is spent on advertising, X = 0

∴ Y = 5 + (2  0)
(i) Y=5+0
(ii) Y=5
Therefore sales revenue is Rs 5  10,000 = Rs 50,000 on average when
nothing is spent on advertising. II is correct. IV is incorrect.
If Rs 1,000 extra is spent on advertising, then X = X + 1
∴ Y = 5 + 2 (X + 1)
(i) Y = 5 + 2X + 2
(ii) Y = 7 + 2X
Increase in sales revenue when an extra Rs 1,000 is spent on
advertising is Rs 20,000 ((7 – 5)  Rs 10,000). III is correct and I is
incorrect.

15. D When X = 20, we don't know anything about the relationship between
X and Y since the sample data only goes up to X = 10. I is therefore true.
Since a correlation coefficient of 0.8 would be regarded as strong (it is a
high value) the estimate would be reliable. II is therefore not true.
With such a small sample and the extrapolation required, the estimate
is unlikely to be reliable. III is therefore not true.

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The sample of only six pairs of values is very small and is therefore
likely to reduce the reliability of the estimate. IV is therefore true.
The correct answer is therefore D.

16. D Y = 30 + 5X
When nothing is spent on advertising, X = 0.
∴ Y = 30, ie sales revenue will be Rs 30 on average (IV is correct).
If advertising expenditure increases by 1, ie if we replace X by (X + 1),
we have
Y = 30 + 5(X + 1)
Y = 30 + 5X + 5
Y = 35 + 5X
ie sales revenue increases by Rs 5 on average when expenditure on
advertising increases by Rs 1 (II is correct).

17. C If sales are zero (Y = 0)

0 = 54 – 3x
3x = 54
x = 18
If sales (Y) are zero, the temperature is therefore 18C.
Therefore, I is correct and II and III are incorrect. You should have been
able to eliminate options B and D straightaway since sales cannot really
be negative.
If temperature is 0C (x = 0)
Y = 54 – 3x
(i) y = 54 – (3  0)
(ii) y = 54 – 0
(iii) y = 54
If the temperature is 0C, sales are Rs 54,000. IV is correct and the
correct answer is C (statements I and IV being true).

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18. 0.99
n  XY   X  Y
Correlation coefficient, r =
(n  X2  ( X)2 )(n  Y2  ( Y)2 )

(5 8,104)  (100  400)

(a) =
(5 2,040  1002 )(532,278  4002 )
(b) = 520
200  1,390
520
(c) =
527.3
(d) = +0.99

19. B The least squares method of linear regression analysis involves using
the following formulae for a and b in Y = a + bX.
n  XY   X  Y
=
n  X2  ( X)2

(i) = (5×8,104)  (100×400)

(5×2,040)  1002
40,520  40,000
(ii) =
10,200  10,000
520
(iii) =
200
(iv) = 2.6
At this stage, you can eliminate options A and C.
a = Y  bX
400 100
(vi) = – 2.6  ( )
5 5
(vii) = 28

20. False
The coefficient of determination (R2) explains the percentage variation
in the dependent variable which is explained by the independent
variable.

21. 11.00
Y = a + bX
If intercept (a) is Rs 248, then Y = 248 + bX
If the value of Y is Rs 523 and X is 25, then using the equation Y = 248 +
bX we can determine the unknown value of b (ie the slope) as follows.

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523 = 248 + (b  25)

523 – 248 = 25b
∴ 275 = 25b
275
b= = +11.00
25

22.

 Weekly fixed costs are approximately Rs 1,500.

 Variable costs are approximately Rs 15 per unit on average.
 Next week's production costs are likely to be about Rs 9,000.
A linear equation of the form y = a + bx has fixed costs of a and variable
costs per unit of b.
 Fixed costs = Rs 1,500
Variable costs = Rs 15 per unit
If output = 500, total costs = Rs 1,500 + (Rs 15  500)
= Rs 1,500 + Rs 7,500
= Rs 9,000

23. D None of them

If r = 0.9, there is a high degree of correlation between weekly costs of
production and production level. Statement (i) is not correct.
If r = 0.9, r2 (coefficient of determination) = 81% (0.92) and 81% of the
variation in weekly costs can be explained by the amount produced.
Statement (ii) is not correct.
If r = 0.9 and a linear pattern is evident, forecasts are likely to be
reliable, not unreliable. Statement (iii) is not correct.

24. B Slope of a regression line

The correlation coefficient values lie between –1 and +1.
The slope of a regression line is its gradient and it is possible to have a
gradient of –2.
The variance is the standard deviation squared and is always a positive
value.

25.
 The slope of the equation if plotted on a graph is 4

 The line cuts the y-axis at –15 if plotted on a graph

When an equation has the form y = a + bx, b gives the slope which is 4
in the equation y = 4x – 15.
When an equation has the form y = a + bx, a gives the intersection on
the y-axis which is –15 in the equation y = 4x – 15.

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26. 0.17
n xy   x y
r =
n x2    x 2  n y 2    y 2 
   

 6  14  2  15
=
6  30  22  6  130  152 
  

84  30
=
176  555

54
= = 0.172777884
312.54

= 0.17 (to 2 decimal places)

27. y = 2 + 2.2x
x y x2 xy
1 4 1 4
2 6 4 12
3 10 9 30
4 10 16 40
10 30 30 86
n =4
n  xy   x  y
b =
n  x2    x 
2

=
 4  86  10  30 = 44 = 2.2
4×30  10 2 20

30  10 
a = y– b x =  2.2    2
4  4

Therefore y = 2 + 2.2x.

28. False
Correlation does not prove a causal link and this statement is therefore
false. The coefficient of determination is the square of the correlation
coefficient.

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29. y = 7.72 + 0.70.71x

y x x2 xy
9 2 4 18
10 3 9 30
9 1 1 9
8 1 1 8
9 2 4 18
45 9 19 83
n =5
n  xy   x  y
b =
n  x2    x 
2

× × 10
= = =0.71
× 14
45  9
a = y – bx =  0.71   = 7.722 = 7.72 (to 2 decimal places
5  5

Therefore, the equation is x = 7.72 + 0.71x

30. A Fixed costs are Rs 200. Variable costs per unit are Rs 30. If C = 200 +
30P, then fixed costs are the constant, Rs 200 and variable costs are
Rs 30 per unit.

31. 0.4624
The coefficient of determination, r2, measures the proportion of the
total variation in the value of one variable that can be explained by
variations in the value of the other variable.
r2 = 0.682
= 0.4624
Therefore, only just under half of the variation in one variable can be
explained by variation in the other.

32. False
When using the regression of Y upon X, X is the independent variable
and Y is the dependent variable (the value of Y will depend upon the
value of X).

33. Lowest value = 0

Highest value = 1

The correlation coefficient, r, must always fall within the range –1 to

+1, therefore the coefficient of determination must always fall in the
range 0 to 1 (–12 = +1)

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34. The correlation coefficient of temperature and sales is 0.98 (to

two decimal places).
WORKINGS
n xy   x y
Correlation coefficient =
n x2    x 2  n y 2    y 2 
   

10 4,209-210 187


10 4,634  2102  10  3,865  1872 
  

2,810
=
2,240×3,681
2,810
= = 0.98
2,871.49

35.
b= 10.05 (to two decimal places)
a= 44.50 (to two decimal places)
WORKINGS
x y xy x2
2 60 120 4
8 132 1,056 64
6 100 600 36
8 120 960 64
10 150 1,500 100
4 84 336 16
4 90 360 16
2 68 136 4
6 104 624 36
10 140 1,400 100
60 1,048 7,092 440
n  xy   x  y
b =
n  x2    x 
2

10×7,092  60×1,048
b=
10×440  602
8,040
=
800
= 10.05
a = y – bx
1,048 60
a= – (10.05  )
10 10
= 44.5

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36. The equation to use for predicting the likely maintenance cost per
vehicle per annum is y = y = 44.5 + 10.05x
where
y = maintenance costs (Rs 10)

x = age

37. 0.64
The correlation coefficient of determination is calculated by squaring
the correlation coefficient.

