INSTITUTE OF ACCOUNTANCY ARUSHA (IAA)
FACULTY OF FINANCE AND ACCOUNTANCY
AFU 07128/ AFU 07104: BUSINESS MATHEMATICS AND STATISTICS
PROGRAMS: BA I, BAF I, BB APPR & BFI I
TOPICS: MATHEMATICS OF FINANCE
TUTORIAL QUESTIONS TWO
ACADEMIC YEAR: 2025/2026
SEMESTER: I
FACILITATOR: [Link] NKINDWA
LEARNING SUPPORT NOTES
i. Believe in your ability
Business Mathematics is not about memorizing formulas; it is about
understanding ideas and applying logic. Every student can succeed with
practice and patience.
ii. Connect mathematics to real business situations
Always relate calculations to real-life business activities such as profit, cost,
revenue, interest, budgeting, and investment decisions. This will make learning
easier and more meaningful.
iii. Practice regularly
Mathematics improves through consistent practice. Attempt examples,
homework, and past questions even if you make mistakes—mistakes are part
of learning.
iv. Show all working steps
In business mathematics, correct reasoning is as important as the final answer.
Clearly showing steps helps you gain partial marks and improves your
understanding.
v. Ask questions without fear
Do not hesitate to ask questions in class or during discussions. Clarifying small
doubts early prevents confusion later.
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vi. Work collaboratively
Discuss problems with classmates, explain solutions to each other, and learn
different problem-solving approaches. Teamwork strengthens understanding.
vii. Be patient and persistent
Some topics may seem challenging at first. Stay calm, revisit examples, and
practice step-by-step. Improvement comes with effort.
viii. Use mathematics as a decision making tool
Remember, business mathematics helps you make informed financial and
managerial decisions. The skills you learn here are valuable for your future
career.
ix. Maintain academic integrity
Attempt all work honestly. Your effort and original thinking are more
important than perfect answers.
x. Stay positive and confident
Confidence grows with effort. Each problem you solve builds your skills and
prepares you for real-world business challenges
QUESTIONS
1. Nkindwa borrowed Tshs200, 000 for 3 months at 12% annual simple interest
rate. Calculate the total amount of Interest
2. Nyando borrowed an amount of Tshs73, 000 from Sohail for 20 days at 18%
annual simple interest rate. Determine the amount of simple interest and the
total amount received by Sohail at the end of maturity period.
3. Jenna borrowed Tshs10 million for 3 years from Benny. Benny agreed to lend
the amount and Jenna had to pay
4. Tshs2.7 million simple interest at the end of three years along with the principal
amount. What is rate of interest?
5. Rosy deposited Tshs100, 000 for 5 years in the bank. Bank provides 5%
compound interest. Interest is deposited by bank every month. What amount
will she receive at the end of the maturity period?
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6. What is the amount and interest earned after 5 years if TZS 10,000 is invested
at 8% compounded?
(a). Annually
(b). Semi-annually
(c). Quarterly
(d). Monthly
(e). Daily
7. A person with $14,000 is trying to decide whether to purchase a car now or to
invest the money at 6.5% compounded semi-annually and then buy a more
expensive car. How much will be available for the purchase of a car at the end
of 3 years
8. John is considering two investment options to invest TZS 1,000,000/=. Option
A offers an interest rate of 6% compounded annually, while option B offers an
interest rate of 5% compounded semi-annually. What is the best option to be
invested after 5 years?
9. James wants to save up $12,000 for a vacation. He decides to invest $3,000
into a high-yield savings account that offers an annual compound interest rate
of 4%. How many years will it take for James to reach his vacation savings
goal if compounded semi-annually?
[Link] you invest $1,000 into a savings account with an annual interest rate of 6%,
what will be the future value of the investment after 10 years?
[Link] the future value of an investment is $5,000 after 5 years and the interest rate
is 8% annually, what is the present value of the investment?
12.A bond with a face value of $1,000 will mature in 5 years, and the annual
interest rate is 4%. What is the present value of the bond?
13.A real estate property is expected to generate $1,500 in monthly rental income
for the next 10 years. Assuming a discount rate of 6%, what is the present value
of the rental income stream?
[Link] you contribute $200 to your retirement account every month, and the account
earns an annual interest rate of 7%, what will be the future value of your
retirement savings after 30 years?
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[Link] expect to receive $50,000 at the end of 15 years. If the discount rate is
10%, what is the present value of this future sum?
[Link] you invest $2,500 into a mutual fund with an average annual return of 9%,
what will be the future value of your investment after 20 years?
17. A company wants to accumulate TZS 5,000,000 in 5 years to replace a
machine. If money earns 8% compounded annually, find the annual sinking
fund instalment.
