SEMI FINALS COVERAGE (12 hours)

Intended Learning Outcomes: At the end of the modules, the students should be
able to: Recall the different terms and basic concepts in statistics; and compute and
interpret the mean, median, and mode of ungrouped and grouped data applying the
MS Excel.

Specific Instructions in the completion of this Chapter:

1. Student must read and understand the Intended Learning Outcomes specified
above and make it as a checklist of acquired knowledge and skills after
completing the entire chapter. This shall be the basis of the teacher in the
formulation of the Summative evaluation given at the end of the chapter.
2. Students must carefully study the given lecture notes and take note of topics
that were not clearly stated or understood by the student. These areas can be
referred to the subject teacher during consultation hours provided for the
students to contact the teacher. The registrar the scheduled class hours sets
the set consultation hours.
3. Study the discussions and insights given and follow instructions for activities if
there are.
4. A flash drive will be given containing the different topics and pre-downloaded
video clips as supplement to the given discussion in this learning guide. Should
there be further queries; feel free to contact the teacher through the FB
Messenger or through text or call.
5. Upon completion of all the lessons and topics presented, answer the self-
reflection questions given to you. Check the instruction of to answer and what
to do to comply with required answers.
6. Compile your outputs in your Learning Portfolio to be submitted at specific
date by your teacher.

Key Terms
Central Tendency
Divisions of Statistics
Frequency distribution table
Levels of Measurement
Mean
Median
Mode
Statistics
Variability
 MODULE 4: BASIC STATISTICS

OVERVIEW of the LESSON:

One of the most important disciplines in mathematics is Statistics. It provides us the
idea of managing data properly in order to derive meaningful information, which is necessary in
rightful decision-making. This module will present the basic concepts of Statistics. Specifically, it
deals with the measure of central tendency and variability with application of MS Excel.

Summary of Lectures

Lesson 1 Basic Concepts of Statistics

Statistics, as a subject, can be define as the study of collection, organization,

summarization, analysis of data, and the decision-making about the body of data called
population based on only a representative part of the data called sample. (Islam and Al-Shiha,
2018)

Likewise, Lane et. al expounded that statistics is also known as statistical analysis, or
statistical inference. It is a field of study concerned with summarizing data, interpreting data,
and making decisions based on data.

Another definition of Statistics according to Bian is that it is a bunch of mathematics

used to summarize, analyze, and interpret a group of numbers or observations. He added also
that it is a tool.

Processes in Statistics
1. COLLECTION of DATA It is the process of gathering and obtaining numerical and
categorical data
2. TABULATION of DATA It is a process which involves summarizing of numerical data in
textual, tabular or graphical form
3. ANALYSIS of DATA It is the process of extracting from the given data relevant
information from which numerical descriptions can be formulated.
4. INTERPRETATION of DATA It refers to the process of making or drawing
conclusions based on the analyzed data
5.
Figure 4. 1 The Processes of Statistics

Collection
of
Informatio
n

Presentati
STATISTIC on/
Interpretati Tabulatio
on S n of
Informati
on

Analysis
Analysis
of
of
Informati
Informati
on
on
Divisions of Statistics
Descriptive statistics is use to describe what is going on in a population or
data set. It encompasses summarizing the data already collected. Moreover, this is considered
as the first part statistical analysis for most statisticians. In here, you will just provide a
summary description of the sample of your study by the use of graphs, percentages and/or by
the use of the central tendency.

To illustrate:

In a hospital, the medical imaging laboratory in-charge records the number of patients
they cater in a week for CT scan, MRI, X-ray and Ultrasound. His records show that 52% of
their patient has undergone X-ray examination, 21% CT scan, 23% Ultrasound and the rest
seeks MRI examination.

The above example, used percentage in describing the results of a week record of
examination. Apart from this, we can also use graphical ways in presenting our summary
description of the subject of our study. Another important tools used in descriptive statistics are
the measures of central tendency (mean, median or the mode) and the measures of dispersion
(range, variance, standard deviation and the like)

Conversely, inferential statistics allows scientists/researchers to take findings from a

sample group and generalize them to a larger population. It also encompasses drawing
tentative conclusions (hypotheses) about entire populations from data sampled from those
populations. In this case, we will be using statistical tools testing the hypothesis like analysis of
variance (ANOVA), t-test or z-test, confidence interval, regression analysis and other parametric
and non-parametric tools.

For instance, a researcher wants to determine the effect of over exposing patients to
radiation to their health. In this particular instance, a researcher may hypothesized that
overexposing may lead to serious illness among patient. This hypothesis will be validated
whether or not if it is true or not using the necessary tools in hypothesis testing

Figure 2: The Divisions of Statistics

D escriptive Inferenti al
Sta tistics Sta tistics

M aiinly desc
Maiinly ribe
describe D raw s inference
Draws infere nce
t he subject
the sub ject o
off abou
about t a
a
teh
teh study
study populati on
population

Frequ ency
Frequency H ypo th esis
Hypothesis
Co unts
Counts T esti ng
Testing

Perc entage
Percentage C o nfidence
Confidence
Co unts
Counts In terval
Interval

C entral
Central T /Z test
T/Z test
Te nden cy
Tendency

A N O VA and
ANOVA and
D ispersion
Dispersion others
others
Some Common Terms in Statistics

Population: This idea refers to the totality of the subject in a study. Moreover, it refers
to all the members of group about which one wants to draw conclusions. For instance, you are
conducting a study on the level of preparedness among first year college students of MCNP. In
here, your population is the whole First Year College students enrolled in any medical courses
of MCNP.
Sample: This term refers to the parts of the group where you want to draw inference.
In other definition, it is the subset of the population taken into consideration for analysis. From
the above example, if you consider only the students enrolled in the BS Radiologic Technology
students as your main respondents then they will be considered as the sample of your study.
Variables: This refers to any conditions, attributes or characteristics of any item or any
individual that will be analyzed using any statistical tools. It is denoted by letter, usually “x”, or
any symbol for that matter. This information is not only something that we measure, but also
something that we can manipulate and something we can control for. Examples are gender, the
household income of the citizens who voted in the last presidential election, the publishing
category (hardcover, trade paperback, mass-market paperback, textbook) of a book, the
number of varieties of a brand of cereal. A variable may be a univariate or bivariate. A
univariate variable is any information using a single data only. Let say you want to find the
average age of the students in a certain class, and the average age or the single value age that
re-presents the class is considered a univariate data. A bivariate variable on the other hand,
are the variables that we examines relationship between two variables. Say for instance we
want to determine whether socio-economic status and the academic performance of the
students. In this case, we are working with bivariate variables (socio-economic status and
academic performance)
In connection to the above example, another classification of variables is the
independent and the dependent variables . Independent variables or the explanatory
variables are that information that can stand alone without the other information. The
independent variable for the given example is the socio-economic status of the students. This
will explain whether the performance of the students based from their families’ socio-economic
status. Meanwhile, dependent variables or conclusion variables are those that require the
help of other variables in order to be explain. With this, the variable academic performance of
the students from the above example is considered as dependent variable. Generally, when we
talked of independent and dependent variables, we say that independent variables causes
change in the dependent variables. That is, socio-economic status of the students causes
change in their academic performance.