38. D b is the slope of the line which measures the increase in the y variable
for unit increase in x

39. C a is the intercept on the y axis which is the value of the dependant
variable when the value of the independent variable is zero.

40. C A correlation coefficient of 0.9 indicates that the relationship between x

and y is too strong to have been caused by chance.

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 12 Time series forecasting
1.

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2. A If x = 8, y = 690.24 – (2.75  8) = 668.24

Forecast = trend + seasonal component = 668.24 – 25.25 = 642.99 =
643 (to the nearest unit)
If you selected option B, you calculated the forecast for the seventh
period and deducted the seasonal component of the eighth period.
If you selected option C, you correctly forecast the trend for the eighth
period but forgot to deduct the seasonal component.
If you selected option D, you simply calculated the trend for the
seventh period instead of the eighth period.

3. D I Provided the seasonal variation remains the same in the future as

in the past, it will not make forecasts unreliable.
II Provided a multiplicative model is used, the fact that the trend is
increasing need not have any adverse effect on the reliability of
forecasts.
III If the model being used is inappropriate, for example, if an
additive model is used when the trend is changing sharply,
forecasts will not be very reliable.
IV Forecasts are made on the assumption that everything continues
as in the past.
III and IV are therefore necessary and hence the correct answer is D.

4. A With an additive model, the weekly component represents the average

value of actual production minus the trend for that week, so a
component of +9 means production is 9,000 units above the trend.
This is the only correct statement.
If you selected option B, C or D, you have confused the additive
variation of –4, +5 and –6 (actually –4,000 units, +5,000 units and –
6,000 units respectively) with the multiplicative variation of –4%, +5%
and –6% respectively.

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5. A
Quarter
1 2 3 4 Total
Unadjusted 1.09 0.93 1.17 0.78 3.97
average
Adjustment 0.0075 0.0075 0.0075 0.0075 0.03
Adjusted average 1.0975 0.9375 1.1775 0.7875 4.000
4 – 3.97 = 0.03
We therefore need to add 0.03  4 = 0.0075 to each average.
From the table above, it can be seen that the first quarter adjusted
average is 1.0975 as per option A.
If you selected option B, you added the entire deficit of 0.03 to the
second quarter average instead of spreading it across all four averages.
If you selected option C, you subtracted the entire deficit of 0.03 from
the third quarter average rather than sharing it across all four
averages.
If you selected option D, you have subtracted the deficit of 0.0075 from
each quarter's average, instead of adding it.

6. B As this is a multiplicative model, the seasonal variations should sum (in

this case) to 4 (an average of 1) as there are four quarters.
Let x = seasonal variation for quarter 4.
0.45 + 1.22 + 1.31 + x = 4
2.98 + x = 4
x = 4 – 2.98
= 1.02
If you selected option A you subtracted the sum of the seasonal
variations from 3 instead of 4.
If you selected option D, you forgot to subtract the sum of the seasonal
variations for quarters 1-3 from 4.

7.
Quarter Sales forecast
1 6,591 (W4)
2 7,489 (W3)
3 2,364 (W2)
4 3,358 (W1)

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WORKINGS
5,300
(1) The trend changes from 4,500 to 5,300. The growth rate is
4,500
= 1.178 = 17.8%.
Expressed per quarter (there are four quarters) this is 1.1781/3 =
1.056 or 5.6% per quarter.
Therefore, in quarter 1, the forecast for actual sales = 5,300 
1.056  0.6 = 3,358.
(2) Therefore, in quarter 2, the forecast for actual sales = 5,300 
1.0562  0.4 = 2,364.
(3) Therefore, in quarter 3, the forecast for actual sales = 5,300 ×
1.0563 × 1.2 = 7,489.
(4) Therefore, in quarter 4, the forecast for actual sales = 5,300 
1.0564  1 = 6,591.

8. 172
WORKINGS
In Q3 of 2010, t = 19
T = 52 + (6.3  19) = 171.7
= 172 to three significant figures

9. A For week 9, the trend value is 84 + (0.7  9) = 90.3

The seasonal variation is actual – trend = 88.7 – 90.3
= – 1.6

10. D The residual is the difference between the actual data and the figure
predicted by the time series analysis. It is the unexplained element in
the actual figure.
Actual 4,000
Trend (3,150 + 72  12) 4,014
Seasonal variation (47)
(3,967)
33

11. A = 944
B = 962
C = 236.0
D = 240.5
E = 238
F = -114

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WORKINGS
Moving Moving
total of average of
4 quarters' 4 quarters' Seasonal

Year Quarter Sales sales sales Trend variation

20X2 1 200
2 110
870 217.5
3 320 219 +101
884 221.0
4 240 222 +18
892 223.0
20X3 1 214 225 -11
906 226.5
2 118 229 -111
926 231.5
3 334 232 +102
932 233.0
4 260 234 +26
938 234.5
20X4 1 220 235 -15
944 236.0
2 124 238 –114
962 240.5
3 340
4 278
A = 260 + 220 + 124 + 340 = 944
B = 220 + 124 + 340 + 278 = 962
C = 944  4 = 236.0
D = 962  4 = 240.5
E = (236.0 + 240.5)  2 = 476.5  2 = 238.25
F = 124 – 238 = –114

12. G = -2
H = +0.5
I = -12.5
J = -112.0
K = +102.0
L = +22.5

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WORKINGS
Quarter
Year 1 2 3 4 Total
20X2 +101 +18
20X3 –11 –111 +102 +26
20X4 –15 –114
Average seasonal –13.0 –112.5 +101.5 +22.0 –2
variation
Adjustment +0.5 +0.5 +0.5 +0.5 +2
Adjusted seasonal –12.5 –112.0 +102.0 +22.5 0
variation
The seasonal variations from the table in (a) are the initial entries in
the table shown above. The seasonal variations are averaged by adding
them together and dividing by two. The total of the averages gives the
value of G, which should ideally be zero. (In this case it is –2.) We adjust
the average seasonal variations by subtracting G/4 (–2/4 = –0.5) from
each average which in this case means adding H = 0.5 in order to obtain
the adjusted seasonal variations I to L.

13. 255.5
WORKINGS
The additive model is A = T + S and we seasonally adjust the data in
order to estimate the trend, T.
T = A–S
= 278 – 22.5
= 255.5

14. 232.5
WORKINGS
The additive model is A = T + S. Forecast sales are calculated by adding
the adjusted seasonal variation (S) to the predicted trend (T).
Forecast sales = 245 – 12.5
= 232.5

15. D Year = 2006

 Trend = (0.0004  20062) + (0.2  2006) + 80.2
= 2,091.0144
 Forecast = 1.87  2,091.0144 = 3910.196928
 Forecast in whole units = 3,910

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16. B y = 7.112 + 3.949x

If x = 19, trend in sales for month 19 = 7.112 + (3.949  19) = 82.143
Seasonally-adjusted trend value = 82.143  1.12 = 92
If you failed to select the correct option, rework the calculation
carefully. You shouldn't have too much trouble with this question since
it is just a matter of plugging in a value for x into the equation given in
the question.

