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Assignment # 1: Solution

This document contains 7 math problems and their solutions related to finance topics like taxes, salaries, interest, loans, and discounts. The problems calculate taxable income, gross remuneration, discounts, future and present values, and maximum loan amounts. The solutions show the step-by-step work and formulas used to arrive at the final answers.

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526 views5 pages

Assignment # 1: Solution

This document contains 7 math problems and their solutions related to finance topics like taxes, salaries, interest, loans, and discounts. The problems calculate taxable income, gross remuneration, discounts, future and present values, and maximum loan amounts. The solutions show the step-by-step work and formulas used to arrive at the final answers.

Uploaded by

anon_605229
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Assignment # 1

MTH302 (Fall 2010)

Total marks: 10
Lecture # 1 to 8
Due date: 28-10-10

Question 1:

If the basic salary of an employee is Rs. 37000 and allowances are Rs. 22,000.
What is the taxable income of employee?
SOLUTION:-
Basic salary = 37,000Rs.
Allowances = 22,000Rs.
%Allowances = (22,000/37,000)*100= 59.46%
Allowed non-taxable allowances = 50%= 0.5*37,000 = 18,500Rs.
Taxable allowances = 59.46% - 50% = 22,000-18,500 = 3,500Rs.
Hence 3500Rs. Of allowance are taxable
Total taxable income = 37,000+3,500=40,500Rs.
Add back to the income of the company = 9.46% allowance = 3,500Rs.

Question 2:

If the salary and allowances of an employee is as follows:


Basic salary = Rs. 12,000
House Rent Allowance = 45%
Conveyance Allowance = 5%
Utilities Allowance = 7%
Group Insurance/Medical = 0%
Misc. Social Charges = 5.8%
There are 12 casual, 24 earned and no sick leaves per year where as normal working days
per month are 26. Find the Gross remuneration of the employee.

Solution:-
Basic salary = 12000Rs.
House rent allowance = 0.45*12000= 5,400Rs.
Conveyance allowance = 0.05*12000= 600Rs.
Utilities allowance = 0.07*12000= 840Rs.
Total allowance = 5400+600+840=6840Rs.
Gross salary = Basic salary + total allowances
= 12000+6840=18840Rs.

Social charges:-
Total social charges= 5.8%*18840 = 1092.72

Leaves:-
Gross salary = 18840Rs.
Cost of casual leaves per year =
{12/ (26*12)*18840*12/12=724.615Rs.
Cost of earned leaves per year =
{24/ (26*12)*18840*12/12= 1449.23
Total cost of leaves per year = 724.615+1449.23 =2173.845.

Gross remuneration: - 18840+1092.72+724.615+1449.23 =


22106.57
Question 3:

A trade discount series of 20, 10, and 5 is offered on an item which has a list price of Rs.
9100. Find the amount of discount and the net price.

Solution:-

D=R*L
=0.20*9100=1820
N=9100-1820=7280
D=R*L
=0.10*7280=728
N=7280-728=6552
D=R*L
=0.05*6552=327.6
N=6552-327.6=6224.4

Hence total Discount= 1820+728+327.6=2875.6


Net price = 9100-2875.6=6224.4

Shortcut method:-
N= L*(1-d1)(1-d2)(1-d3)
N= (1-20%) (1-10%) (1-5%)*9100
N= 0.80*0.90*0.95*9100=6224.4
Discount = L-N
= 9100-6224.2 = 2875.6
Question 4:

If your goal is to have an amount of 325000 in seven years and you can get interest rate
of 9% per annum compounded annually. How much would you need to invest now?

Solution:-
PV= FV
(1+r)^n
= 325000/ (1+9/100) ^7
= 325000/ (1+0.09) ^7
= 325000/ (1.09) ^7
= 325000/1.83
PV = 177595.63

Question 5:

If you start saving Rs. 28,000 at the end of each six month, and you get interest rate 11%
(per annum) compounded semi-annually, how much will you have accumulated at the
end of 20 years?
SOLUTION:-
FV= C*(1+i) ^n-1__
I
Fv = 28000* (1+11%/2) ^20*2-1
11%/2
Fv = 28000 *(1+0.055) ^40-1
0.055
Fv = 28000*(1.055) ^40-1
0.055
Fv = 28000* (8.513-1)
0.055
Fv = 28000* (7.513)
0.055
Fv =
28000* 136.60
Fv = 3824800
Question 6:

The price of an item decreased from Rs. 856 to Rs.752. What is the percentage change in
price of item?

Solution:-
Change/decreased in prices = (final value- initial value)

=752-856 = - 104

Percentage change= (change /initial value)*100

% change= -104/856*100= -12.15%

Question # 7

Suppose you can afford to pay 9,000 per month on a loan. How much can you borrow if
the loan is for a period of 15 years and the interest rate is 5% per annum compounded
monthly?

SOLUTION:-
1
PV = C[1 − ]/ i
(1 + i )n

1
PV = 9000[1 − ]/ 5%
(1 + 5%)15*12

1
PV = 9000[1 − ]/ 0.05
(1 + 0.05)180

1
PV = 9000[1 − ] / 0.05 /12
(1 + 0.05 /12)180

1
PV = 9000[1 − ] / 0.0042
(1.0042)180
1 − 0.4702
PV = 9000[ ]
0.0042

0.52972
PV = 9000[ ]
0.0042

PV = 9000(126.119)

= 1135071

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