18. A municipality plans to redeem a bond of TZS 10,000,000 after 10 years. If
the sinking fund earns 6% compounded annually, calculate the yearly
contribution.
[Link] of the following statements are correct?
1. The sensitivity of a project variable can be calculated by dividing the project
net present value by the present value of the cash flows relating to that project
variable
2. The expected net present value is the value expected to occur if an
investment project with several possible outcomes is undertaken once
3. The discounted payback period is the time taken for the cumulative net
present value to change from
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 1, 2 and 3
[Link] capital budgeting decision depends in part on the
A. Availability of funds.
B. Relationships among proposed projects.
C. Risk associated with a particular project.
D, All of these.
[Link] a company's required rate of return is 10% and, in using the net present value
method, a project's net present value is zero, this indicates that the
A. Project's rate of return exceeds 10%.
B. Project's rate of return is less than the minimum rate required.
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C. Project earns a rate of return of 10%.
D. Project earns a rate of return of 0%.
22.A tourist hotel in Arusha is planning to invest in a new eco-friendly conference
hall to attract international tour operators and NGOs. The project requires an
initial investment of TZS 120 million. The expected net cash inflows from the
project are:
YEAR CASH INFLOW (TZS MILLION)
1 35
2 40
3 45
4 30
The hotel uses a discount rate of 10%.
Required:
(a). Calculate the Net Present Value (NPV) of the project.
(b). Interpret the NPV result and advise management whether the hotel
should undertake the investment.
(c). Explain how the NPV decision supports long-term financial
sustainability in Arusha’s tourism industry.
[Link] company operating in Arusha National Park is considering two mutually
exclusive investment projects to improve tourist services:
Project A: Purchase of new safari vehicles
Project B: Development of an online booking and payment system
Both projects require an initial investment of TZS 80 million. The expected net
cash inflows are shown below:
YEAR PROJECT A (TZS MILLION) PROJECT B (TZS MILLION)
1 30 20
2 30 30
3 25 40
4 20 35
The company’s required rate of return is 12%.
Required:
(a). Calculate the NPV for each project.
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(b). Using the NPV rule, recommend which project should be selected and
justify your choice.
[Link] Company is evaluating two alternative machines that are expected to
generate significant reductions in assembly costs. Each machine requires an
initial investment of $14,000 and has an estimated useful life of four years,
with no residual (salvage) value at the end of its life. The company applies a
required rate of return of 12% and prefers investments that recover the initial
cost within the first half of the project’s lifespan. The projected annual after-
tax cash savings for each machine are shown in the table below.
YEAR MACHINE A($) MACHINE B($)
1 5,000 8,000
2 5,000 6,000
3 5,000 4,000
4 5,000 2,000
TOTAL 20,000 20,000
Required:
(a). Compute the net present value for each machine.
(b). Which machine should be purchased?
25.B Company is considering purchasing equipment that costs $235,000. The
equipment has an estimated useful life of 5 years and no salvage value. B
Company believes that the annual cash inflows from using the equipment will
be $65,000.
Required:
(a). Calculate the net present value of the equipment assuming that B
Company's cost of capital is 12%. Is the equipment an acceptable
investment?
(b). Calculate the net present value of the equipment assuming that B
Company's cost of capital is 10%. Is the equipment an acceptable
investment?
26.A tour-operating company in Arusha invested in a digital safari-booking
platform to attract international tourists. The project has an initial investment
of TZS 100 million and a useful life of 4 years. The company’s required rate
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of return is 10%.The net present value (NPV) of the project has been calculated
and found to be TZS 12 million. The expected net cash inflows are as follows:
YEAR NET CASH INFLOW (TZS MILLION)
1 30
2 x
3 y
4 35
Assume that the cash inflows in Year 2 and Year 3 are equal.
Required:
(a). Using the NPV formula, determine the value of the annual cash inflow
in Year 2 and Year 3.
(b). Briefly explain what a positive NPV of TZS 12 million implies for
investment decisions in Arusha’s tourism industry.
27.A tourist lodge located on the outskirts of Arusha city plans to renovate its
guest rooms to meet international tourism standards. The renovation requires
an immediate investment of TZS 150 million. The project has a useful life of 5
years, and the lodge uses a 12% discount rate.
The lodge expects to receive:
TZS 40 million at the end of Year 1,
TZS 50 million at the end of Year 5, and equal net cash inflows at the end of
Year 2 and Year 3, while the Year 4 cash inflow is twice the cash inflow of
Year 2.
After evaluation, the NPV of the project is TZS 18 million.
Required:
(a). Determine the annual net cash inflow in Year 2 and Year 3.
(b). Calculate the net cash inflow in Year 4.
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