17. A If x = 16, y = 345.12 – (1.35  16) = 323.52

Forecast = trend + seasonal component = 323.52 – 23.62 = 299.9 = 300
(to nearest unit)
If you selected option B, you calculated the forecast for the fifteenth
period and deducted the seasonal component of the sixteenth period.
If you selected option C, you correctly forecast the trend for the
sixteenth period but forgot to deduct the seasonal component.
If you selected option D, you simply calculated the trend for the
fifteenth period instead of the sixteenth period.

18. A Y = 20 – 0.25X
X = 12
 Y = 20 – 0.25(12) = 17%

19. A A variation of, for example, +50% means that forecast sales are 50%
above the trend value (i.e. trend  150%) whereas a variation of –50%
means that forecast sales are 50% below the trend value (i.e. trend 
50%).
 Trend  seasonal variation = actual
 Trend  150% = 240 (for Q2 )

 Trend = 240 ÷ 1.5 = 160

Variation in Q3 = – 50%

 Forecast = 160  50% = 80

If you selected option B, you have simply taken 50% of the trend for Q2
(50%  240 = 120).
If you selected option C, you calculated the trend and not the forecast
for Q3.
If you selected option D, you divided the trend in Q3 by 50% instead of
multiplying it by 50%.

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20. B Seasonally adjusting the values in a time series removes the seasonal
element from the data thereby giving an instant estimate of the trend.

21. B
X = 38 and Y = 40
X  36  Y
= 38
3
36  Y  41
= 39
3
Y = (3 × 39) – 36 – 41 = 40
X  36  40
= 38
3
X = (38 × 3) – 36 – 40 = 38

22. D If t = 1 in the first quarter of 20X5

t = 8 in the fourth quarter of 20X6
Trend (Y) = 65 + (7  8)
= 121
Forecast = trend + seasonal component
= 121 + (–30)
= 121 – 30
= 91
If you selected option A, you used t = 4 instead of t = 8 in the fourth
quarter of 20X6.
If you selected option B, you calculated the trend as (65 + 7)  8 = 576
instead of 65 + (7  8) = 121.
If you selected option C, you reduced the trend by 30% instead of
subtracting 30 from it.

23. C In the first month of 20X9, t = 13

 Y = Rs 1,500 – Rs (3  13)
= Rs 1,461
Forecast = trend  seasonal component
= Rs 1,461  0.92
= Rs 1,344
If you selected option A, you substituted t = 1 into the trend equation
instead of t = 13.
If you selected option B, you calculated the trend as (Rs 1,500 – Rs 3) 
13 = Rs 19,461 and therefore forecast sales as Rs 19,461  0.92 =
Rs 17,904.
If you selected option D, you added the seasonal component of 0.92 (as
you would for an additive model) instead of multiplying by 0.92.

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 Answers

24.
Year Quarter Sum of twos Trend*
20X3 2
3
4 190 23.750
20X4 1 193 24.125
2 195 24.375
3 197 24.625
4 198 24.750
20X5 1 198 24.750
2 199 24.875
3 201 25.125
4
20X6 1
*The trend is calculated as (figure for 'sum of twos'  8), where 8
relates to the 8 quarters' figures which make the 'sum of twos' figure.
For example, the figure of 190 incorporates the actual values from the
following quarters.
20X3 Q2, Q3, Q4 and 20X4 Q1 – which total to 94
20X3 Q3, Q4 and 20X4 Q1, Q2 – which total to 96
190

25. The multiplicative model is Y = T  S

where Y = the actual time series (original data)
T = the trend series
S = the seasonal component
 Seasonally-adjusted data = Y/S = original data  seasonal factor
For example, 31/1.343 = 23.083,

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Year Quarter Original data Seasonal factor Seasonally-adjusted

(Y) (S) demand (Y/S)
20X3 2 31 1.343 23.083

3 18 0.765 23.529
4 20 0.847 23.613
20X4 1 25 1.045 23.923
2 33 1.343 24.572
3 19 0.765 24.837
4 21 0.847 24.793
20X5 1 26 1.045 24.880
2 33 1.343 24.572
3 19 0.765 24.837
4 22 0.847 25.974
20X6 1 27 1.045 25.837

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174 BL1 - Financial Accounting CA Sri Lanka

 Mock Exam Questions

Mock Questions
1. A client wishes to invest Rs 5,000 for five years in a savings fund where the
14.5% per annum gross rate is compounded annually.
What is the size of the fund at the end of five years?
A Rs 8,625
B Rs 9,840
C Rs 10,048
D Rs 25,000

2. In exactly three years from now, a company will have to replace capital
equipment which will then cost Rs 100,000. The managers have decided to
set up a sinking fund into which 12 equal sums will be put at quarterly
intervals, with the first one being made three months from now. The rate of
compound interest is 2% a quarter. What is the quarterly payment required
for the sinking fund?
A Rs 7,456
B Rs 8,333
C Rs 13,412
D Rs 33,333

3. A company need to replace some machinery in four years’ time, the

machinery will cost Rs 150,000, and the company has decided to provide for
this future commitment by setting up a sinking fund into which 4 equal
annual investments will be made, starting now. The fund will earn interest at
12%.
Calculate the annual investment.
Rs

4. A depreciation rate of 40% equates to a value for r of:

A + 40%
B 40%
C + 0.4
D  0.4

5. An investor has been offered two deals:

Option 1 1.5% compounded every three months
Option 2 3.3% compounded every six months
Which option offers the best APR?

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6. It is estimated that a particular cost will decline by 7% per annum on a

compound basis.
If the cost is now Rs 12,000, by the end of year 2 the cost will be
approximately:
A Rs 11,160
B Rs 10,379
C Rs 9,652
D Rs 8,977

7. Investment C would last for four years, with a nominal interest rate of 16%,
payable quarterly. Calculate the effective annual rate of interest to two
decimal places.
%

8. A fixed-interest Rs 200,000 mortgage, with annual interest compounded at

6% each year, is to be repaid by 15 equal year-end repayments of Rs R.
The annual repayment Rs R will be closest to:
A Rs 14,133
B Rs 20,593
C Rs 31,954
D Rs 83,400

The following information is for the next two questions.

A retailer is considering running a sales promotion on one of its products for a
period. The following information is provided relating to the product.
Normal sales 7,000 units per period
Normal selling price Rs 13 per unit
Purchase price Rs 6 per unit
A 20% reduction in selling price is proposed.
9. Calculate the percentage increases in sales value and in sales volume that are
required during the promotional period in order to maintain gross profit
(Rs'000).
Note. Gross profit = selling price – purchase price.
The revenue and cost functions of the above product have been identified as:
Total revenue = –x2 + 20x
Total cost = 6x + 21,000
where x = sales in thousands of units.

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 Mock Exam Questions

10. Demonstrate how the above functions may have been used to establish
normal selling price and sales units of Rs 13.00 and 7,000 respectively.

The following information is for the next three questions.

A firm's average cost curve is given by

AC = x2 – 21x + 183
where x is output and AC is average cost (Rs) and its average revenue is
AR = –3x + 102
where AR is average revenue (Rs).
Total cost is average cost multiplied by output and total revenue is average
revenue multiplied by output.
11. Determine expressions for total cost and total revenue.

12. Determine the expression for profit.

13. Calculate the profit at the profit maximising output.

14. The profit function for a business (over a relevant range) has been estimated
as follows:
Total profit (Rs'000) = –3x2 + 43x – 115
Where x = output
What output will maximise profit?