Level of Measurement Variables:

Measurement variables speak about the numerical value associated in it. This refers to
the amount of something or the value of something in terms of “number”. Scales of
measurement for this matter is the way in which variables/numbers are defined and
categorized. The following are the four scales or levels of measurement.
a. Nominal: Often called the categorical variable where there is no natural ordering of the
data in a category. Like when we categorized respondents of a survey into the male or
female groups respectively.
b. Ordinal: This level data are categorized or group but order of groupings will now be
considered. Example for this level is the year level of the students or IQ level of students.
c. Interval: This scale is interpreted, as the distance between attributes does not have any
meaning. A scale, which represents quantity and has equal units but for which zero
represents simply an additional point of measurement is an interval scale. The Fahrenheit
scale is a clear example of the interval scale of measurement. Thus, 60 degree Fahrenheit
or -10 degrees Fahrenheit are interval data. Measurement of Sea Level is another example
of an interval scale. With each of these scales, there is direct, measurable quantity with
equality of units. In addition, zero does not represent the absolute lowest value. Rather, it is
point on the scale with numbers both above and below it (for example, -10 degrees
Fahrenheit).
d. Ratio: Data that is measured using the ratio scale takes care of the ratio problem and gives
you the most information. Ratio scale data is like interval scale data, but it has a 0 point and
ratios can be calculated. You will not have a negative value in ratio scale data. For instance,
the score of students in their examinations. No students will ever get any negative score

Figure 3 The Levels of Measurement

RATIO – absolute zero
INTERVAL – distance is meaningful
ORDINAL – attributes can be ordered
NOMINAL – attributes are only named; weak
Source: https://conjointly.com/kb/levels-of-measurement/

Lesson 2 Frequency Distribution Table

In order for us to have a clearer picture and efficiently extract information from the data
gathered from the respondents, we must organized and present our data in the most
convenient way. The most utilized way of summarizing and presenting the data is through the
frequency distribution table.

Frequency Distribution table is the tabular arrangement of gathered data by

categories together with their corresponding frequencies and their class mark or class midpoint.
This table is the correspondence of mutually exclusive categories and the number of occurrence
of the members of the categories.

Frequency Distribution Table is categorized as:

a. Grouped frequency distribution.
b. Ungrouped frequency distribution.
c. Cumulative frequency distribution.
d. Relative frequency distribution.
e. Relative cumulative frequency distribution
Some Important Concepts of Frequency Distribution Table
1. Raw Data: This is the data collected in original form. This is data that are not yet
treated in any form.
2. Range: Range is the difference of the highest score and the lowest score in the
distribution.
3. Class: A large number of observations varying in a wide range are usually classified in
several groups according to the size of their values. Each of these groups is defined by
an interval called class interval.
4. Class Limits: It is the smallest and the largest possible value in each class interval of
the frequency distribution table.
5. Class width (i): It is also known as the class size. It is the width of each of the
classes. This is also the number of element in each class. Let say, the class 27-33, the
size of this class is 7. The members are 27, 28, 29, 30, 31,32 and 33.
6. Class Boundaries: It is consider as the true limit of each class. This is located
between the upper limit of one class and the lower limit of the other class.
7. Class Mark: This is also called the class midpoint or just simply midpoint. This is the
average of the upper limit and the lower limit of each class. Let say, the class 50-57, to
57
get the midpoint, add 50 and 57 that is 107.Then divide the sum by 2, = 53.5. So,
2
finally the class mark or midpoint of 50-57 is 53.5
8. Frequency: It is the number of occurrences of each of the elements in a class. This
presents the number of items in each category or class
9. Cumulative Frequency: This is the cumulative sum of the frequencies of each of the
classes.
10.Relative Frequency: This frequency is obtained by getting the quotient of the
frequency of a class to the total number of cases in the observation.
11.Percentage Frequency: This is obtained by multiplying 100 the relative frequency of
each class.

Steps in Constructing a Frequency Table (Numerical Data)

1. Determine the range of the distribution. Subtract highest score by the lowest score
2. Determine the number of classes or class intervals in the distribution. Remember the
ideal number of class ranges from 5 to 20. In determining the number of class, we apply
the 2k rule where the number of classes is 2 k≤ n. Note that k the power of two which
represents the number of class and n is the total number of cases in the distribution
3. Determine the class size/class width (i ) by getting the range divided by the desired
number of classes. In symbol:
Range R
i= =
Number of classes k
4. Write the class intervals starting from the lowest lower limits as determine by the class
size. The upper limit is determined by the size of the class interval minus 1. Subsequent
classes shall be obtained in the same manner.
5. Tally the number of times the elements of each class or categories appears in the
distribution.
6. Determine the frequency of each of the classes based from the tally made.
 7. Determine the class mark/midpoint by getting the average of the upper limit and lower
limit of each class. The class mark is representative value of the corresponding class
interval.

Illustrative Example
The following is the raw score of 50 students in their 70 item final examination in Statistics.
Construct a grouped frequency distribution table for the given scores.

65 34 67 22 12 5 60 42 33 12
23 28 60 64 54 50 23 12 12 18
56 19 10 65 51 51 50 44 42 24
65 66 67 11 15 18 19 20 21 34
44 43 42 44 39 38 34 31 30 21

Step 1: Determine the range of the distribution:

HS = 67 LS = 5
R = HS – LS = 67 – 5 = 62

Step 2 Determine the number of classes. The number of cases is 50 ( n =50) and to determine
the number of class, let us identify a power of 2 that will give us an answer which is less than
or equal to 50.
2k ≤50
25 ≤50; k = 5
32<50
So, the number of classes we have must be 5.

Step 3 Determine the class width/class size

Range R
i= = In here, we are going to round up the value to get the desired number of
Number of classes k
classes. So, we will use 13
62
i= =12.4
5

The class size is 12.

Step 4 Write down the class interval.

