Business Mathematics Question Paper
Business Mathematics
Course:Bridging Certificate Course In Mathematics
Institution: Kabarak University question papers
Exam Year:2010
INSTRUCTIONS:
1. Answer ALL questions in Section A and any THREE in Section B
2. Clearly Show all your workings.
SECTION A
1) Juma purchased a house costing Kshs. 4,680,000 through mortgage. The down payment was 10%
of the cost and the interest was 28% on unpaid balances. Determine the interest he paid and the
monthly installments if the repayment period was 15 years. (5 Marks)
2) Fluid earns Kshs. 123,000 as her basic salary per month. He is a pension contributor and is
deducted 2.5% of the basic pay. He is entitled to a personal relief of Kshs. 1,162 per month. He
also receives a house allowance of Kshs. 13,000 and contributes Kshs. 320 to NHIF. Two
methods can be applied in determining the tax he should pay. Either a tax rate of 30% or using a
tax schedule as indicated below. Determine Fluid’s P.A.Y.E, and Net pay under each method.
Income group Tax Rate
First 10,160 10%
Next 9,120 15%
Next 9,120 20%
Next 9,120 25%
Balance 30% (5 Marks)
1) A man deposited Kshs. 1,200,000 in a fixed deposit account with his bank for 5 years. The bank
offers rates of interest compounded twice a year as follows: 10% in the first 2 years, 12% in the
next one year and 15% in the subsequent years. How much will the man have in his account at
the end of the 5th year? (5 Marks)
4) Smith opened an account on 3rd May and deposited Kshs. 125,000 at 8% interest rate
Compounded daily. On 17th July, he deposited another Kshs. 65,000. Determine how much
money was in his account at the end of July and the compound interest earned. (5 Marks)
5) Tom bought an electronic camera on hire purchase. He paid a deposit of Kshs. 8,000 followed by
36 monthly installments of Kshs. 900. If compound interest was charged on unpaid balances at
12%, determine the cash price of the camera. (5 Marks)
6) XYZ Company has goods available for sale valued at Kshs. 4,800,000. This includes 75 boxes of
unsold items from the previous year valued at Kshs. 6,450 per box. The operating expenses for
the year are Kshs. 750,000 and no items were left unsold at the end of that year. 15 items were
confirmed defective and a sales allowance of Kshs. 3,500 per item was allowed. If the
company’s sales amounted to Kshs. 8,000,000, draw up an income statement and determine the
gross profit and Net profit or loss.
(5 Marks)
7) Brian will have to pay back a total of Kshs. 980,000 to his bank in 5 years time. What is the
current value of the amount that Brian owes if interest is 10% compounded monthly? (5 Marks)
8) An estate agent sold a house for Kshs. 3,500,000. He charged a commission of 10% for the first
Kshs. 1,500,000, 5% on the next 2,000,000 and ½% on the remainder. He also charged 2.5% on
contingencies. How much did the agent earn and how much did the owner receive? (5 Marks)
1) A and B were partners who agreed to share their profits based on their capital contributions.
In that year their business made a profit of Kshs. 60,000.
a) How much did each partner get if their capital contributions were Kshs. 420,000 and
Kshs. 380,000 respectively and a 5% interest allowance was made?
b) In the second year, they agreed to admit partner C. However, they agreed on a new
profit sharing ratio of A: ½, B: 1/3, C: ¼. In that year C got a profit share of Kshs.
15,000. How much will each of the others get? (10Marks)
2) Esau wants to take a loan of Kshs. 3,000,000 to buy a van for his transport business. The
bank gives him three options. Either:
a) take the loan at a simple interest of 18% payable in 6 years
b) take the loan at an interest of 12% compounded monthly payable in 6 years
c) Take the loan at an interest of 9% compounded quarterly payable in 8 years.
Determine how much he will pay in each option and advice him which one to take.
(10Marks)
3) A mother deposited Kshs. 8,000 to her child’s account at the beginning of each year for 5
years. The account attracted an interest rate of 12% compounded yearly.
a) How much will be in the child’s account after the 5th year?
b) Determine how much compound interest the account would have earned
c) Determine the present value of the above deposits. (10Marks)
4) Explain the following terms as used in business:
a) Business Mathematics
b) Effective interest rate
c) Cost of goods sold
d) Income tax
e) Preferred shares (10Marks)
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