1.

Calculation techniques

Maths brushing up course for MIBEM

Nick Deschacht
 Overview
• Lesson 1: Calculation techniques
A. Operations with algebraic expressions
B. Logarithms
C. Linear equations
D. Systems of linear equations
E. The summation sign
F. Series
• Lesson 2: Functions
• Lesson 3: Calculus

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 A. Operations with algebraic expressions
An algebraic expressions is a combination of:
• numbers, possibly represented by symbols (
, , , , …)
• combined by any or all of the operations of addition, subtraction,
multiplication, division, exponentiation, and extraction of roots.

Examples

• 2 + 16 +


• 10 − 3 
+
 is an algebraic expression in the variable

() 
is an algebraic expression in the variables
and 

•

• 5−
=

is not an algebraic expression but an equation.

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 A. Operations with algebraic expressions
The order of operations:
• First parentheses
• then exponents and roots
• then multiplications and divisions
• then additions and subtractions

Examples:
• 1 + 2 × 3
= 1 + 2 × 9 = 1 + 18 = 19
Remember exponents:
 =
.
…
(! factors). So 3 = 3.3 = 9
2+3 3+6−1

•
= 5 3 + 6 − 1 = 5 9 − 1 = 5 × 3 − 1 = 15 − 1 = 14
 

4
 A. Operations with algebraic expressions
For adding and subtracting algebraic expressions: work out the brackets and
combine similar terms (terms that only differ by their numerical coefficients)

Example:
•
+ 2

− (1 +
+
 )
= 3

− 1 +
+
 = 3
 − 1 −
−
 = −1 −
+ 2


The distributive property. Rule: # $ + % = #$ + #%

Examples:
• 2 5 +
= 10 + 2

•
+ 2 2
− 3
=
2
− 3 + 2 2
− 3 = 2
 − 3
+ 4
 − 6

5
 A. Operations with algebraic expressions
• Product of powers with the same base:
Example:
 .
 =
.
.
.
.
=

Rule: #& . # ' = #&'

• Negative exponents.

Example:
 =


Rule: # =
()

• Rational exponents:
Example:
*. =
=

+⁄ 


Rule: # = #
+⁄ )
)

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 A. Operations with algebraic expressions
• Simplifying fractions:
  () 
= =
  
Example:
So common factors can be divided to simplify fractions.
(- -
= (if # ≠ 0)
(. .
Rule:

• Caution: Only common factors may be divided!



Examples:


≠

•


≠+1

•
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 A. Operations with algebraic expressions
( . (.
• Multiplying fractions. Rule: . =
- 0 -0
( - (-
• Adding fractions. Rule: + =
. . .
So fractions can only be added after rewriting them so that they have the
same denominator.
Examples:
 
.
 
•

− 1 .1
−1
= = 

+ 1 . (
+ 2)
+ 3
+ 2

    
+ = + = =
  1 1 1 1
•

  () ( ) 2

+ = + =
  ( )() ( )()   
•
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 B. Logarithms
In statistics logarithms are sometimes used to transform data.
• Example: log* 100 = 2 because 10 = 100
We say: the log to the base 10 of 100 is 2.
Rule: log -
=  if $  =

• Examples:
• log  8 = …
• log* 10 = …
• log* 1 000 000 = ⋯

• Usually, the base is 10 (“log”) or the number 8 ≈ 2.71828 … (“ln”)

Example: ln 1000 ≈ 6.9 because 8 1.< ≈ 1000

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 B. Logarithms
• Rules: ln #$ = ln # + ln $
ln #- = $ ln #
• Examples:
– Check that ln 4 × 5 = ln 4 + ln 5
=.> ?
– Expand the expression ln
0@
= ln AB ( C -
= ln A + ln B ( + ln C - = ln A + # ln B − $ ln C

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 Exercises
1) 1 + 2 × 3() − 2 × 9 = ⋯