The counting of the
Class Interval number of elements in
Since the lowest Lower - Upper each class is inclusive. The
score is 5, we start Limit Limit lower limit and the upper
writing our class 57 - 69 limit are included
interval with 5. Add
13 to 5 to get the
44 - 56
next lower limit of 31 - 43
the next class. 18 - 30
Repeat until we will 5 - 17
cover up the HS.
Step 5 Tally the number of appearance for each class.

Class Interval
Lower Upper Tally
-
Limit Limit
57 - 69 IIII - IIII
44 - 56 IIII - III
31 - 43 IIII – IIII - I
18 - 30 IIII – IIII -III
5 - 17 IIII –III

Step 6 Determine the frequency of each class

Class Interval
Frequency
Lower Upper Tally
- (f)
Limit Limit
57 - 69 IIII - IIII 10
44 - 56 IIII - III 8
31 - 43 IIII – IIII - I 11
18 - 30 IIII – IIII -III 13
5 - 17 IIII –III 8
Total n = 50

Step 7 Determine the class mark/class midpoint and other important parts of the table

Class Interval Class

Frequency
Lower Upper Tally Midpoint
57+69 -
126 (f)
Limit Limit (x)
= =63
257 - 269 IIII - IIII 10 63
44 - 56 IIII - III 8 50
31 - 43 IIII – IIII - I 11 37
18 - 30 IIII – IIII -III 13 24
5 - 17 IIII –III 8 11
Total
To get the cumulative n = 50
frequency below, copy the
Other Parts of the
frequency Table
of the Needed In Analysis
lowest class
interval. Then add this to the
nextInterval
Class interval and write the Cumulative Cumulative
Frequency Frequency Frequency
Lowersum in theUpper
row opposite the
Tally (f) from below from above
- Do this until the
interval.
Limit Limit (<cf or cfb) (>cf or cfa)
higher class interval. For the
57cumulative
- 69frequencyIIII - IIII
above, 10 50 10
44we start
- from
56 the highest
IIII - III 8 40 18
31class -interval
43 down IIII – IIII - I 11 32 29
18 - 30 IIII – IIII -III 13 21 42
5 - 17 IIII –III 8 8 50
Total n = 50
 <cfb >cfa Relative Percentage
Class Interval f frequency Frequency
57 - 69 10 50 10 0.2 20%
44 - 56 8 40 18 0.16 16%
` 31 - 43 11 32 29 0.22 22%
18 - 30 13 21 42 0.26 26%
5 - 17 8 8 50 0.16 16%
Total n = 50 1.00 100%

The sum of this column is always 1.00

Sample Categorical Frequency Table

Construct a categorical frequency distribution table of the given raw data on the
commonly used social media flat forms.
You Tube LinkedIn LinkedIn You Tube Blog Blog
LinkedIn You Tube You Tube LinkedIn Facebook Twitter
Facebook Twitter You Tube Instagram Twitter Twitter
Instagram Twitter Pinterest Pinterest Blog Twitter
Instagram You Tube You Tube LinkedIn LinkedIn LinkedIn
LinkedIn LinkedIn LinkedIn You Tube You Tube Facebook

Solution:

Since the given data is in the form of categories, we will use the categories as our class
interval. When creating a categorical frequency table, we will include only the relative frequency
and percentage frequency.

Table for the Commonly Used Social Media Account of Students

Class Interval Tally Frequency Relative Percentage
Frequency Frequency
You Tube IIII-IIII 9 0.25 25%
Facebook III 3 0.083 8.3%
LinkedIn IIII – IIII 10 0.277 27.7%
Pinterest II 2 0.055 5.5%
Instagram III 3 0.083 8.3%
Twitter IIII – I 6 0.166 16.6%
Blog III 3 0.083 8.3%
Total 36 n = 36 1.00 100.00%

Lesson 3 Measure of Central Tendency

Measure of central tendency is one of the most common tools in statistical analysis.
Once gathered data had been organized and presented in tables and graphs, the first analysis
conducted is through the descriptive statistic. This measure of central tendency is a single value
that summarizes the characteristics of the given set of data. This is often called the average
value of the data set.

Characteristics of a good measure of central tendency

Measure of central tendency is a single value representing a group of values and hence is
supposed to have the following properties.

1. Easy to understand and simple to calculate. A good measure of central tendency

must be easy to comprehend and the procedure involved in its calculation should be
simple.

2. Based on all items. A good average should consider all items in the series.

3. Rigidly defined. A measure of central tendency must be clearly and properly defined.
It will be better if it is algebraically defined so that personal bias can be avoided in its
calculation.

4. Capable of further algebraic treatment. A good average should be usable for

further calculations.

5. Not be unduly affected by extreme values. A good average should not be unduly
affected by the extreme or extra ordinary values in a series.

6. Sampling stability. A good measure of central tendency should not be affected by

sampling fluctuations. That is, it should be stable.

The most common measures of central tendency are:

- Arithmetic mean

- Median

- Mode

The Mean
 The Arithmetic Mean or arithmetic average is defined as the sum of the values of the
variables divided by the number of observations.

The mean is the most common measure of central tendency. It is simply the sum of the
scores divided by the number of scores. The formula for mean is shown below:

Σx ΣX
x́=
n
or μ=
N

where:
x́ = read as “x bar” sample mean
μ = mu, represents population mean
Σx/ΣX = the summation of all the values of the elements of the data set
n/N = The total number of cases or number items in the data set

Illustrative Example 1

The table shows the scores of ten students in their 10-items quiz in Science Technology
and Society subject.

Students Scores (10/10) Solution:

1.Mark 8
2.Joseph 9 Ʃx
3.Ryan 10
µ= N
4.Anna 9 72
5.Kiko 8 Mean = 8
6.Thelma 9 Mean = 9
7.Melai 10
8.Joan 9
Total Score 72

Illustrative Example 2

The following are the ages of the chief of police of a certain towns in the province: 36, 45, 54,
65, 59, 58, and 48. What is the average age of the political leaders of the province?

Solution:
36+ 45+54+65+59+ 58+48 365
x́= = =52.14 The average age of th is 52.14.
7 7 This means that they are in their
early adulthood.
Median e chief of police of the province
 This measure of central tendency is the middle most score that divides the distribution
into halves when the data is arranged from lowest to highest or vice versa. Median of
ungrouped data is determined in two ways: first when the distribution is odd and the other one
is when the distribution is even.

Median for the Odd Samples

The median of odd samples is the middle most score when it is arrange in descending or
ascending order.

To determine the location of the median, the following expression is used.

n+1
Location of the Median =
2

Take note, this is not the actual value of the median this is just the position or location
of the median.

Illustrative Example 3
The following are the ages of the chief of police of a certain towns in the province: 36, 45, 54,
65, 59, 58, and 48. What is the median of the distribution?