The following information relates to the next two questions.

A travel agency has kept records of the number of holidays booked and the
number of complaints received over the past ten years. The data are as follows.
Year 1 2 3 4 5 6 7 8 9 10
Number of holidays booked 246 192 221 385 416 279 343 582 610 674
Number of complaints 94 80 106 183 225 162 191 252 291 310
The agency suspects there is a relationship between the number of bookings and
the volume of complaints and wishes to have some method of estimating the
number of complaints, given the volume of bookings.
15. Using the method of least squares, calculate the coefficients in the regression
line y = a + bx using the above data.

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BL2: Business Mathematics and Statistics

16. Use the calculated values to forecast the number of complaints if the number
of holidays booked is 750.

The following information relates to the following four questions.

The following table shows the average weekly gross wages earned by a group of
300 employees in a factory.
Weekly gross wages Number of employees
> Rs 160 300
> Rs 180 280
> Rs 200 250
> Rs 220 200
> Rs 240 120
> Rs 260 70
> Rs 280 40
> Rs 300 10
> Rs 320 10
> Rs 340 0
17 Calculate the median
Calculate the following probabilities (to the nearest whole %):
18. The probability that the average weekly gross wages of an employee selected
at random from the group are more than Rs 260:
A 22%
B 23%
C 24%
D 25%
19. The probability that the average weekly gross wages of three employees
selected at random from the group are each more than Rs 240:
A 5%
B 6%
C 12%
D 25%
20. The probability that the average weekly gross wages of an employee selected
at random from the group are either less than Rs 180 or more than Rs 320:
A 5%
B 10%
C 15%
D 25%

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 Mock Exam Questions

The following information relates to the next three questions.

The managers of an import agency are investigating the length of time that
customers take to pay their invoices, the normal terms for which are 30 days net.
They have checked the payment record of 100 customers chosen at random and
have complied the following table
Payment in: Number of customers
5 to 9 days 4
10 to 14 days 10
15 to 19 days 17
20 to 24 days 20
25 to 29 days 22
30 to 34 days 16
35 to 39 days 8
40 to 44 days 3
21. What is the arithmetic mean?
A 21 days
B 22 days
C 23 days
D 24 days
22. What is the standard deviation (to the nearest whole number)?
A 71
B 35
C 17
D 8
23. Estimate the probability that an unpaid invoice chosen at random will be
between 30 and 39 days old.

24. Product X needs 2 labour hours, product Y needs five labour hours, there are
500 hours available. How would this be expressed as an inequality?
A 2X + 5Y < 500
B 5X + 2Y > 500
C 2X + 5Y > 500
D 5X + 2Y < 500

25. George does a number of cycle rides in a week. In a week where his average
ride was 22 miles, his individual ride distances, in miles, were
35, 24, x, 17, y, 23
When x = 2y, the value of x is

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26. The following has been calculated for a frequency distribution.

(f) =50
(fx) = 1,610
(fx2)=61,250
The value of the standard deviation (to one decimal place) is

27.

Y 140

120

100

80

60

40

20

0
0 10 20 30 40 50 60 70 80

What is the best approximation to the equation of the line drawn through
these points?
3x
A y = 2 – 20
2x
B y = 3 + 20
3x
C y = 2 + 20
2x
D y = 3 – 20

28. Sample 1: 2, 5, 5, 12
Sample 2: 1, 3, 5, 8, 8
Which of the following statistics has the same value in both samples?
A Arithmetic mean
B Standard deviation
C Median
D Mode

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 Mock Exam Questions

29. A company's market value has fallen from Rs 32 billion to Rs 2 billion in four
years. The average annual percentage decline in market value is closest to
A 20%
B 40%
C 50%
D 100%

30. A company is bidding for three contracts which are awarded independently
of each other. The board estimates its chances of winning Contract A as 40%,
of winning Contract B as 1 in 4 and of winning Contract C as 1 in 5. The
profits from A, B and C are estimated to be Rs 600,000, Rs 700,000 and
Rs 800,000 respectively.
The expected value to the company of the profits from all three contracts will
be closest to:
A Rs 240,000
B Rs 575,000
C Rs 700,000
D Rs 800,000

31. For a set of six data pairs for the variable x (profit) and y (sales) the
following values have been found.
x = 2
y = 15
x2 = 30
y2 = 130
xy = 14
Calculate the values for the intercept and gradient of the linear regression line
for this data (to two decimal places).
a=
b=

32. The sales of a product are recorded monthly for 24 months. The four-point
(centred) moving averages are calculated and plotted on a graph.
How many moving average points are plotted?
A 20
B 21
C 22
D 24

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33. A company's weekly costs (Rs C) were plotted against production level (P)
for the last 50 weeks and a regression line calculated to be C = 2,000 + 300P.
Which statement about the breakdown of weekly costs is true?
A Fixed costs are Rs 2,000. Variable costs per unit are Rs 5.
B Fixed costs are Rs 300. Variable costs per unit are Rs 4.
C Fixed costs are Rs 300. Variable costs per unit are Rs 2,000.
D Fixed costs are Rs 2,000. Variable costs per unit are Rs 300.

34. The correlation coefficient between two variables, x and y, is +0.65. The
proportion of variation in x that is explained by variation in y is
A 0.43
B 0.65
C 0.80
D 0.85

35. The number of daily complaints to a railway company has an average

(arithmetic mean) of 12 and a standard deviation of 3 complaints.
The coefficient of variation is
A 0.25%
B 4%
C 25%
D 400%

36. The following formula is used in the financial analysis of dividends:

 V
R =   +G
 P

When the formula is rearranged, with P in terms of the other variables, P is

equal to
R
A  V  G
 

B
R  G
V
V
C  R  G
 
V
D
  G
R

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 Mock Exam Questions

37. The length of telephone calls to a Software Support line is approximately

normally distributed with a mean of 20 minutes and a standard deviation of
5 minutes.
The percentage of calls lasting under 30 minutes is closest to:
A 2%
B 48%
C 83%
D 98%

38. A fixed-interest Rs 200,000 mortgage, with annual interest compounded at

6% each year, is to be repaid by 15 equal year-end repayments of Rs X.
The annual repayment Rs X will be closest to:
A Rs 14,133
B Rs 20,593
C Rs 31,954
D Rs 83,400

39. A company's security system is made up of three separate electronic alarms,

which operate independently. The security system operates provided that at
least one of the three alarms is working. The probability of an alarm failing at
any time is 1 in 100.
The probability of the security system failing is:
A 1 in 100
B 3 in 100
C 1 in 10,000
D 1 in 1,000,000

40. A manufacturer supplies components in boxes of 10, stating that there is a

(independent) chance of 10% of any one component being faulty.
In a large batch, the percentage of boxes containing no faulty components
will be closest to:
A 10%
B 35%
C 50%
D 90%

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41. A new lake is to be stocked with fish, according to the numbers in the table
below.
Type of fish A B C D
Number of 400 300 200 100
fish
Annual % 10 20 30 40
increase
After one year, the percentage of fish of Type D in the lake will be closest to:
A 10%
B 12%
C 14%
D 20%

42. In a time series analysis, the trend equation for a particular product is given
by
TREND = 0.0002  YEAR2 + 0.4  YEAR + 30.4
Due to the cyclical factor, the forecast for the year 2007 is estimated at 1.6
times trend.
In whole units, the forecast for the year 2007 is:
A 1,639
B 3,211
C 2,608
D 2,622

43. A company's annual profits have a trend line given by Y = 30t – 10, where Y
is the trend in Rs'000 and t is the year with t = 0 in 20X0. Forecast profits for
the year 20X8 using an additive model if the cyclical component for that year
is –25 are:
A Rs 235,000
B Rs 205,000
C Rs 161,000
D Rs 260,000

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 Mock Exam Questions

44. The mail-order sales (units) of Brand X in a certain country are shown
below. In this country, the populations of all twenty sub-groups are equal.
Each customer buys one unit. Ages are given in years.
Mail-order sales of Brand X (units) by region and age in 20X6
21–29 30–39 40–49 50–59 60 + Total
Region/Age
North 100 80 50 40 30 300
South 55 50 45 30 20 200
East 65 60 65 60 50 300
West 20 30 40 50 60 200
240 220 1,000
A customer is to be randomly selected for a holiday prize. The probability
that this customer is from the East and over 39 years of age is to
three decimal places.

