Mathematics for Business and Social Sciences

DR. M. Koorapetse

September 18, 2025

University of Botswana
Department of Mathematics

DR. M. Koorapetse Mathematics for Business and Social Sciences

SIMPLE INTEREST
Simple interest is given by

I “ Prn
I stand for Interest, P for Principal(Sum of money lent or borrowed), r
for rate of interest(% p.a.) expressed as a decimal and n is the number of
years.
The total amount A, also called the accumulated value or the future
value, is given by
A “ P ` I “ P ` Prn “ Pp1 ` rnq
Example 1
1. Find simple interest on P2000 at 8% pa in 15 years.
2. Find simple interest and total amount on P156.00 invested for 3
years at the rate of 5% per annum.
3. Atang borrows P600 for 5 months at a simple interest rate of 15%
per year. Find the interest, and the total amount she is obligated to
pay?
4. A Visa credit card company charges a 1.5% finance charge each
month on the unpaid balance. If Martha owed P2350 and has not
paid her bill for three months, how much does she owe now?
DR. M. Koorapetse Mathematics for Business and Social Sciences
Discount and Proceeds
Banks often deduct the simple interest from the loan amount at the time
that the loan is made. When this happens, we say the loan has been
discounted. The interest that is deducted is called the discount, and the
actual amount that is given to the borrower is called the proceeds. The
amount the borrower is obligated to repay is called the maturity value.
If an amount M is borrowed for a time n at a discount rate of r per year,
then the discount D is

D “ Mrn
The proceeds P, the actual amount the borrower gets, is given by

P “ M ´ D “ M ´ Mrn “ Mp1 ´ rtq

where interest rate r is expressed in decimals.
Example 2
1. Thuto borrows P1200 for 10 months at a simple interest rate of 15%
per year. Determine the discount and the proceeds.
2. If Thuto wants to receive P1200 for 10 months at a simple interest
rate of 15% per year, what amount of loan should he apply for?
DR. M. Koorapetse Mathematics for Business and Social Sciences
COMPOUND INTEREST
Formulas for calculating compound interest are as follows
1. Compounded annually:
A “ Pp1 ` r qn
P is the Principal,
n is the number of years,
r is the rate of interest expressed as a decimal.
2. NOT Compounded annually:
´ r ¯mn
A“P 1`
m
m is the number of times interest is calculated in one year
Example 3
1. Find the interest earned by each of the following deposits
(a) P3000 at 5% pa compounded annually for 7 years
(b) P6500 at 20% pa compounded semi-annually for 5 years
(c) P7200 at 4% pa compounded weekly for 3 years
2. A lawn mower is valued at P750 and appreciates by 12% a year.
Find its value after 3 years.
3. The population of a village was 2500 in 2010, if the population
grows by 7% every year, estimate the population in 2021.
DR. M. Koorapetse Mathematics for Business and Social Sciences
Cont...

Solution
1. Find the interest earned by each of the following deposits
(a) P1 221.30
(b) P10359.33
(c) P917.60
2. P1053.70
3. 5262.

DR. M. Koorapetse Mathematics for Business and Social Sciences

NOMINAL AND EFFECTIVE INTEREST RATE
NOMINAL AND EFFECTIVE INTEREST RATE
Interest can be thought of as nominal or effective. An interest rate which
is quoted as an annual rate but is calculated at shorter time intervals is
called a nominal rate of interest, eg, interest quoted as 8% pa but
calculated or compounded monthly.
The true rate of interest earned is called the effective rate of interest and
is expressed in annual terms as the annual percentage rate(APR),
´ r ¯m
APR “ 1 ` ´1
m
where r is the nominal or quoted rate of interest in decimal,
m is the number of times interest is calculated in one year.
Example 4
1. Interest on a credit card is quoted as 23% pa compounded monthly.
What is the effective annual interest rate?
2. What is the effective annual interest rate for a loan quoted as 21%
pa compounded quarterly?
Solution
1. 25.6%
2. 22.7%
DR. M. Koorapetse Mathematics for Business and Social Sciences
DEPRECIATION

Depreciation maybe defined as that part of the cost of a fixed asset that
is used up during its period of use by a business. It is calculated by

D “ Pp1 ´ r qn

Example 5
1. A machinery depreciates by 14% every year. In 2016, the value was
P15600. Find its value in 2021.
SOLUTIONS
1. P7338.66