Solution:
The number of cases in the data set is n= 7.

7+1 8
Location of the Median = = =4
2 2

So, the location of the median is the 4 th term form the lowest age that when it is arrange from
lowest to highest.

36, 45, 48, 54, 58, 59, 65 The median is 54, which
means that 50% of the chief
of polices’ age is lower than
54

Median for Even Samples

The median of even samples is the average of the middle two middle most scores.

Example:
The following are the ages of the chief of police of a certain towns in the province: 36, 45, 54,
65, 59, 58, 42 and 48. What is the median of the distribution?

Solution:
The number of cases in the data set is n= 8 which is even.

8+1 9
Location of the Median = = =4.5
2 2
So, the location of the median is at 4.5 th term, this term is between the 4 th and the 5th term in
the data set.

36, 42, 45, 48, 54, 58, 59, 65 Location of

the median

Since, it is between the 4th and 5th location we take the values of this locations and get
their average. The 4th value is 48 and the fifth value is 54.
48+54 102
= =51
2 2

The value of the median is 51. This implies that half of the chief of police ages above 51 years
old.

Mode

The mode is the most frequently occurring elements of data set. This means that when
an element has the most number of appearances in the distribution it is considered as the mode
of the distribution, Moreover, If two or more data appears the same number of times then we
have multiple modes. However, if all elements in the data set has the same number of
appearance, then there is no mode ion the data set.

Example 1: Age Problem

The following are the ages of the chief of police of a certain towns in the province: 36, 45, 54,
65, 59, 58, and 48. What is the mode of the distribution?

Solution:

As observed from the distribution, all elements occur only once. This means that there is no
mode in the distribution.

Example 2: Students’ Performance

The following data are the scores of select students in their 30-items unit test. Their
scores are as follows: 23, 24, 25, 26, 26, 27, 15, 15, 18, 19, and 28.

Solution:
Looking at the score, it is observed that the scores 15 and 26 appears the same number
of times. Then, we can say that the distribution is a bimodal distribution and the modes are 15
and 26.

Technology in Focus

Excel Operations on Central Tendency

1. Encode Data, then click the fx or function bar, look for average, then click go. This will
appear, and then highlight the data to get the mean from. Then Press Ok.

FUNCTION BAR

Highlight data
for Mean

2. Compute for the median, click fx or function bar, then go to median, highlight the data to
get the median from, then click Ok.
 To solve for the MEDIAN,
click fx or function bar

Click drop
box, select
Statistics,
Median, Ok

3. For the mode, click fx or function bar, then go to mode, highlight the data to get the
mode from, then click Ok.
 To solve for the
MODE, click fx or
function bar

Click drop
box, select
Statistics,
MODE, Ok

Lesson 4 Measures of Variability

Variability refers to how “spread out” a group of scores is. To see what we mean by
spread out, consider graphs in the two figures. These graphs represent the scores on two
quizzes. The mean score for each quiz is 7.0. Despite the equality of means, you can see that
the distributions are quite different. Specifically, the scores on Quiz 1 are more densely packed
and those on Quiz 2 are more spread out. The differences among students were much greater
on Quiz 2 than on Quiz 1.

source
PSYCHOLOGICAL%20STATISTICS/An%20Introduction%20to%20Psychological%20Statistics.pdf

The terms variability, spread, and dispersion are synonyms, and refer to how spread out
a distribution is. We will discuss measures of the variability of a distribution. There are three
frequently used measures of variability: range, variance, and standard deviation. In the next
few paragraphs, we will look at each of these measures of variability in more detail.

Range

The simplest measure of dispersion is the range, which is the difference between the
maximum value and the minimum value of data.
Range = HS - LS
Where: HS - the highest measure in the distribution
LS - lowest measure in the distribution

Example: Find the range for the following three sets of data:
Set 1: 5 15 15 5 15 5 15 15 15 15
Set 2: 8 7 15 11 12 5 13 11 15 9

Solution: In each of these sets, the highest number is 15 and the lowest number
is 5. Since the range is the difference between the maximum value and the minimum
value of the data, it is 10 in each case.

Variance
The varience is defined as the average of the squared deviations from the mean.

Ʃ f ( X− x́ )2
σ=
n
Standard Deviation

Standard Deviation is the most important mesaure of variability. It reflects dispersion

of scores, so that variability of different distributions may be compared in terms of standard
deviations. It is also the distance of the scores from the mean. It is a member of mathematical
system that permits its use in more advanced statistical considerations.
Ʃ f ( X−x́ )2
SD=
√ n

Example: The data shown are the scores of 30 students in Statisticsl exam. Find the range,
standard deviation and variance of the given data if 9 class intervals shall be used in grouping
tha data.

47 65 81 65 68 55
56 69 61 75 71 67
61 87 50 74 49 66
49 89 77 75 79 85
68 90 57 63 54 90
Solution:

Range
Range = H - L
= 90-47
= 43
Variance
Ʃ f ( x − x́)2
σ=
n

Construct first a table, (recall how to construct table in the previous chapter).

Table 2.4
Class Class Class fx |x− x́| f |x −x́| 2
f |x −x́|
Interval Frequency Mark (x)
(f)
47-51 4 49 196 18.7 74.8 1398.76
52-56 3 54 162 13.7 41.1 563.07
57-61 3 59 177 8.7 26.1 227.07
62-66 4 64 256 3.7 14.8 54.76
67-71 5 69 345 1.3 6.5 8.45
72-76 3 74 222 6.3 18.9 119.07
77-81 3 79 237 11.3 3.9 383.07
82-86 1 84 84 16.3 16.3 265.69
87-91 4 89 356 21.3 85.2 1814.76
Ʃf =N =30 Ʃf x = 2031 Ʃ f |x−x́|
2
= 4834.7

To solve for mean;

Ʃfx
x́=
N
2031
x́= = 67.7
30

Given the table solve,

Ʃ f ( x− x́ )2 4834.7
2
σ = = = 161.16
n 30

Standard Deviation
Ʃ f ( X−x́ )2
SD=
√
4834.7
n
SD=
√30
SD=12.69
 A measure of central tendency is a single value that attempts to describe a set of data
by identifying the central position within the set of data. As such, measures of central tendency
are sometimes called measures of central location. The mean, median, mode are all valid
measures of central tendency.

Mean is the arithmetic average and it is used for continuous data.

Median is a value that splits the data into halves. Mode is the category that has the most
occurring data.

A measure of variability is a summary statistic that represents the amount of dispersion

in a dataset. The most common measures of variability are the range, the variance, and
standard deviation.