The following information is to be used for the next two questions.

In a time series analysis, the multiplicative model is used to forecast sales and the
following seasonal variations apply:
Quarter 1 2 3 4
Seasonal 1.3 1.6 0.5 ?
variation
The actual sales values for the first two quarters of 2006 were:
Quarter 1: Rs 125,000
Quarter 2: Rs 135,000

45. The seasonal variation for the fourth quarter is:

A 3.4
B 0.6
C 1.0
D 1.1
46. The trend line for sales:
A Decreased between quarter 1 and quarter 2.
B Increased between quarter 1 and quarter 2.
C Remained constant between quarter 1 and quarter 2.
D Cannot be determined from the information given.

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47. In an additive time series analysis, the seasonal variations given by

averaging the (Y – T) values are as follows.
Year Y –T
1 16
2 32
3 -18
4 -34
The averages are subsequently adjusted so that their total is 0. What is the
new value of the current average for year 4?

48. Which of these scatter diagrams shows no linear correlation between x and
y?
y y y y
    
   
  
  
   
   

x x x x
A B C D

49. A gas supplier has monitored the monthly volume of gas consumed in an
area against the mean temperature each month. The following results have
been produced.
Mean Gas
temperature consumption
X Y X2 Y2 XY
2.50 26.70 6.25 712.89 66.75
0.80 33.10 0.64 1,095.61 26.48
4.60 28.60 21.16 817.96 131.56
8.90 22.40 79.21 501.76 199.36
14.60 17.30 213.16 299.29 252.58
15.10 10.10 228.01 102.01 152.51
18.30 5.10 334.89 26.01 93.33
21.20 4.20 449.44 17.64 89.04
20.30 4.40 412.09 19.36 89.32
14.20 11.60 201.64 134.56 164.72
10.60 23.50 112.36 552.25 249.10
6.50 24.50 42.25 600.25 159.25
137.60 211.50 2,101.10 4,879.59 1,674.00

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 Mock Exam Questions

50. Calculate the correlation coefficient for this data (to three decimal places).

On the basis of the scatter diagram above, which of the following equations
would best represent the regression line of Y on X?
A Y= –X + 8
B Y= X + 8
C Y= X – 8
D Y= –X – 8

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188 CA Sri Lanka

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190 BL1 - Financial Accounting CA Sri Lanka

 Answers

Mock Solutions
1. B 14.5% a year compounded annually
After five years, there will have been five interest payments.
Fund = 5,000 1.145 = Rs 9,840

A(Rn –1)
2. A Use the formula S = , where R = 1.02, S is the value of the fund
(r –1)
at the end of 12 quarters and A is the quarterly sum invested.
Using this formula, the first payment into the fund must be one time
period (three months) from now.
A(1.0212  1)
After three years (12 quarters), value of sinking fund = =
(1.02 1)
13,412 A
After 12 quarters, the reserve fund must equal Rs 100,000
100,000 = 13.412 A
 A = Rs 7,456 quarterly payment

3. Rs 28,022
This is a geometric progression with
A = A (1.12)
R = 1.12
n =4

A1.12(1.124  1)
150,000 =
(1.121)

150,000 = 5.35285A
150,000
A =
5.35285
A = 28,022
Therefore, four investments, each of Rs 28,022 should be made.

4. D A depreciation rate of 40% equates to a negative rate of interest of

40% where r = 0.4

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5. Option 2
APR of option 1 = (1+ 0.015)4 –1
= 0.0614
= 6.14%
APR of Option 2 = (1 + 0.033)2 – 1
= 0.067
= 6.70%
Option 2 therefore offers the best APR.

6. If a cost declines by 7% per annum on a compound basis, then at the

end of the first year it will be worth 0.93 the original value.
Now = Rs 12,000
End of year 1 = Rs 12,000  0.93
End of year 2 = Rs 12,000  0.932
End of year 3 = Rs 12,000  0.933
 At the end of year 2, Rs 12,000 will be worth
Rs 12,000  (0.93)2 = Rs 10,379

7. 12.55%

WORKING
Rate of interest = 4% per quarter
 Quarterly ratio = 1.04
 Annual ratio = 1.044
= 1.1699
 Effective annual rate = 16.99% (to two decimal places)
8. Rs 20,593
PV
Annuity =
annuity factor
Rs 200,000
=
9.712
= Rs 20,593

9. Gross profit per unit is currently Rs 7 (Rs 13 – Rs 6)

 The product requires a total gross profit of Rs 7  7,000 =
Rs 49,000
If the selling price is reduced by 20%, then the new selling price
= Rs 13 – (20%  Rs 13)
= Rs 13.00 – Rs 2.60
= Rs 10.40

192 CA Sri Lanka

 Answers

 Gross profit per unit of product in the promotional period is

Rs 10.40 – Rs 6.00 = Rs 4.40
The required sales volume for the period is therefore
49,000/4.4= 11,136 units
 The required sales value = 11,136 units  Rs 10.40

= Rs 115,814
Original sales value = Rs 13  7,000 = Rs 91,000
Let x = percentage increase in sales value.
 Rs 91,000  x% = Rs 115,814
 x% = 115,814/91,000 = 1.27
 Percentage increase in sales value required during the promotional
period in order to maintain gross profit is 27%.
The original sales volume = 7,000 units
Sales volume in promotional period = 11,136 units
Let x% = percentage increase in sales volume
 7,000  x% = 11,136
11,136
 x% = = 1.59
7,000
 Percentage increase in sales volume required during the
promotional period in order to maintain gross profit is 59%.

