NATIONAL OPEN UNIVERSITY OF NIGERIA
14/16, AHMADU BELLO WAY, VICTORIA ISLAND, LAGOS
SCHOOL OF MANAGEMENT SCIENCES
MARCH 2014 EXAMINATION
Course Code: MBF 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.
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%.
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.
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?
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
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.
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