Business Mathematics & Statistics – Complete
Preparation Notes
These notes cover the full syllabus shown in the images (Units U2–U6). They include definitions,
formulas, computational methods, and key exam concepts.
UNIT 2 – BASIC MATHEMATICS OF FINANCE
1. Simple Interest
Simple Interest is calculated only on the original principal.
Formula: SI = (P × R × T) / 100
Amount: A = P + SI
Where P = Principal, R = Rate of Interest, T = Time in years
2. Compound Interest
Interest is calculated on principal plus accumulated interest.
Amount Formula: A = P (1 + R/100)^n
Compound Interest: CI = A − P
Half-yearly compounding: A = P (1 + R/200)^(2n)
Quarterly compounding: A = P (1 + R/400)^(4n)
3. Nominal and Effective Rate
Nominal Rate: Stated annual interest rate.
Effective Rate Formula: Effective Rate = (1 + R/m)^m − 1
m = number of compounding periods per year
4. Continuous Compounding
Formula: A = Pe^(rt)
e = 2.718
5. Present Value and Discounting
Future Value: FV = PV(1+r)^n
Present Value: PV = FV / (1+r)^n
6. Annuities
An annuity is a series of equal payments at equal time intervals.
Future Value of Ordinary Annuity: FV = R[(1+i)^n − 1]/i
Future Value of Annuity Due: FV = R[(1+i)^n − 1]/i × (1+i)
UNIT 3 – PROBABILITY
Meaning of Probability
Probability measures the likelihood of an event occurring.
Formula: P(E) = Favorable outcomes / Total outcomes
Range: 0 ≤ P(E) ≤ 1
Rules of Probability
Addition Rule: P(A ∪ B) = P(A) + P(B) − P(A ∩ B)
Multiplication Rule: P(A ∩ B) = P(A) × P(B) (for independent events)
Conditional Probability
P(A|B) = P(A ∩ B) / P(B)
Bayes Theorem
P(Ai|B) = [P(Ai)P(B|Ai)] / Σ[P(Ai)P(B|Ai)]
Probability Distributions
Bernoulli Distribution: Only two outcomes – success or failure.
Binomial Distribution: P(X=r) = nCr × p^r × q^(n−r)
Poisson Distribution: P(X=x) = e^(−λ) λ^x / x!
Normal Distribution: Bell-shaped curve with Mean = Median = Mode
UNIT 4 – MEASURES OF CENTRAL TENDENCY
Arithmetic Mean
Direct Method: Mean = ΣX / N
Grouped Data: Mean = ΣfX / Σf
Assumed Mean Method
Mean = A + (Σfd / Σf)
Where A = assumed mean, d = X − A
Step Deviation Method
Mean = A + (Σfu / Σf) × h
Where u = (X − A)/h and h = class interval
Median
Median = L + [(N/2 − cf) / f] × h
Mode
Mode = L + [(f1 − f0) / (2f1 − f0 − f2)] × h
MEASURES OF DISPERSION
Range = Maximum − Minimum
Quartile Deviation = (Q3 − Q1) / 2
Mean Deviation = Σ|X − Mean| / N
Standard Deviation
Direct Method: σ = √[Σ(X − Mean)^2 / N]
Assumed Mean Method: σ = √[(Σfd² / Σf) − (Σfd / Σf)^2]
SKEWNESS
Skewness measures asymmetry of a distribution.
Positive Skew: Mean > Median > Mode
Negative Skew: Mean < Median < Mode
Karl Pearson Coefficient
Sk = (Mean − Mode) / Standard Deviation
Alternative: Sk = 3(Mean − Median) / Standard Deviation
Bowley Coefficient
Sk = (Q3 + Q1 − 2Median) / (Q3 − Q1)
KURTOSIS
Kurtosis measures the peakedness of a distribution.
Mesokurtic: Normal distribution
Leptokurtic: More peaked
Platykurtic: Flatter
Coefficient of Kurtosis: β2 = µ4 / (µ2)^2
Excess Kurtosis: γ2 = β2 − 3
UNIT 5 – CORRELATION
Correlation measures relationship between two variables.
Types: Positive, Negative, Zero correlation
Karl Pearson Correlation
r = [nΣxy − (Σx)(Σy)] / √{[nΣx² − (Σx)²][nΣy² − (Σy)²]}
Spearman Rank Correlation
ρ = 1 − (6Σd² / n(n² − 1))
Probable Error
PE = 0.6745 (1 − r²) / √n
REGRESSION ANALYSIS
Regression predicts one variable using another.
Regression line of Y on X: Y − ■ = b_yx (X − X■)
Regression line of X on Y: X − X■ = b_xy (Y − ■)
UNIT 6 – TIME SERIES ANALYSIS
A time series is data arranged in chronological order.
Components
Trend (T) – long term movement
Seasonal Variation (S) – regular seasonal changes
Cyclical Variation (C) – business cycle fluctuations
Irregular Variation (I) – unpredictable events
Models
Additive Model: Y = T + S + C + I
Multiplicative Model: Y = T × S × C × I
Trend Measurement
Semi Average Method
Moving Average Method
Least Squares Method: Y = a + bx
These notes summarize the complete syllabus and formulas necessary for exam preparation.