FIN500 Business Mathematics

Course Overview

Dr. Yilin Zhang

Peking University HSBC Business School

1
 Today
• Administrative stuffs
• Overview and notations
• Review on basic algebra
– Algebraic operation rules
– Equations
– Linear equation system
– Functions

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 Contacts
• Instructor: Yilin Zhang
– Office Hours: Wednesday 3:00-5:00PM @PHBS660
– Email: ylzhang@phbs.pku.edu.cn
• Course-related emails (Please include “Fin500” in the
subject field) are usually replied within 24 hours;
otherwise send me a reminder email
• I strongly recommend you come during the office hours
to discuss in person
• TA: Zhen Pan
– Email: panzhen96@pku.edu.cn
– Office Hours:
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 Wechat Group
• Scan the following QR code (effective till Sept.11) to join the class (session EF)
Wechat group.
• You can discuss with your classmates and the TA about any course related issues in
the group. The TA may also make course related announcement in the group.

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 Aim & Coverage
• To review the math you’ve learned before and to equip you with
necessary mathematic tools for the rigor of graduate economics
and finance
• To many of you, the material will not be completely new
• Algebra: Algebraic operations rules, types of functions etc.
• Linear algebra: Matrix operations, special matrices, determinant, matrix
inversion, Cramer’s rule
• Calculus: Rules of differentiation, single variable /multivariable
differentiations, monotonicity and concavity
• Optimization: Unconstrained and constrained optimization

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 Textbooks
• Required Text
– Ian Jacques, Mathematics for Economics and
Business, 7th edition
• You can probably borrow one from the senior students
• The answers to most exercise questions are at the end of
the book so you are encouraged to practice by yourself.

• Other Reference
– Alpha C. Chiang and Kevin Wainwright, Fundamental
Methods of Mathematical Economics. 4th edition
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 Reference List
• Part 1: Review of basic concepts and algebra
– Chapter 1-3 of Jacques’ textbook
– Chapter 2 and 10 of Chiang’s
• Part 2: Calculus
– Chapter 4-5 of Jacques’
– Chapter 6,7, 11 (differentiation) of Chiang’s
• Part 3: Linear Algebra
– Chapter 7 of Jacques’
– Chapter 4-5 of Chiang’s
• Part 4: Optimizaion
– Chapter 4-5 of Jacques’
– 9 and 12 (optimization) of Chiang’s
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 Course Website
• The course website is
• http://cms.phbs.pku.edu.cn/claroline/course/index.php?
cid=19BM_EF
– Register and login onto the CMS website; then search for the
course “Business Math (Math Session E&F)” or “19BM_EF”
under my name and enroll with key “2019Fin500EF”.
• NOTE: Please do not enroll in the other session (M) as the teaching
plans are different.
– Let me know ASAP if you have difficulty accessing the website
• All the announcements, lecture notes, homeworks and other
supplemental documents will be posted on the course
website so please check it as frequently as possible
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 Assessment

Components Weights

Midterm (in-class exam in the fifth week, details 30%

TBA)

Final (1-3PM, Monday, Nov.11) 35%

Homework 25%

Participation 10%

Total 100%

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 Letter Grade System
• The final grades for the course will be converted into letter grades
according to the following criteria:
Letter Grades Criteria
A+, A & A- 70th percentile

B+ & B* 10th percentile and total score 70

B-, C & D 10th percentile and total score 70

F Total score 70

• *: There is a minimum requirement of B (3.0) on average GPA for

graduation.

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 Assessment (Cont’d)
• Exams
– If you expect any time conflict with the exam dates, please let me know as early as
possible before the exam so we can make arrangement. If you cannot attend the
midterm exam for legitimate reasons, the weight of your midterm exam will be
moved to the final.
• Homeworks
– You can work in groups on the homeworks but you must write up and submit your
individual copy of the homework.
– If you submit your homework late, you’ll get AT MOST 80% of the total credits.
• Participation
– Full attendance of the lectures is required as the materials are cumulative. You
need to get my pre-approval if you are absent from any class. As per school policy,
missing more than 1/3 of classes in a course results in an F.
– Please come to the class on time.
– You are strongly encouraged to ask questions during office hours.
– There will be about 2 TA sessions (one before each exam) where the TA reviews
the lecture notes, homeworks and answers course-related questions. While full
attendance is not required, you are strongly encouraged to go to the TA sessions.
– Plagiarism issue
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 What you should expect…
• The proofs and derivations will be kept to a minimum but the
class will still be mathematical in nature.
• Given the very limited lecture time we have in class and that
you are graduate students:
– It is VERY IMPORTANT that you read the lecture notes, required text
and other reference (e.g. online) by yourself and practice on your own
and beyond finishing the homeworks, especially if the contents are new
to you.
– On average, students should spend about 14 hours per week (i.e. 2
hours/day) in addition to the lecture time on studying for this course.
• There will NOT be any form of make-up exam/extra
essay/problem set after the final exam if your total score is
below 70
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 1st Homework posted
• Under “Assignments” on Fin500 course website under the CMS system
• HW0 (Session EF):Upload an info sheet
– Word or PDF file named “Last name, First name_Student ID.doc(x) or pdf”
• E.g. Named “Zhang, Xiaopang_18xxxxxxx.docx”
– Please include a recent photo of you in the document.
– Little bit about yourself
• Name, a little background, interests, ……,or other things you would like to share
– Your expectations for this course
• Individual assignment
– It will NOT be graded but I will read everyone of them (and will be counted toward
your final grades)
• Due on Sept. 12 (Thursday) by 1:30PM through the online Assignment system
of CMS
– If you cannot upload your answer sheet properly, please email me the file BEFORE
the due date.
– Late submissions will NOT be accepted and you will get ZERO for the assignment.
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 Overview
• Why mathematics?
– Math is a concise and precise language……And in
economics, finance and business in general, we need
such a language.
– Math contains many tools, formulae and theorems
that help making general statements.
– Math forces us to explicitly state all assumptions, and
help preventing us from failing to acknowledge implicit
assumptions.
– No matter what your career is, math develops
analytical skills and the ability to work in a problem-
solving environment.
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 Applications
• Minimize cost of production with multiple inputs
• Maximize individual’s utility functions
• Optimal portfolio choices
• Investment/saving decisions
……