Reference List

1. Bian, H. Basic Statistics I [pdf]. Retrieved from

http://core.ecu.edu/ofe/statisticsresearch/basic%20statistics%20I.pdf
2. Gilmour, S. G. MAS113X Fundamentals of Statistics I Lecture Notes [pdf]. Retrieved from
http://danida.vnu.edu.vn/cpis/files/Books/Fundamentals%20of%20Statistics%20I%20-
%20Lecture%20Notes.pdf
3. Hon, K. An Introduction to Statistics [pdf]. Retrieved from
https://www.fd.cvut.cz/department/k611/PEDAGOG/THO_A/A_soubory/statistics_firstfive.p
df
4. http://web.cjcu.edu.tw/~jdwu/biostat01/lect001.pdf
5. https://online225.psych.wisc.edu/wp-content/uploads/225-Master/225-UnitPages/Unit-
07/Laerd_Statistics_2013.pdf
6. https://www.pearsonhighered.com/assets/samplechapter/0/1/3/1/0131467573.pdf
7. https://stattrek.com/descriptive-statistics/variables.aspx
8. https://www.statisticshowto.com/probability-and-statistics/types-of-variables/
9. http://onlinestatbook.com/2/introduction/variables.html
10. https://www.slideshare.net/ZakariaHossain13/types-of-variables-in-statistics
11. https://www.questionpro.com/blog/nominal-ordinal-interval-ratio/
12. https://365datascience.com/explainer-video/levels-of-measurement-in-statistics/
13. https://courses.lumenlearning.com/odessa-introstats1-1/chapter/frequency-frequency-
tables-and-levels-of-measurement/
14. https://www.commoncoresheets.com/Math/Statistics/Populations%20and
%20Samples/English/1.pdf
15. https://www.toppr.com/guides/maths/statistics/frequency-distribution/
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example.html
17. https://byjus.com/maths/frequency-distribution-table/
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statistics/frequency-distribution-table/
19. http://www.tutorsville.net/math/frequency_distribution.php
20. http://math.ucdenver.edu/~ssantori/MATH2830SP13/Math2830Chapter02Slides.pdf
 21. https://www.uotechnology.edu.iq/dep-production/branch3_files/Frequency
%20distribution%20(2).pdf
22. http://www.cimt.org.uk/cmmss/S1/Text.pdf
23. https://www.riosalado.edu/web/oer/wrkdev100-
20011_inter_0000_v1/m5/pdf/m5_l1_mean_median_mode_practice_probs.pdf
24. https://college.cengage.com/mathematics/brase/understandable_statistics/9780618949
922_ch03.pdf
25. http://www.businessbookmall.com/DS%20CTG1.pdf
26. https://www.mathsisfun.com/data/frequency-grouped-mean-median-mode.html
27. https://online.stat.psu.edu/stat500/lesson/1/1.5/1.5.3
28. https://saylordotorg.github.io/text_introductory-statistics/s06-03-measures-of-
variability.html
29. https://latrobe.libguides.com/maths/measures-variability
30. https://www.statisticshowto.com/how-to-tell-the-difference-between-a-statistic-and-a-
parameter/
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http://cs.ioc.ee/ITKStat/files/1_intro.pdf
32. Narag, E. R. (2010). Basic Statistics with Calculators and Computer Applications . Manila:
Rex Book Store.
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Bartlett Learning.
34. Variability in Statistics: Definition & Measures.
https://study.com/academy/lesson/variability-in-statistics-definition-measures-quiz.html

 
FINALS COVERAGE (12 hours)

Intended Learning Outcomes:

At the completion of this coverage, the students shall be able to:
- Define and understand the concept simple interest and identify the four quantities
involved in the computation of simple interest
- 2. Apply the concept of simple interest in real life situations
- 3. Differentiate simple interest from compound interest
- 4. Compare the two different rates compounded at different conversion period per year
- 5. Apply the concept of compound interest in real life situations.

Specific Instructions in the completion of this Chapter:

1. Student must read and understand the Intended Learning Outcomes specified above and
make it as a checklist of acquired knowledge and skills after completing the entire chapter. This
shall be the basis of the teacher in the formulation of the Summative evaluation given at the
end of the chapter.
2. Students must carefully study the given lecture notes and take note of topics that were not
clearly stated or understood by the student. This area can be referred to the subject teacher
during consultation hours provided for the students to contact the teacher.
3. Study the discussions and insights given and follow instructions for activities if there are.
4. A flash drive will be given containing the different topics and pre – downloaded video clips as
supplement to the given discussion in this learning guide. Should there be further queries; feel
free to contact the teacher through the FB Messenger or through text or call.
5. Upon completion of all the lessons and topics presented, answer the self-reflection questions
given to you. Check the instruction of to answer and what to do to comply with required
answers.
6. Compile your outputs in your Learning Portfolio to be submitted at specific date by your
teacher.
Should the student have any queries or clarifications with the topics, the student should contact
the subject teacher in the given consultation hours which can be found in the preliminaries of
this material.

Key Terms:
INTEREST
PRINCIPAL
RATE OF INTEREST
TIME or TERM
FINAL AMOUNT
COMPOUND AMOUNT
COMPOUND INTERST

INTEREST PERIOD
FREQUENCY CONVERSION
Learning Outcome/s: At the end of the
Module, the students will be able to;
1. Define and understand the concept simple interest and identify the four quantities involved in the
computation of simple interest
2. Apply the concept of simple interest in real life situations
3. Differentiate simple interest from compound interest
4. Compare the two different rates compounded at different conversion period per year
5. Apply the concept of compound interest in real life situations
Overview of the Lesson:

It is a common belief that every person has debts, that even a newly-born child is
already doomed to pay the debts of his country; debts he is innocent of and knows nothing
about. Some of us pay interest in banks, to lending institutions and to individual lenders.
Whether we receive interest or pay interest for the money borrowed or invested, it is very
essential for us to have a good understanding of interest and how it is computed.

In the study of this discipline, the student will learn the Mathematical processes of calculating
interest of money that enables those with money to earn more money for themselves and
utilized such money for national economic development and growth, and those without money
who resort to borrow money from lending institutions or persons to know how much money
they pay for the interest.

Summary of Lectures

Lesson 1 Simple Interest

Business entrepreneurs and private individuals who find themselves in need of cash or
financial credit borrow money and agree to pay a certain percentage for the privilege of using
the borrowed amount. This activity of borrowing money should be beneficial to borrower since
he can invest the money borrowed on some profitable business. Likewise, the lender or the
investor benefits from this transaction because he is able to earn an amount for the charge fee
for the use of his money which is the interest paid by the borrower.