2) p × p = ⋯
+
3) 9 = ⋯ 

4) 3 = ⋯
 
5) 
× =⋯
E
 
6) 
+ =⋯
E

7) log E 16 = …
8) log  0.5 = …
9) Expand the expression ln(A. X R ) = …

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 C. Linear equations
• An equation is a statement that two expressions are equal. For example:

+3=5 (
is the unknown)

= 2 is a solution of the equation because filling in the solution turns the
equation into an equality: 2 + 3 = 5

• In order to find the solution of an equation, we convert the equation into

equivalent equations that are simpler (equivalent equations have the same
solution). Equivalent equations can be obtained by:
– Adding or subtracting the same expression on both sides of the equation.
Example:
+ 3 = 5 ⇒
+ 3 − 3 = 5 − 3 ⇒
= 2
– Multiplying or dividing both sides of the equation with the same factor if
this factor is not zero.
 
Example: 3
= 15 ⇒ = ⟹
=5
 
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 C. Linear equations
Example: 3
+ 5 = 8
− 20
⇒ 3
+ 5 − 3
= 8
− 20 − 3

⇒ 5 = 8
− 20 − 3

⇒ 5 = 5
− 20
⇒ 5 + 20 = 5

⇒ 25 = 5

25
⇒ =

5
⇒5=

13
 C. Linear equations

− 3 = 10

Example:
2
+ 1
⇒ = 10 + 3
3
2
+ 1
⇒ = 13
3
⇒ 2
+ 1 = 3.13
⇒ 2
+ 1 = 39
⇒ 2
= 38
38
⇒
= = 19
2

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 D. Systems of two linear equations
A system of linear equations is a collection of two or more linear equations
involving the same set of unknowns. Example:

− 6 = 20
U is a system of two equations with two unknowns
and 
2
− 5 = 19

2 − 6. (−3) = 20
(2, −3) is a solution to this system because U
2.2 − 5. (−3) = 19

Systems can be solved by repeatedly eliminating variables:

1. In one equation, solve for one of the variables in terms of the others.

2. Substitute this expression into the other equation and solve it.

3. Back-substitute the solution in the first equation to find the other

unknown.
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 D. Systems of two linear equations

− 6 = 20
Example: U
2
− 5 = 19

= 20 + 6
⇔U
2
− 5 = 19

= 20 + 6
⇔U
2(20 + 6) − 5 = 19

= 20 + 6
= 20 + 6
= 20 + 6
⇔U ⇔U ⇔X
40 + 12 − 5 = 19 7 = −21  = −21Y7 = −3

= 20 + 6(−3)
= 20 − 18 = 2
⇔U ⇔U
 = −3  = −3

So the solution of the system is (2, −3).

You can easily check whether your calculations were correct by
plugging the solution into the original system. 16
 E. The summation sign
The summation sign Σ is a compact way to write sums. Examples:

• ∑ ]^ \ = 1 + 2 + 3 + 4 + 5 = 15

• ∑
]^* 2. \ = 2.10 + 2.11 + 2.12 = 66

The summation sign is often used in statistics.

Example: Data view for the ages of four students:

Age (_` ) The mean (average) age can be written as:

∑E]^
]
 +
 +
 +
E
i
=
4 4
1 20
20 + 22 + 19 + 19
= = 20
2 22
3 19 4
In statistics the mean of n observations is denoted:
∑]^
]
4 19

̅ =
! 17
 Exercises
c
1. Solve the equation: 3 − b =


2 + 2d = 6
2. Solve the system of equations: U
3 − 2d = −1

3. ∑Ee^ \ 

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 F. Series
A series is the sum of an infinite sequence of terms. Example:
1+2+3+4+⋯

Note that series continue indefenitely (the example series does not stop at 4).

Many series can be written compactly using the summation sign and using
the symbol ∞ to denote ‘infinity’. Example:
h

g\
]^

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 F. Series
A geometric series is a series with a constant ratio between successive terms.