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 Some Useful Notations
•
•
•
•
•
•
•
•
•
–
–
–
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 Review: Algebraic Operation Rules
• Rules of algebraic operation – BIDMAS
– Brackets first
– Indices second
– Division and Multiplication third
– Addition and Subtraction fourth
• E.g.
n

×
n

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 Review: Equations
• Equations
– Linear equations
•
• (suppose y is the unknown and a, b, c,
d are all known constants)
– Non-linear equations
•

•
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 Review: Linear Equation System
• Linear equation system

• More to come in the linear algebra section J

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 Review: Function -- Definition
• A function is a rule assigning a uniquely
defined number y in a set to every number x
in set
– Notation:
• The incoming number, , is called the argument of the
function, or the independent variable
– A function can have more than one arguments
• The outgoing number, , is the value of the function, or the
dependent variable

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 Review: Function – More Terms
• We will only work with real-valued function, or real function
• If is a function
– The set of all permissible values of is called the domain of the function

– The set of all possible values of is called the range of the

function.

• is sometimes also called a mapping from into

• Notation:
• -value that correspond to a -value is called an image of

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 Review: Function 1
• Linear function
– Demand function:
• -2 is called the slope of the line and 50 is the y-intercept of the
line
• We can also “reverse” the function or transpose the formula to
express Q in terms of P:
–
• This is called the Inverse demand function, denoted

– For every given P value, the inverse demand function assigns a

unique Q value.
– In this case the original function is called invertible
» Note: Not all functions are invertible.
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 Review: Function 2
– Quadratic functions
–
–
–
–
• The sign of
• Y-intercept
• X-intercept
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 Review: Function 2 – Example
Solve for the equilibrium price and quantity given the
following quadratic supply and demand functions (non-
linear equation system)

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 Review: Function 3
• Power function:
– E.g.
• Try https://www.desmos.com/calculator/jfesw7c1re to see how the
shape of the power function changes with different integer value.

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 Review: Function 3 (Cont’d)
• Power function:
– E.g.

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 Review: Exponent Rules
• Rule 1:
• Rule 2:
• Rule 3:
• Rule 4:
• Rule 5:
• E.g.
–
–

–
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 Review: Function 3 – Example (Cont’d)
• Cobb-Douglas production function

– Where , and are positive constants

– and stands for the level of the two inputs (capital and labor),
respectively
– Cobb-Douglas function is homogeneous of degree

• i.e. if you increase both inputs by the same multiple , then the output
level is scaled up by the multiple
• In general, if a function satisfies , then the
function is homogeneous of degree

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 Review: Function 4
• Exponential Function:
– ,…
– Natural exponential function)
• where is Euler’s number,
→

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 The number
• is Euler’s number,

• From: http://www.mathsisfun.com/numbers/e-eulers-number.html

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 Interest Compounding: More about
• Interest Compounding: If we have $100 now and the 1 year
interest rate is then after 1 year, we have
– if the interest rate is compounded annually (or simple
rate)

– if the interest rate is compounded semi-annually

– if the interest rate is compounded monthly

– if the interest rate is compounded daily

– if the interest rate is compounded times a year

– Let the compounding intervals become extremely short, we have
continuous compounding. And after 1 year, we have
• In general, if the interest rate is continuously compounded, then over a time
period of length , $1 grows into $
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 Review: Function 5
• Logarithmic function

– If , then
– If , then (Natural logarithmic function)
• The domain of the natural log function is

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 Natural Exponential vs. Natural
Logarithm Function

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 Review: Logarithm Rules
• Rule 1:
• Rule 2:
• Rule 3:

– Express the following as a single logarithm

•
•
•
– Express the following so the result is linear in and
.
•

•
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 Homework 1
• Please download the pdf file (HW1_EF.pdf) from the
course website under the “Document” directory.
• Due at the beginning (1:30pm) of the class on
Thursday (Sept. 19).
– The questions in this homework are chosen for you to
practice and to help you refresh your memory about the
basic algebra.
– Submission in handwritten or printed hard copy only.
• Also applies to all the homeworks later on.
– The textbook provides answers to almost all the exercises at
the end of the book so you can check your answers easily.
– This homework will be graded based on effort.
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