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BL2: Business Mathematics and Statistics

10. Total revenue (TR) = –x2 + 20x

Total cost (TC) = 6x + 21,000
Total profit (TP) = TR – TC
= –x2 + 20x – 6x – 21,000
= –x2 + 14x – 21,000
Assuming that the retailer is seeking to maximise profit, then we need
to differentiate total profit (TP) with respect to x in order to establish
the stationary point.
TP = –x2 + 14x – 21,000
dTP
= –2x + 14
dx
dTP
Profit is maximised when = 0, ie when
dx
–2x + 14 = 0
2x = 14
x=7
 Sales volume = 7,000 units
Substituting x = 7 into our formula for total revenue gives
Total revenue = –x2 + 20x
= –49 + 140
= 91
= Rs 91,000
Total revenue
 Selling price = = 91,000/7,000 = Rs 13 per unit
Number of units

11. Total cost = average cost  output

= (x2 –21x + 183)x
= x3 – 21x2 + 183x
Total revenue = average revenue  output
= (–3x + 102)x
= –3x2 + 102x

12. Profit = total revenue – total cost

= (–3x2 + 102x) – (x3 – 21x2 + 183x)
= –x3 + 18x2 – 81x

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 Answers

dP
13. Profits are maximised or minimised when =0
dx
dP
= –3x2 + 36x – 81
dx
–3x2 + 36x – 81 = 0
x2 – 12x + 27 = 0 (Divide by –3)
(x – 3) (x – 9) = 0 (Factorise using the formula, workings not shown)
So, profits are maximised or minimised when x = 3 or 9.
Using the profit formula
X= 3
Profit = -33 + (18 x 32) – (81x3) = -–108
X=9
Profit = -93 + (18 x 92) – (81x9) = 0
So, x = 3 minimises profits.
So, x = 9 maximises profits and the level of profit is zero

14. Profits are maximised when Dy/Dx = 0

Dy/Dx = -6x +43 = 0
X = 43/6 = 7.2

15. The method of least squares involves using the following formulae for a
and b in y = a + bx.
Let x = the number of holidays booked
Let y = the number of complaints received
n x   x  y
b=
n x2    x 
2

a = y  bx

where n = the number of pairs of data

x = the average x value of all the pairs of data
y = the average y value of all the pairs of data

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BL2: Business Mathematics and Statistics

WORKINGS
x y xy x2 y2
246 94 23,124 60,516 8,836
192 80 15,360 36,864 6,400
221 106 23,426 48,841 11,236
385 183 70,455 148,225 33,489
416 225 93,600 173,056 50,625
279 162 45,198 77,841 26,244
343 191 65,513 117,649 36,481
582 252 146,664 338,724 63,504
610 291 177,510 372,100 84,681
674 310 208,940 454,276 96,100
3,948 1,894 869,790 1,828,092 417,596
Therefore, n = 10 (there are ten pairs of data for x and y values)
x = 3,948
y = 1,894
xy = 869,790
x2 = 1,828,092
y2 = 417,596
n x   x  y (10869,790)  (3,948  1,894)
b = =
n x2    x 
2
10  1,828,092  (3,948)2
8,697,9007,477,512 1,220,388
= = = 0.453
18,280,92015,586,704 2,694,216

1,984 3,948
Therefore a = y  bx =( ) – (0.453  )
10 10
= 189.4 – 178.84
= 10.56
Thus y = 10.56 + 0.453x

16. If the number of holidays booked is 750, then x = 750 and the number
of complaints (y) may be forecast as follows.
y = 10.56 + (0.453  750)
= 10.56 + 339.75
= 350.31, say 351 complaints

196 CA Sri Lanka

 Answers

17.
Weekly gross wage Frequency Cumulative frequency
> 160  180 300 – 280 = 20 20
> 180,  200 280 – 250 = 30 50
> 200,  220 250 – 200 = 50 100
> 220,  240 200 – 120 = 80 180
> 240,  260 120 – 70 = 50 230
> 260,  280 70 – 40 = 30 260
> 280,  300 40 – 10 = 30 290
> 300,  320 10 – 10 = 0 290
> 320,  340 10 – 0 = 10 300
> 340 0= 0 300
300
R
Median = value of lower limit to the class + (  c)
f
where c = size of class interval
f = frequency of class
R = difference between middle member and cumulative total of
frequencies up to end of preceding class
Median is value of wages of 150th employee
150th employee is in the class > Rs 220 but  Rs 240
 c = Rs 20
f = 80
R = 150 – 100 = 50
50
 Median = Rs 220 + Rs (  20) = Rs 232.50
80

18. P(wages > 260) = (30 + 30 + 10)/300 = 7/30 = 23% = B

19. By simple rule of multiplication:

P(wages employee 1 > 240 and wages employee 2 > 240 and wages
employee 3 > 240)
= P(wages employee > 240)  P(wages employee 2 > 240) × P(wages
employee 3 > 240)
= 120/300  120/300 × 120/300 = 8/125 = 6% = B

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BL2: Business Mathematics and Statistics

20. By simple rule of addition:

P(wages either < 180 or > 320)
= P(wages < 180) + P(wages > 320)
= 20/300 + 10/300 = 30/300 = 1/10 = 10% = B
Payment time Midpoint Frequency
x f fx fx2
Days
5–9 7 4 28 196
10–14 12 10 120 1,440
15–19 17 17 289 4,913
20–24 22 20 440 9,680
25–29 27 22 594 16,038
30–34 32 16 512 16,384
35–39 37 8 296 10,952
40–44 42 3 126 5,292
100 2,405 64,895

Σfx
21. D Arithmetic mean = = 2,405/100 = 24.05 days
Σf

Σfx2
22. D Standard deviation =  x2
Σf
= 64,895/100  (24.05)2
= 70.5475 = 8.399 (to 3 decimal places)

23. There are 100 invoices and 24 (16 + 8) lie in the classes covering 30–
39 days old. The probability that an invoice chosen at random will be
between 30 and 39 days old is 24/100 = 0.24.

24. A 2X + 5Y < 500

If you answered B or D, you have the letters the wrong way around and
if you answered C, the symbol is greater than instead of less then.

25. 22

35+24 +2y +17 + y +23

= 22
6
99+3y
 = 22
6
99 + 3y = 132
3y = 33
y = 11
If x = 2y
x = 2  11
= 22

198 CA Sri Lanka

 Answers

26. 13.7

Σfx2 2  fX
Standard deviation = - x where x =
Σf f
2
61,250  1,610 
=  
50  50 

= 1,225  32.22
= 188.16
= 13.7

27. C y = 3x + 20
2
The equation of a straight line is y = ax + b.
The straight line drawn through the points will intercept the y axis at
approximately 20 (a) and the gradient (b) of the line is (change in
y/change in x) which is approximately (120/80) = 1.5

28. C Sample 1 median = average of second and third items in the array, ie
5  5
  =5
 2 
Sample 2 median = the middle (third) item in the array ie 5
The median has the same value, therefore, in both samples.

29. C 50%
If 32  (1 – r)4 = 2
2
(1 – r)4 =
32
2
1–r = 4
32
2
r = 1– 4
32
r = 1 – 0.5
r = 0.5 or 50%

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BL2: Business Mathematics and Statistics

30. B Expected value = probability  profit

Contract Probability Estimated profits Expected value

Rs Rs
A 0.4 600,000 240,000
B 0.25 700,000 175,000
C 0.2 800,000 160,000
2,100,000 575,000
Option A is incorrect because it is just the highest expected value (from
Contract A).
Option C is the arithmetic mean of the estimated profits (Rs 2,100,000
 3 = Rs 700,000)
Option D is the maximum expected profit from any one contract, ie
Rs 800,000 from Contract C.

31. a = – 2.40
b = 0.31

b = nΣxy 2 (Σx)(Σy)
nΣx  (Σx)2
(6×14)  (2×15)
=
(6×30)  22
84  30
=
180  4

= 54 = 0.31
176

y = 15 = 2.5
6
2
x = = 0.33
6
a = y  bx
= 2.5 – (0.31  0.33)
= 2.5 – 0.1023
= 2.40

200 CA Sri Lanka

 Answers

32. B 21
If you successively sum the sales data in groups of 4, there will be 21
four-point moving averages calculated. You then need to do a further
moving average so that trend values can relate to specific actual
figures.
Jot down months 1-24, work out where the moving averages would be
calculated, and then calculate how many there are if you are unsure
how to arrive at the correct answer.

