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Finance Simple English

The document discusses proportions, percentages, and simple interest. It defines proportions and percentages, and shows examples of solving proportions and calculating percentages. It also defines simple interest and provides formulas for calculating simple interest on yearly, monthly, and daily bases, demonstrating the formulas with examples.

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Rakip Maloski
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73 views15 pages

Finance Simple English

The document discusses proportions, percentages, and simple interest. It defines proportions and percentages, and shows examples of solving proportions and calculating percentages. It also defines simple interest and provides formulas for calculating simple interest on yearly, monthly, and daily bases, demonstrating the formulas with examples.

Uploaded by

Rakip Maloski
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Proportions and Percentages

Simple Interest
Summary
Mathematics of Finance
Proportions and Percentages.
Simple Interest
F. M. Berisha
South East European University, Tetovo
Mathematics of Finance 1
Proportions and Percentages
Simple Interest
Summary
Aims and Objectives
Solving a proportion for an unknown.
Percentual calculus.
Calculating simple interest.
Mathematics of Finance 2
Proportions and Percentages
Simple Interest
Summary
Contents
1
Proportions and Percentages
2
Simple Interest
Mathematics of Finance 3
Proportions and Percentages
Simple Interest
Summary
Proportions
Two quantities are said to be proportional
if they have a constant ratio;
e.g.,
10
4
is the same as
5
2
.
Equality of two ratios is called a proportion:
a
b
=
c
d
.
A proportion
a
b
=
c
d
holds if and only if ad = bc.
Mathematics of Finance 4
Proportions and Percentages
Simple Interest
Summary
Proportions. (Continued)
Example
Solve the following equation
5
x
=
25
12
.
Proof.
The given proportion is equivalent to the following equation
25x = 5 12
x =
5 12
25
= 2.4.
Mathematics of Finance 5
Proportions and Percentages
Simple Interest
Summary
Percentage
Percentage
The quantities related to computing a percentage are:
1
Principal (present value) P is the quantity ("the total")
out of which a part is calculated based on a percentage.
2
Percentage p represents the one hundreds of the principal.
3
Interest I is "the fraction" of the total
calculated based on the percentage.
The relationship between these is given by the proportion
P
I
=
100
p
,
Symbolically, a percentage p is denoted by p%.
Mathematics of Finance 6
Proportions and Percentages
Simple Interest
Summary
Percentage. (Continued)
Example
A price of 380 C of a product is decreased by 5%.
What is the interest I and the new price?
Proof.
Given P = 380, p = 5, we need I and P I.
I =
P p
100
=
380 5
100
= 19.
The new price will be
P I = 380 19 = 361
euros.
Mathematics of Finance 7
Proportions and Percentages
Simple Interest
Summary
Percentage. (Continued)
Example
If 18% sugar is obtained from sugar beet
how many kilograms of the sugar beets are needed
for 13,113 kilograms of sugar?
Proof.
Here, we have p = 18, I = 13,113; P is needed.
From the percentual proportion we nd
P =
I 100
p
=
13,113 100
18
= 72,850
kilograms.
Mathematics of Finance 8
Proportions and Percentages
Simple Interest
Summary
Simple Interest
Simple Interest
An interest I on a principal P with an
annual simple interest rate p% is calculated by the formulae:
for n years
P
I
=
100
pn
for m months
P
I
=
1200
pm
for d days
P
I
=
36000
pd
Mathematics of Finance 9
Proportions and Percentages
Simple Interest
Summary
Simple Interest. (Continued)
Example
How much interest will 750 C earn for 3 years
at an annual simple interest rate of 5
1
3
%?
Proof.
Given P = 750, p = 5
1
3
=
16
3
, n = 3, we need I.
By the formula for calculating simple interest on yearly bases,
I =
Ppn
100
=
750
16
3
3
100
= 120.
Mathematics of Finance 10
Proportions and Percentages
Simple Interest
Summary
Simple Interest. (Continued)
Example
Which principal will earn 15,750 C for 9 months
at an annual interest rate of 7%?
Proof.
We have p = 7, I = 15,750, m = 9; P is needed.
By the formula for calculating simple interest on monthly bases,
P =
100I
p

12
m
=
100 15,750
7

12
9
= 300,000.
Mathematics of Finance 11
Proportions and Percentages
Simple Interest
Summary
Simple Interest. (Continued)
Example
If 6,000 C are invested in a bank on April 24
at an annual rate of 7%, how much interest will be earned
until October 29 of the same year?
Proof.
We have P = 6,000, p = 7, d = 30 6 +5 = 185; we need I.
By the formula for calculating simple interest on daily bases,
I =
Pp
100
d
360
=
7 6,000
100
185
360
215.83.
Mathematics of Finance 12
Proportions and Percentages
Simple Interest
Summary
Simple Interest. (Continued)
Example
At what annual interest rate,
7,125 C will earn an interest of 152 C for 96 days?
Proof.
Given P = 7,125, d = 96, I = 152, p is required.
We have,
p =
100I
P

360
d
=
100 152
7,125

360
96
= 8.
Thus, the annual simple interest rate is 8%.
Mathematics of Finance 13
Proportions and Percentages
Simple Interest
Summary
For Further Reading
http://fberisha.netfirms.com
Homework: Exercises from teaching materials
D. P. Maki, M. Thompson, Finite mathematics, pp. 411-421.
S. T. Karris, Mathematics for business, science and
technology, pp. 7-17-84.
F. M. Berisha, M. Q. Berisha, Matematik pr biznes
dhe ekonomiks, pp. 6572.
Mathematics of Finance 14
Proportions and Percentages
Simple Interest
Summary
Summary
A proportion and solving it
A percentage and calculating it
Calculating simple interest
on yearly bases,
on monthly bases,
on daily bases
Mathematics of Finance 15

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