NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF SCIENCES
JUNE 2013 EXAMINATION

Course Code: BUS 839                                                 Credit Unit: 2.

Course Title: Quantitative Techniques for Banking and Finance

Time Allowed: 2 Hours.

Instructions:

1. Attempt Question 1 and any other two (2) Questions.

2. Question 1 is compulsory and carries 30 marks

while the other 2 Questions carry 20 marks each.

3. Show all your calculations for appropriate marks.

Questions

1a. Define variation and discuss two kinds of variation that are most common.

1b. Discuss five advantages of quantitative skills for managers.

1c. A firm is faced with two alternative investment plans. Plan 1 will cost #750 and plan 2 #950. Both plans involve the purchase of equipment the life of which is four years, and the current rate of return on capital is expected on capital is expected to be 20%. The estimated cash flows resulting from the projects are:

Years                         1                 2                 3                 4

Plan 1                   #300           #400           #300           #200

Plan 2                   #500           #400           #300           #300

The present value of these expected returns assuming a rate of return on capital of 20%.

Questions

2a. Define Arithmetic and Geometric progression.

2b. Suppose #1,000 is invested at 7% per annum compound interest. Find value of the investment at the end of the tenth year.

Questions

3a. Define Capital budgeting

3b. An equipment costing #1,000 has an expected life of 5years. It is estimated that the cash flow resulting from the use of the machine will be #400 a year. The rate of return expected from capital of the type is 15%. Is the investment worthwhile?

Question

4a. Explain the following

i. Bond with maturity

ii. Pure Discount Bonds

iii. Perpetual Bonds

4b. Describe the objective functions and the constraints of L.P

4c. A farmer mixes three products to feed his pigs. Feedstuff M costs 20p per kilo, feedstuff Y costs 40p per kilo and feedstuff Z costs 55p per kilo. Each feedstuff contributes some essential part of the pigs diet and the farmer wishes to feed.

Questions

5a. Differentiate the four costs associated with inventory.

5b. What are the advantages and disadvantages of the periodic review system of inventory control.

5c. The following data relate to a particular stock item

          Normal Usage                           110 per day

          Minimum Usage                       50 per day

          Maximum Usage                      140 per day

          Lead time                                 25-20 days

          EOQ                                         5000

Using this data, calculate the various control levels.