33. D If C = 2,000 + 300P, then fixed costs are Rs 2,000 and variable costs are
Rs 300 per unit.

34. A r2 = 0.652
= 0.4225
Therefore, only just under half of the variation in one variable can be
explained by variation in the other.

Standard deviation
35. C Coefficient of variation =
Mean
3
= = 0.25
12
0.25 as a percentage is 25% (0.25  100%)
If you selected option A, you forgot to multiply the coefficient of
variation by 100%.
If you selected option B, you calculated the coefficient of variation as
(mean  standard deviation) instead of (standard deviation  mean).
You also forgot to multiply your answer by 100%.
If you selected option D, you calculated the coefficient of variation as a
percentage as (mean  standard deviation  100%) instead of
(standard deviation  mean  100%).

V
36. D
R G
V
If R  G
P
V
R–G=
P
V
 P =
R G

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BL2: Business Mathematics and Statistics

37. D 98%

20 30

If z = x  μ
σ
30  20
=
5
10
= =2
5
Using normal distribution tables, when z = 2, this corresponds to a
probability of 0.4772. We must also remember to take into account the
area to the left of  = 20 which corresponds to a probability of 0.5.
The area that we are interested in shown on the graph above therefore
corresponds to a probability of 0.4772 + 0.5 = 0.9772 or 97.72% = 98%

38. B Rs 20,593
PV
Annuity =
annuity factor
200,000
=
9.712
= 20,593
(Note. The annuity factor is found by looking in the cumulative present
value tables where n=15 and r=6%.)
Alternatively, you could have arrived at the same answer by using the
following method.
Final value of loan must equal sum of repayments
Final value of loan = 200,000  (1.06)15 = 479,312
The repayments are a geometric progression. The sum of the
repayments can be found by using the formula for the sum of a
geometric progression.
A(R n  1)
S=
R 1
where S = 479,312
R = 1.06
n = 15

202 CA Sri Lanka

 Answers

A(1.0615  1)
 479,312 =
1.06  1
479,312  0.06 = A(1.0615 – 1)
28,758.72 = A(1.0615 – 1)
28,758.72
A =
 
1.0615  1
A = 20,593

39. D 1 in 1,000,000
Since the electronic alarms operate independently, the failure of one
alarm in no way affects the operation of the other two alarms. We
need to use the simple multiplication law or AND Law.
1 1 1
 Probability of security system failing =  
100 100 100
1
=
1,000,000

40. B 35%
P(faulty component ) = 0.1
P(no faulty components) = 1 – 0.1 = 0.9
P(no faulty components in a box of ten) = 0.910
= 0.3487
= 34.87 or 35%

41. B 12%
Type of fish A B C D Total
Number of fish 400 300 200 100
Annual % increase 10 20 30 40
Number after one year 440 360 260 140 1,200
140
Percentage of Type D fish in lake after one year =  100%
1,200
= 11.67%
= 12%

42. D Year = 2007

Trend = (0.0002  20072) + (0.4  2007) + 30.4
= 805.6 + 802.8 + 30.4
= 1,638.8
Forecast = 1.6  1,638.8
= 2,622.08
Forecast in whole units = 2,622

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BL2: Business Mathematics and Statistics

43. B In 20X8, t = 8
y = 30t – 10
y = (30  8) – 10
y = 240 – 10 = 230
Forecast profits for 20X8 = 230 – 25
= 205
= Rs 205,000
If you selected A, you used t = 9 instead of t = 8. If you selected C, you
have used a multiplicative instead of an additive model.
If you selected D, you have added rather than subtracted the cyclical
component.

44. The probability that this customer is from the east and over 39 years of
age is 0.175 to three decimal places.
WORKINGS
Number of customers from the East and over 39 years of age = 65 + 60
+ 50 =175
Total number of customers = 1,000
175
 Required probability =
1,000
= 0.175

45. B As this is a multiplicative model, the seasonal variations should sum to

4 in this case with an average of 1 as there are 4 quarters.
If x = seasonal variation for quarter 4
1.3 + 1.6 + 0.5 + X = 4
X = 4 – 3.4
X = 0.6

46. A T = Y/S for the multiplicative model

Quarter
1 2
Seasonal component 1.3 1.6
Actual series 120,000 135,000
Trend (T) 92,308 84,375
The trend line for sales has therefore decreased between quarter 1 and
quarter 2.

204 CA Sri Lanka

 Answers

47. –33
Year Y–T Adjustment Adjusted
average
1 16 1 17
2 32 1 33
3 – 18 1 – 17
4 – 34 1 – 33
–4 4 0

48. C A shows strong negative correlation, B shows weak positive correlation

and D shows weak negative correlation.

nΣxy (Σx)(Σy)
49. – 0.968 r =
[nΣx2 (Σx)2 ][nΣy2 (Σy)2
(12×1,674) (137.6×211.5)
=
[(12×2,101.1)  137.62 ][(12×4,879.59)  211.52 ]
20,088  29,102.4
=
(25,213.2  18,933.76)(58,555.08  44,732.25)
= 9,014.4
6,279.44×13,822.83
9014.4
=
9,316.63
= – 0.968

50. A The scatter diagram displays perfect negative correlation. The gradient
of the regression line has a gradient of –1 and cuts the y axis at y=8
(ie when x=0, y=8).

CA Sri Lanka 205

Appendix: Tables
Area under the normal curve
This table gives the area under the normal curve between the mean and the point
Z standard deviations above the mean. The corresponding area for deviations
below the mean can be found by symmetry.

(x  μ)
Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
σ
0.0 .0000 .0040 .0080 .0120 .0160 .0199 .0239 .0279 .0319 .0359
0.1 .0398 .0438 .0478 .0517 .0557 .0596 .0636 .0675 .0714 .0753
0.2 .0793 .0832 .0871 .0910 .0948 .0987 .1026 .1064 .1103 .1141
0.3 .1179 .1217 .1255 .1293 .1331 .1368 .1406 .1443 .1480 .1517
0.4 .1554 .1591 .1628 .1664 .1700 .1736 .1772 .1808 .1844 .1879
0.5 .1915 .1950 .1985 .2019 .2054 .2088 .2123 .2157 .2190 .2224
0.6 .2257 .2291 .2324 .2357 .2389 .2422 .2454 .2486 .2517 .2549
0.7 .2580 .2611 .2642 .2673 .2704 .2734 .2764 .2794 .2823 .2852
0.8 .2881 .2910 .2939 .2967 .2995 .3023 .3051 .3078 .3106 .3133
0.9 .3159 .3186 .3212 .3238 .3264 .3289 .3315 .3340 .3365 .3389
1.0 .3413 .3438 .3461 .3485 .3508 .3531 .3554 .3577 .3599 .3621
1.1 .3643 .3665 .3686 .3708 .3729 .3749 .3770 .3790 .3810 .3830
1.2 .3849 .3869 .3888 .3907 .3925 .3944 .3962 .3980 .3997 .4015
1.3 .4032 .4049 .4066 .4082 .4099 .4115 .4131 .4147 .4162 .4177
1.4 .4192 .4207 .4222 .4236 .4251 .4265 .4279 .4292 .4306 .4319
1.5 .4332 .4345 .4357 .4370 .4382 .4394 .4406 .4418 .4429 .4441
1.6 .4452 .4463 .4474 .4484 .4495 .4505 .4515 .4525 .4535 .4545
1.7 .4554 .4564 .4573 .4582 .4591 .4599 .4608 .4616 .4625 .4633
1.8 .4641 .4649 .4656 .4664 .4671 .4678 .4686 .4693 .4699 .4706
1.9 .4713 .4719 .4726 .4732 .4738 .4744 .4750 .4756 .4761 .4767
2.0 .4772 .4778 .4783 .4788 .4793 .4798 .4803 .4808 .4812 .4817
2.1 .4821 .4826 .4830 .4834 .4838 .4842 .4846 .4850 .4854 .4857
2.2 .4861 .4864 .4868 .4871 .4875 .4878 .4881 .4884 .4887 .4890
2.3 .4893 .4896 .4898 .4901 .4904 .4906 .4909 .4911 .4913 .4916
2.4 .4918 .4920 .4922 .4925 .4927 .4929 .4931 .4932 .4934 .4936
2.5 .4938 .4940 .4941 .4943 .4945 .4946 .4948 .4949 .4951 .4952
2.6 .4953 .4955 .4956 .4957 .4959 .4960 .4961 .4962 .4963 .4964
2.7 .4965 .4966 .4967 .4968 .4969 .4970 .4971 .4972 .4973 .4974
2.8 .4974 .4975 .4976 .4977 .4977 .4978 .4979 .4979 .4980 .4981
2.9 .4981 .4982 .4982 .4983 .4984 .4984 .4985 .4985 .4986 .4986
3.0 .49865 .4987 .4987 .4988 .4988 .4989 .4989 .4989 .4990 .4990
3.1 .49903 .4991 .4991 .4991 .4992 .4992 .4992 .4992 .4993 .4993
3.2 .49931 .4993 .4994 .4994 .4994 .4994 .4994 .4995 .4995 .4995
3.3 .49952 .4995 .4995 .4996 .4996 .4996 .4996 .4996 .4996 .4997
3.4 .49966 .4997 .4997 .4997 .4997 .4997 .4997 .4997 .4997 .4998
3.5 .49977 .49978 .49978 .49979 .49980 .49981 .49981 .49982 .49983 .49983