Definition of Terms

 INTEREST (I)_– When people borrow money from someone or lending any institution
 PRINCIPAL(P) – The money borrowed or amount of money invested
 RATE OF INTEREST(r) – The per cent of interest that is paid on the loan
 TIME or TERM (t) – The period of the loan
 FINAL AMOUNT (F)– The money borrowed plus the interest it bears


1.1 SIMPLE INTEREST

 Simple Interest is an interest in which only the original principal bears interest of the
entire term of the loan. It is defined as the product of the principal, rate and time. It is given by
the formula:

I = Prt
Where:
I = Simple Interest
P = Principle
r = rate of percent principle which is to be paid per unit of time
t = unit of time usually expressed in years of fractional parts of a year
From the Simple Interest formula which is I = Prt, we can derive the following formulas.

P = I/Rt
R = I/Pt
T = I/Pr
To determine the final amount or maturity value at the end of the term, the following formulas
can be used;

F=P+I
I=F–P
Since I = Prt, F can be expressed as:

F = P (1 + rt)

The term may be stated in any of the following ways:

1. When time is expressed in number of year(s),

I = P x r x number of year(s)
2. When time is express in number of month(s)

I = P x r x number of month(s)
3. When time is expressed in number of days, there are two ways to compute for the
interest, namely:
a. Ordinary interest

Io = P x r x (number of days/360)

b. Exact interest
Io = P x r x (number of days/365)

ILLUSTRATIVE EXAMPLES 1
 1. A man borrowed P6,000 from the bank at 8% simple interest. What is the simple
interest and final amount he will be pay after 2 years?

Solution:

Given: P = P6,000 r = 8%t = 2 years

I = Prt F=P+I
= (P6,000) (0.08) (2) = P6,000 + P960
= P960 = P6,960
2. Find the interest and amount on P5,900 at 6 ¾% simple interest for 9 months.

Solution:

Given: P = P5,900 r = 6 3?4% t = 9 months

I = Prt F = P+I
= (P5,900) (6 ¾%) (9) = P5,900 + P298.60
= P298.69 = P6198.69
3. A man paid P10, 600 on a loan made 3 years ago at 7 ½% simple interest. Find the original
amount of the loan.

Solution:

Given: F = p10, 600 r = 7 ½% t = 3 years find P;

P = F/1 + rt
= P10, 600/ 1 (0.075) (3)
= P8, 653.06
4. Tery borrowed P10, 000 from a multi-purpose cooperative charging 12% simple interest with
an agreement of paying the principal and the interest at the end of the term. If she paid P13,
500 on the maturity date, how long did she use the money?

Given: P = P10,000 F = P13, 500 r = 12% find t;

Solution:

I=F–P t= I/Pr
= P13, 500 – P10, 000 = P3, 500/ (P10, 000)(0.12)
 = P3, 500 = 2.92 years

1.2 APPROXIMATE AND ACTUAL NUMBER OF DAYS

When we are counting the number of days between two days it is necessary to determine the
ACTUAL and APPROXIMATE TIME.

ACTUAL TIME – is obtained by counting the exact number of days in any given month.
APPROXIMATE TIME – is obtained by assuming all months within a year contain 30
days.

NOTE: In finding the time between dates, the first day is excluded, while the last day is
included.

ILLUSTRATIVE EXAMPLE 2
1. Find the actual and approximate time from January 25, 1997 to April 4, 1997.
Solution:
Actual Days Months Approximate Days
6 (31-25) January (30-25) 5
28 February 30
31 March 30
4 April 4
Total: 69 69

Alternative Solution:
Actual time
“to date” -- April 4 = 94
“from date” -- January 25 = 25
Difference -----------
69 days
Approximate Time (Express the dates in numeral)
3 30 + 4 = 34
April 4, 1997 = 1997 4 4
January 25, 1997 = 1997 1 25
________________________________
2 months 9 days
= 2 (30) + 9
= 60 + 9
= 69 days
2. Find the actual and approximate time between June 10, 2001 and September 25,
2001.
Solution:
Actual Days Months Approximate Days
20 June 20
31 July 30
31 August 30
25 September 25
Total: 107 days 105 days
Alternative Solution:
Actual Time
“to date” -- September 25 = 268
“from date” -- June 10 = 161
______
Difference: 107 days

Approximate Time (express the dates in numerals)

September 5, 2001 = 2001 9 25
June 10, 2001 = 2001 6 10
________________________
3months 15 days
= 3 (30) + 15
= 90 + 15
= 105 days

1.3 ORDINARY AND EXACT INTEREST

When the interest is computed with a denominator of 360, the interest is called ORDINARY (Io)
and if the denominator of the term is 365 (366 in a leap year), the interest is called EXACT (Ie).
Unless specified in the problem, it is assumed as ORDINARY.

Formula: Io = Prt/360
Ie = prt/365

Where: Io = ordinary interest

Ie = exact interest

Illustrative Example 3

1. Find the ordinary and exact interest on P10, 300 for 83 days at 8 1/3% simple interest.
Given: P = P10, 300 r = 8 1/3% t = 83 days
Find: Io and Ie

Solution:
Io = Prt/360
= (P10, 300) (0.08333) (83/360)
= P197.81
 Ie = Prt / 365
= (P10, 300) (0.08333) (83/360
= 195.10

2. Determine the final amount due on P15, 000 at 12 ¾% for 125 days, using ordinary interest.
Given: P = P15, 000 r = 12 ¾% t = 125 days
Find: Io and F
Solution:
Io = Prt / 360
= (p15, 000) (0.1275) (125/360)
= P664.04
F = P + Io
= P15, 000 + P664.06
= P15, 664.04

3. Find the exact interest and amount on P5, 900 for 208 days at 6 1/2 % simple interest.
Given: P5, 900 r = 6 ½% t = 208 days
Findo: Ie and F

Solution:
Ie = prt / 365
= (P5, 900) (6 ½%) (208 / 365)
= P218.54
F = P + Ie
= P5 900 + P218.54
= P6, 118.54

4. How much must be deposited now at 12% simple interest rate in order to have P5, 900 in
250 days?
Given: F = P5, 900 r = 12% t = 250 days
Find: P

Solution:
P = F / 1 + rt
P = p5, 900 / {1 + (O.12) (250 / 360)}
P = P5, 446.15

1.4 SIMPLE DISCOUNT

In some cases, interest in a loan deducted in advance from the amount is often called
DISCOUNT or INTEREST IN-ADVANCE. The value of money the borrower receives at the
beginning of the term is called PROCEEDS.
The RATE OF DISCAOUNT is the ratio if the discount given in a unit of time to the maturity
value or final amount.