Example: 1 + 2 + 4 + 8 + 16 + ⋯ = ∑h
]^* 2]

Geometric series can be written as: ∑h

]^* #. i , where # is the first term and i
]

is the common ratio.

If i is between −1 and +1, then the sum of the geometric series converges to
(
&
the number .
    
Example: ∑h]^*() is the geometric series 1 +  + E + 2 + ⋯ with i =  and
]

a = 1. Since i is between −1 and +1, the sum of the series equals:

h
1 ] 1 1
g( ) = = =2
2 1 1
1−
]^* 2 2
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 F. Series
Application 1: the money multiplier (see Macroeconomics)
Suppose banks are required to hold 10% of their deposits in reserve.
If you deposit 100€ with the bank, the bank can lend out 90€ of that deposit.
There is now 100€ (on paper) + 90€ (real money) = 190€ of money in the
economy. The 90€ is used for consumption and the sellers deposit the 90€ in
their bank. Those banks can lend out 81€ (they keep 10% in reserve). …
In the end the total amount of money in the economy is:
100 + 90 + 81 + 72,9 + ⋯
h
100
= g 100. (0,9)] = = 1,000 €
1 − 0,9
]^*
The money multiplier measures the maximum amount of commercial bank
money that can be created by a given unit of central bank money.
,*** €
= 10
** €
In the example, the money multiplier is
(the money multiplier is the inverse of the reserve ratio). 21
 F. Series
Application 2: the multiplier effect in the theory of Keynes (Macroeconomics)
Suppose that consumers spend 80% of their income (they save the rest).
In order to fight an economic crisis, the government decides to hand out 100€ in
additional income. 80€ of that is spent on consumption goods. The income of the
seller now increases by 80€ so that (s)he increases consumption with 64€ (i.e. 80%
of 80€). Etcetera.
In the end the total additional income (economic growth) resulting from the
injection of 100 € by the government is:
100 + 80 + 64 + ⋯
h
100
= g 100. (0,8)] = = 500 €
1 − 0,8
]^*
The multiplier measures the effect on total output in the economy (GDP) resulting
from the initial change in spending (e.g. government injection).
** €
In the example, the multiplier is ** € = 5

= 5).
*%
(the multiplier is the inverse of the fraction of income that is saved:
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 F. Series
Application 3: Net Present Value (see Corporate Finance)
• 100€ today is worth more than 100€ in the future, because the 100€ today
could be put on a bank account to gain interest payments.
• If i is the yearly interest rate, then the future value (lm) after n years of om
euro today (om is present value) is:
lm = om. (1 + i)p
Example: when i = 10%, the future value after two years of 100€ today is
100. (1 + 0,1) = 121 €
• Inversely, the present value of a future payment is:
lm
om =
(1 + i)p
Example: when i = 10%, the present value of 100€ in two years time is
100
= 82,6 €
(1 + 0,1) 23
 F. Series
Application 3: Net Present Value (see Corporate Finance)
• Imagine an investment of 1,000 € today which results in an indefinite cash
flow of 100 € per year. If i = 5%, then the Net Present Value (qom) of this
investment project is:
100 100 100
qom = −1,000 + 100 + + + +⋯
1 + 0,05  1 + 0,05  1 + 0,05 
h ]
1 100
= −1,000 + g 100. = −1,000 + = 1,100 €
1,05 1
1−
]^* 1,05
• At i = 10%, the om of an indefinite yearly cash flow of 100 € starting next
+ss
** ** ** **
+ + +⋯= +,+
+ = 1,000 = !
,+ , ,r  *%
year is
+,+

u
In general, the present value of a yearly cash flow  starting next year is .
&
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 Exercises
1. What is the sum of the series
∑h
]^* 1000(0.8) = 1000 + 800 + 640 + ⋯ =
]

2. Calculate the present value of a payment of 1000 € in 2 years

time if the interest rate is 3%.

3. Calculate the present value of an indefinite yearly cash flow

of 100 € per year (starting this year) if the interest rate is 3%.

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