DR. M. Koorapetse Mathematics for Business and Social Sciences

Project Appraisal
What is the Investing?
Investing is where you use money to make more money. There are so
many methods that we can use to improve our money such as,
1. Invest in the bank
2. Invest in the stock exchange market
3. Invest in a business etc
There is a risk when we invest. Risk should be minimized. Example:
some banks pay low interest, but they are having low risk. Some banks
give high interest, but they are high risk also. How can you tell whether
an investment is risky? Or which investment is more risky than others?
There are many ways to compare investments, but two of the most
popular ways are:
1. Net Present Value
2. Internal Rate of Return
First let us learn what Present Value is?
Present Value (PV)
Money now is more valuable than money later on. Why? Because you
can use money to make more money! You could run a business, or buy
something now and sell it later for more, or invest the money in the bank
to earn interest.
DR. M. Koorapetse Mathematics for Business and Social Sciences
PRESENT VALUE, PV
Example
You can get 10% interest per annum on your money. So P1000 now can
earn P1000x10% “ P100 in a year. Your P1000 now can become P1100
in a year’s time.
PRESENT VALUE FORMULA
Present Value “ Future value(FV) ˆ Discount factor, i.e.
FV
PV “ FV p1 ` r q´n “
p1 ` r qn
The process of calculating PV by this formula is called discounting.
Example 6
1. Rosinah promised you to pay P2000 in 4 years time. What is the
Present Value (using at 10% rate of discount)?
2. Find the Present Value of P250 000 given an annual discount rate of
10% receivable in 5 years.
3. If you will get P3000 in 3 years , what is the present Value
(discounting rate is 10%)
4. What is value now if you get P6500 in next year at the rate of 8.5%?
5. What is the value now if you get P6500 in next year the rate of 15%?
Solution
DR. M. Koorapetse Mathematics for Business and Social Sciences
Present value of a stream of cash flows

In many situations, there are multiple cash flows to value. The present
value of a stream of cash flows is the sum of the present values of the
individual cash flows.
C1 C2 Cn
PV “ ` 2
` ... `
1`r p1 ` r q p1 ` r qn

Where Cn is the cash flow at time n.

Example 7
1. Find the Present Value (PV) of P3000 payable in arrears at the end
of each year for 3 years at a discounted rate of 11%.
2. Find the Present Value of P600 payable in arrears at the end of
each year for 4 years at a discounted rate of 5%.

DR. M. Koorapetse Mathematics for Business and Social Sciences

NET PRESENT VALUE, NPV

The net present value (NPV) is a popular method for valuing business
investments.
‚ To calculate an NPV, calculate the present value of the cash flows
generated by an investment, and subtract today’s cost.
‚ If the NPV is greater than zero (positive), present value of the
future cash flows exceed the cost, and the investment should be
undertaken.
‚ When the NPV is less than zero (negative), the investment should
not be undertaken.
Formula for NPV

NPV “ PV ´ Cost

DR. M. Koorapetse Mathematics for Business and Social Sciences

Example 8
1. Peleng millers plan to acquire a new grinding machine at P18000
with net cash inflows over its 5 year useful life as shown.
Year 1 2 3 4 5
Cash inflow (P) 8000 8000 8000 8000 8000
Using a discount rate of 10% find the NPV.
Solution
PV “ 8000 8000 8000 8000 8000
1.1 ` 1.12 ` 1.13 ` 1.14 ` 1.15 “ 30326.30
So NPV “ 30326.30 ´ 18000 “ P12326.30.
Since net cash inflows are bigger than the net cash outflows, i.e. net
cash flow is positive which means that the project is profitable.
2. Olorato needs P1 000 now, and will pay you back P1 350 in a year.
Is that a good investment when you can get at 10% per year?
3. Matshelo invest P20 000 now and receive 3 yearly payments of P5
000 each, plus P12 000 in the 3rd year. Use 10% discount Rate.
Find NPV.
4. A project with a 4 year life and a cost of P225 000 generates
revenue of P48 000 in year 1, P67 000 in year 2, P95 000 in year 3
and P110 000 in year 4. If the discount rate is 15%, Can the project
be accepted?
DR. M. Koorapetse Mathematics for Business and Social Sciences
Equation of a straight line