Interest in advance can be computed by means of the formula:

D = Fdt
Where:
D = amount of discount
f = final amount
d = discount rate
t = time or term of discount

Other formulas that can be derived from above are the following:
d = D/Ft t = D/Fd F = D/dt

The present value formula:

P=F–D or P = F (1 – dt)

The final amount formula:

F = P/ (1 – dt)

ILLUSTRATIVE EXAMPLE 4
1. How much interest will be collected in advance from a loan of P10, 500 for 2 years if
the discount rate is 12%?
Given: F = P10, 500 t = 2 years d = 13% Find: D
Solution:
D = Fdt
= (P10, 500) (0.12) (2)
= P2, 520.00

2. How much would Zeny asked for if she needs P3, 400 cash which will be repaid in 2
years with 4 ½% simple discount?
Given: P = P3, 400 t = 2 years d = 4 ½% Find: F
Solution:
F = P/ (1 – dt)
= P3, 400/ {1 – (0.045) (2)}
= P3, 736.26

3. Mario borrowed P10, 400 for 3 months from the bank which charged him 8% simple
discount. How much money did Mario received?
Given: F = P10, 400 d = 8% t = 3monnths find: P
Solution:
P = F (1 – dt)
= P10, 400 {1 – (0.08) (3/12)}
= P10, 192.00
1.5 DISCOUNTING PROMISSORY NOTES

 ACCUMULATION is the process of finding the amount of a given Principal at a specified

time.
To ACCUMULATE means to solve the final amount applying the formula.

F = P (1 + rt)

 DISCOUNTING is the process of determining the present value of any amount due in the
futue.
To DISCOUNT n amount means to solve for P applying he formula.

P = F/ (1 + rt)

ILLUSTRATIVE EXAMPLE 5
1. Accumulate P5, 600 for 3 months at 5% simple interest.
Given: P = P5, 600 t = 3months r = 5% find: F
Solution:
F = P (1 + rt)
= P5, 600 {1 + (0.05) (3/12)}
= P5, 670.00

2. Accumulate P1, 000 at 8% simple interest from January 7, 2003 to March 8, 2003.
Given: P = P1, 000 t = Jan. 7 to March 8 r = 8%find : F
Solution:
January (31 – 7) = 24
February = 28
March = 8
_______________
60 days
F = P (1 + rt)
= P1, 000 {1 + (0.08) (60/360)}
= P1, 013.33

3. Discount P5, 000 for 2 years at 9% simple interest.

Given: F = P5, 000 t = 2 years r = 9% find: P
Solution:
P = F/ (1 + rt)
= P5, 000 / {1 + (0.09) (2)}
= P4, 237.29

Lesson 2 Compound Interest

2.1 Compound Interest

DEFINITION OF TERMS

COMPOUND AMOUNT – the sum due at the end of the transaction, designated by F.
COMPOUND INTERST – the difference between the principal and the compound amount.
INTEREST PERIOD – the time between two successive conversions
FREQUENCY CONVERSION – the number of periods in one year, the frequency conversion is
denoted by m.

NOTE:

Annually m=1

Semi – annually m=2

Quarterly m=4

Monthly m = 12

The annual interest rate is called the nominal rate, denoted by j. The interest rate per period,
denoted by I, is the nominal rate j divided by the frequency of conversions m, that is,

Interest rate per period = nominal rate / frequency rate

I=j/m
The time is given in years. The number of conversions during the term, denoted by n, is
determined by multiplying the time by the frequency of conversion, that is:

n=txm

Compound Amount

Formula: F = P (1 + I)n

Compound Interest
Formula: I=F–P

Where, F = Final amount or compound amount

P = Original Principal
i = Periodic rate
n = total number of conversion periods for the whole team
I = Compound Interest

Illustrative Examples 6
1. Find the compound amount and interest on P10,000 at 5% compounded quarterly for 3
years.
Given: P10,000 j = 5% t = 3 years m=4
Find: F & I
Solution:
i = j/m = 5%/4 = 1 ¼%
n = t x m = (3)(4) = 12
F =P(1 + i)n
= P(10,000 [1+ 0.0125]12
= P11,607.55

I=F–P
= P11,607.55 – P10,000
= P1,607.55

2. How much is needed to accumulate P15,000 in 16 months if the interest rate is 8%

compounded semi-annually?
Given: F = P15,000 j = 8% m = 2 t = 16 months
Find: P
Solution:
i = j/m = 8%/2 = 4%
n = t x m = (1.33)(2) = 2.66
F
P= n
(1+i)
P 15,000
= 2.66
(1+0.04)

P 15,000
=
1.109963461

= P13, 513. 96

3. At the birth of her son, George, how much should a mother deposit in the bank to give
her son with P50,000 on his 15th birth day if money is worth 12% compounded monthly?
Given: F = P50,000 t = 15 years m = 12 j = 12%
Find: P
Solution:
i = j/m = 12%/12 = 1%
n = t x m = (15)(12) = 180
F
P= n
(1+i)
P 50,000
= 180
(1+0.01)

P 15,000
=
5.995801975
 = P8,339.16

2.1.1 Interest Rate and Time

In the formula F = P (1 + i)n , the interest rate can be determined if F, P, and n are given.

On the other hand, logarithm is used in finding the rate.

Illustrative Examples 7

1. Find the rate compounded monthly if P5,000 accumulates to P6,5000 in 2 years and 3
months.
Given: P = P5,000 F = P6,500 t = 2 yrs & 3 months m = 12
Find: j
Solution:
n = t x m = (2 3/12) (12) = 27
F = P(1 + i)n
P6,500 = P5,000 (1+i)27
1.3 = (1 + i)2
1+i = (1.3) 1/27
1+i = 1.00976456
i = 1.00976456 – 1
i = 0.00976456
But:
j=ixm
= (0.00976456)(12)
= 11.72%

Alternative Solution:

J = m[(F/P)1/n – 1]

= 12 [(P6,500/P5,000)1/27 – 1]

= 12(1.00976456 – 1)

= 11.72%

2. How long will it take for P8,600 to amount to P15,000, if invested at 10%, m = 4?
Given: P = P8,6000 F = P15,000 j = 10% m = 4
Find: t
Solution:
 i = j/m = 10%/4 = 2.5%
F = P(1+i)n
P15,000 = P8,600 (1 + 0.025)n
1.744186047 = (1.025)n
n log 1.025 = log 1.744186047
log 1.744186047
n =
log 1.025
n = 22.53

but:
t = n/m
= 22.53/4
= 5.63 years

Alternative Solution:
log F−log P
t=
m log (1+i)
log P 15,000−log P8,600
=
4 log(1+0,025)
4.176091259−3.934498451
=
4 (0.010723865)
t = 5.63 years

2.2 Effective and Nominal Rates

2.2.1 Effective Rate

Formula: e = [(1+j/m)m – 1]

Where:

e = effective rate

j = nominal rate

m = conversion period year

When interest is compounded annually, the effective rate is equal to the nominal rate j, but
when it is compounded more than once a year, the effective rate is higher than the nominal
rate.
When comparing two different rates compounded at different conversion periods per year m,
we compute their respective effective rates.