206 CA Sri Lanka

 Present value table
Present value of Re.1 ie (1+r)-n where r = interest rate, n = number of periods
until payment or receipt.
Periods Interest rates (r)
(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826
3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751
4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683
5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621
6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564
7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513
8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467
9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424
10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386
11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350
12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319
13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290
14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263
15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239
16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218
17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198
18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180
19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164
20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149
21 0.811 0.660 0.538 0.439 0.359 0.294 0.242 0.199 0.164 0.135
22 0.803 0.647 0.522 0.422 0.342 0.278 0.226 0.184 0.150 0.123
23 0.795 0.634 0.507 0.406 0.326 0.262 0.211 0.170 0.138 0.112
24 0.788 0.622 0.492 0.390 0.310 0.247 0.197 0.158 0.126 0.102
25 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.116 0.092
26 0.772 0.598 0.464 0.361 0.281 0.220 0.172 0.135 0.106 0.084
27 0.764 0.586 0.450 0.347 0.268 0.207 0.161 0.125 0.098 0.076
28 0.757 0.574 0.437 0.333 0.255 0.196 0.150 0.116 0.090 0.069
29 0.749 0.563 0.424 0.321 0.243 0.185 0.141 0.107 0.082 0.063
30 0.742 0.552 0.412 0.308 0.231 0.174 0.131 0.099 0.075 0.057

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Present value table
Present value of Re.1 ie (1+r)-n where r = interest rate, n = number of periods
until payment or receipt.
Periods Interest rates (r)
(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694
3 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579
4 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482
5 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402
6 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335
7 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279
8 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233
9 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194
10 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162
11 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135
12 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112
13 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093
14 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078
15 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065
16 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054
17 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045
18 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038
19 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031
20 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026
21 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022
22 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018
23 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015
24 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013
25 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010
26 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009
27 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007
28 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0.008 0.006
29 0.048 0.037 0.029 0.022 0.017 0.014 0.011 0.008 0.006 0.005
30 0.044 0.033 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004

208 CA Sri Lanka

 Cumulative present value table
This table shows the present value of Re.1 per annum, receivable or payable at the end of each year for n
1 (1 r )  n
years .
r

Periods Interest rates (r)

(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736
3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487
4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170
5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791
6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355
7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868
8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335
9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759
10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145
11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495
12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814
13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103
14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367
15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606
16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824
17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022
18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201
19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365
20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514
21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649
22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.442 8.772
23 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883
24 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985
25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077
26 22.795 20.121 17.877 15.983 14.375 13.003 11.826 10.810 9.929 9.161
27 23.560 20.707 18.327 16.330 14.643 13.211 11.987 10.935 10.027 9.237
28 24.316 21.281 18.764 16.663 14.898 13.406 12.137 11.051 10.116 9.307
29 25.066 21.844 19.188 16.984 15.141 13.591 12.278 11.158 10.198 9.370
30 25.808 22.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427

CA Sri Lanka 209

Cumulative present value table
This table shows the present value of Re.1 per annum, receivable or payable at the end of each year for n
1 (1 r )  n
years .
r
Periods Interest rates (r)
(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528
3 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106
4 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589
5 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991
6 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326
7 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605
8 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837
9 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031
10 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192
11 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327
12 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439
13 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533
14 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611
15 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675
16 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730
17 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775
18 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812
19 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843
20 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870
21 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891
22 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909
23 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925
24 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937
25 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948
26 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956
27 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964
28 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970
29 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975
30 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979

210 CA Sri Lanka

 Probability
AB = A or B. AB = A and B (overlap). P(B/A) = probability of B, given A.

Rules of addition
If A and B are mutually exclusive: P(AB) =P(A) + P(B)
If A and B are not mutually exclusive: P(AB) = P(A) + P(B)  P(AB)

Rules of multiplication
If A and B are independent: P(AB) = P(A) * P(B)
If A and B are not independent: P(AB) = P(A) * P(B/A)
E(X) = expected value = Σ probability * payoff

Quadratic equations
If aX2 + bX + c = 0 is the general quadratic equation, then the two solutions (roots)
are given by

–b± b2 – 4ac
X=
2a

Descriptive statistics
For ungrouped data For grouped data
Mean

X
X fX
n f
Variance
2 2
 X  X  f  X  X 
 2  n f
X 2  X 2 fX 2  X2
n f
Coefficient of variation
Standard deviation
CV = × 100%
Mean

Time series
Additive model: Series = Trend + Seasonal
Multiplicative model: Series = Trend * Seasonal

CA Sri Lanka 211

Linear regression and correlation
The linear regression equation of Y on X is given by:
Y = a + bX or
Y  Y = b(X – X), where
Covariance (XY) ∑  – (∑ )(∑ )
b = =
Variance (X) ∑  –( ∑ )

and a = YbX ,

or solve Y = na + bX
XY = aX + bX2

Coefficient of correlation (r)

Covariance (XY)
r =
VAR(X).VAR(Y)

n XY –( X)( Y)
=
[n X –
2
  X ][n Y –   Y ]
2 2 2

Financial mathematics
Compound Interest (Values and Sums)
Future Value of S1 of a sum X, invested for n periods, compounded at r% interest:

S = X 1 + r
n

Annuity
Present value of an annuity of £1 per annum receivable or payable, for n years,
commencing in one year, discounted at r% per annum:

1 1 
PV = 1 – 
r  [1 + r]n 
 
Perpetuity
Present value of £1 per annum, payable or receivable in perpetuity, commencing
in one year discounted at r% per annum
1
PV =
r

Loan repayments

A = S × R^n × (R -1) ÷ (R^n - 1)

212 CA Sri Lanka