General form:
y “ mx ` c,
where m is the gradient/slope of the line and c is the y-intercept. Given
the line joining the points px1 , y1 q and px2 , y2 q, then
y2 ´ y1
m“
x2 ´ x1
.
Example 1
Calculate the gradient or slope of the line joining the points Ap2, 3q and
Bp´1, ´6q.
Solutions

y2 ´ y1 ´6 ´ 3
m“ “ “3
x2 ´ x1 ´1 ´ 2

DR. M. Koorapetse Mathematics for Business and Social Sciences

Equation of a line given two points on the line

Example 2
Find the equation of the line joining the points Ap2, 3q and Bp´1, ´6q.
Solution
In Example 1 we have already found the gradient of the line, m “ 3. Next
is to find c using the equation y “ mx ` c, i.e. 3 “ 3p2q ` c “ 6 ` c,
therefore c “ 3 ´ 6 “ ´3. Then the equation of the line AB is

y “ 3x ´ 3

DR. M. Koorapetse Mathematics for Business and Social Sciences

Equation of the line given the gradient and a point on the
line

Example 3
Find the equation of a line with gradient m “ ´ 25 and passing through
the point p4, 2q.
Solution
Find c using the equation y “ mx ` c, i.e. 2 “ ´ 52 p4q ` c “ ´ 58 ` c,
therefore c “ 2 ` 85 “ 18
5 . Then the equation of the line is

2 18
y “´ x`
5 5
.

DR. M. Koorapetse Mathematics for Business and Social Sciences

Coordinates of the mid-point of two points

Given the two points px1 , y1 q and px2 , y2 q, the mid-point of the two
points is given ˆ ˙
x1 ` x2 y1 ` y2
,
2 2
Example 4
Find the midpoint of the points Ap2, 3q and Bp´1, ´6q.
Solution
ˆ ˙ ˆ ˙ ˆ ˙
x1 ` x2 y1 ` y2 2 ` p´1q 3 ` p´6q 1 ´3
, “ , “ ,
2 2 2 2 2 2

DR. M. Koorapetse Mathematics for Business and Social Sciences

Distance between two points (Length of line joining two
points)

Given the two points Apx1 , y1 q and Bpx2 , y2 q, the length of the line AB is
a
LAB “ px1 ´ x2 q2 ` py1 ´ y2 q2 .

Example 5
Find the length of the line joining the points Ap2, 3q and Bp´1, ´6q.
Solution
a ?
LAB “ p2 ´ p´1qq2 ` p3 ´ p´6qq2 “ 90 “ 9.49 units.

DR. M. Koorapetse Mathematics for Business and Social Sciences

Inequalities with one and two variables

inequality signs
‚ ă represents less than
‚ ď represents less than or equal to
‚ ą represents greater than
‚ ě represents greater than or equal to.
Example 6
Solve the following inequalities.
1. 3x ´ 1 ě 14 2. 3 ´ 2x ď 7
Solution
1.

3x ´ 1 ě 14 2. 3 ´ 2x ď 7
3x ě 15 ´ 2x ď 4
x ě 5. x ě ´2.

DR. M. Koorapetse Mathematics for Business and Social Sciences

Example 7
List all the integers satisfying the inequality

9 ă 2x ´ 1 ď 17

Solution
Split the inequality into two inequalities and solve them independently
i.e. 9 ă 2x ´ 1 and 2x ´ 1 ď 17

9 ă 2x ´ 1 2x ´ 1 ď 17
10 ă 2x 2x ď 18
5 ă x. x ď 9.

combining the inequalities we get

5 ă x ď 9.

therefore the x takes the integers {6,7,8,9}

DR. M. Koorapetse Mathematics for Business and Social Sciences

Forming and graphing inequalities

The following steps can be used to graph inequalities with one or two
variables.
‚ Change the inequalities into Linear equations.
‚ Find the intercepts of the linear equations.
‚ Use the two points to draw the line joining the points.
‚ Identify the region that satisfies the inequality.
‚ Shade the wanted or the unwanted region.

DR. M. Koorapetse Mathematics for Business and Social Sciences

Example 8

Kabo is selling pizzas to raise money for a school trip. Cheese pizza cost
P60 and tikka chicken cost P90. Kabo need to sell at least two of each
kind of pizza, and he can only sell up to P1800 worth of pizza.
paq Write three linear inequalities that represent the information given
above.
pbq Hence, graph the inequalities to determine the feasible region.
pcq How many of each kind is he able to sell to generate the maximum
revenue?
Solution
Let x be the number of cheese pizza and y be the number of tikka
chicken.
paq x ě 2, y ě 2 and 60x ` 90y ď 1800

DR. M. Koorapetse Mathematics for Business and Social Sciences

Graph

pbq we draw the lines x “ 2, y “ 2 and 60x ` 90y “ 1800

pcq by selling 3 cheese pizza and 18 tikka chicken he will make the
maximum revenue of P1800

DR. M. Koorapetse Mathematics for Business and Social Sciences