Illustrative Examples 8

1. Find the effective rate corresponding to the rate 6% compounded semi – annually.
Given: j = 6% m = 2
Find: e
Solution:
e = [(1+j/m)m – 1]
= [(1+6%/2)2 – 1]
= [(1+3%)2 – 1]
= [1.0609 – 1]
= 0.0609
= 6.09%

2. Which yields more interest, (5%, m = 4) or (4%, m = 2)?

Solution:
Compute their respective rates
a. j = 5% m = 4
b. j = 4% m = 2
e = [(1+j/m)m – 1]
= [(1+5%/4)4 – 1]
= [(1+1.25%)4 – 1]
= [1.0509455337 – 1]
= 0.0509
= 5.09%

e = [(1+j/m)m – 1]
= [(1+4%/2)2 – 1]
= [(1+2%)2 – 1]
= [1.0404 – 1]
= 0.0404
= 4.04%

CONCLUSION: 5%, m = 4 yields more interest

2.2.2 Nominal Rates

In compound interest problems, there are 3 kinds of rates associated with them. These are:

1. Periodic rate I : It is the rate used to compute interest factors, and it is equal to interest
rate divided by the conversion period m.
2. When the conversion is other than a year, the stated annual rate of interest is called
nominal rate j.
 3. When the conversion period is one year, the annual rate of interest is called effective
rate, the rate actually earned in a year.

Nominal Rate j

If the rate is not specified as nominal or effective, it is assumed that the given rate is nominal.

Formula: j = m [(1 + e) 1/m

– 1]

Where,

j = nominal rate

m = the conversion period per year

e = effective rate

Illustrative Examples 9

1. What nominal rate compounded semi-annually will yield the effective rate of 4 %?
Given: e = 4% m = 2
Find: j
Solution:
j = m [(1 + e) 1/m – 1]
= 2 [(1 + 0.04) 1/2 – 1]
= 2 [1.019803902 – 1]
= 2(0.019803902)
= 3.96%

2. When interest is compounded quarterly, find the nominal rate if the effective rate is
7.5%?
Given: e = 7.5% m=4
Find: j
Solution:
j = m [(1 + e) 1/m – 1]
= 4 [(1 + 0.075) 1/4 – 1]
= 2 [1.018244601 – 1]
= 2(0.018244601)
= 7.30%

2.3 Equivalent Rates

If two rates produce equal interests on the same principal in the same period of time, they are
said to be corresponding or equivalent rates.
To determine the compound interest rate equivalent to another compound interest rate, apply
this formula:

eq = me { (1+G/m)m/me – 1]

where:

eq = the missing or unknown rate

me = the conversion period of the missing rate

G = the given interest rate

m = the conversion period of the given rate

To determine the simple interest rate equivalent to compound interest rate, we apply this
formula:

[ ( 1+i )n−1]
r=
t

where:

r = the missing or unknown simple interest rate

i = the periodic rate

t = the term or time of the investment

n = the total number of conversion periods for the whole term.

Illustrative Examples 10

1. What rate compounded semi-annually is equivalent to 5% compounded monthly?

Given: G = 5% m = 12 me = 2
Find: eg
Solution:
eg = me [(1+G/m)m/me – 1]
= 2 [(1+5%/12)12/2 – 1]
= 2 [(1+5%/12)6 – 1]
= 2 [(1.0255261867) – 1]
= 2(0.025261867)
= 0.0505
= 5.05%
 2. If money is invested for 2 years, what simple interest rate is equivalent to 6%
compounded quarterly?
Given: t = 2 years j = 6% m= 4
Find: r
Solution:
i = r/m = 6%/4 = 3/2%
n = t x m = 2(4) = 8

[(1+i)¿ ¿ n−1]
r= ¿
t

3
[(1+ % ) ¿ ¿ 8−1]
= 2
¿
2

0.126492586
=
2

= 0.0632 or 6.32%

2.4 Equations of Value

In business transactions, it is often needed to exchange an amount of money with different

amounts at different time. The value of money increases when it is accumulated at some future
dates while its value decreases when it is discounted at previous times. The most effective
method to solve investment problems like this is the equation of values.

Equations of value is a mathematical statement which shows the dated values on a comparison
date (focal date) of 2 sets of payments are equal. The focal data or point is the point where all
obligations and payments are brought through the process. The location of the focal point or
date will not change or affect the final answer.

Illustrative Example 11

If money is worth 6% compounded semi-annually, what single payment at the end of 3 years
will equitably replace the following set of obligations:

a. P1,000 due at the end of 1 year.

b. P5,000 due at the end of 4 years with 5% simple interest.
c. P3,000 due at the end of 5 years with interest of ¾% converted quarterly.
d. P4,000 due at the end of 7 years wuth interest at 1% compounded quarterly.

Solution:

a. Compute the settlement rate 6%, m = 2

i = j/m = 6%/2 = 3%
 b. Compute the maturity value of the obligations:
a) P = P1,000 MV = P1,000
b) MV = P(1 + rt)
= P5,000 [1 + (0.05)(4)]
= P6,000

c) MV = P(1 + i)n
= P3,000 (1 + 0.001875)20
= P3,114.53

d) MV = P(1 + i)n
= P4,000 (1 + 0.01)28

c. Place all the obligations and payments along the time diagram as shown below.

X(1 + 3%)8 = P4,289.66 + P3,114.53 (1+3%)4 + P6,000 (1+3%)6 + P1,000 (1+3%)12

X(1.266770081) = P4,289.66 + P3,114.53 + P7,164.31 + P1,425.76

X = P12,934.600

Mathematics of Finance is a mathematical tool mainly used in business administration and

accounting. This is included in our course because even we are not enrolled in business and
accounting, all of us are engage in money transactions. At times when we do not have money
or we have insufficient budget, we tend to borrow from our peers, relatives and other
individuals who are capable in lending money. Aside from the individuals, we also have loans
from lending institutions of from banks. It is therefore necessary for us to know some basic
principles in lending and loaning.

References:

Narag, E. (2006). Mathematics of Investment. Manila: Num Publishing and Printing House,

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