UNIT 14 COMMERCIAL MATHEMATICS

Structure Page No.

14.1 Introduction 5
Objectives
14.2 Interest 6
Simple Interest
Compound Interest
Savings Bank Account

14.3 Profit and Loss 15

14.4 Discount 18

14.5 Taxes 19

14.6 Shares and Debentures 23

14.7 Summary 26

14.8 Solutions/Answers 26

14.1 INTRODUCTION

“Spend within your limits”, is a common saying by elders, i.e. keep your expenditure
less than your income. The meaning of this is to save something for difficult times.
Also, money is required to meet our day-to-day expenses. We always try to save some
money for future use. To keep your savings safe is another task. Banks and other
financial institutions keep the money of their customers. For this purpose the most
popular account offered by the banks is saving bank account, which encourages the
people to develop the habit of saving. Keeping this in mind, if you put money in a
savings account, the bank pays you interest according to what you deposit. In effect, the
bank is paying you for the ”borrowing” of your money. The same is true for the interest
you pay on a loan you take from the bank or the money you borrow from some lending
agent. There are two kinds of interest; simple interest and compound interest. we shall
start the unit by discussing about the Simple interest and compound interest.
All the money related transactions are done for profit. In Section 14.3 we will discuss
profit and loss. In section 14.4, we shall discuss discount. The government performs
various functions like facility for education and health, defence of the country,
maintaining law and order etc. To perfrom these functions it collects the money
required, in the form of revenue, through a wide variety of sources. The most important
of these is tax. In section 14.5, we shall discuss various taxes. One has to be very
careful in making different types of investments. If your investment is proper it will
lead you to gain which we call profit. On the other hand if you invest in buying shares
of a company which is running into losses you may have to bear loss. We shall discuss
about shares and debentures in Sec.14.6.
Let us clearly state the objectives of this unit.
Objectives
After reading this unit, you should be able to
• calculate simple and compound interest
• compute interest for a savings bank acount at given rate of interest. 5
Handling Investments • identify whether there is a profit or loss.
and Data
• calculate discount
• compute different kinds of taxes.
• find the annual income on shares and debentures.

14.2 INTEREST

If you invest some amount in a bank, then after some time you find that there is some
amount given by the bank or other financial institutes. This amount is the fee for the use
of your money, which we call interest. Now we shall discuss two kinds of interests viz.
simple interest and compound interest.

14.2.1 Simple Interest

Suppose you borrow Rs.1000 from a lending agent and return Rs.1050 after 1 year,
then a fee of Rs. 50 is charged for the money borrowed, just as rent is paid for the use
of another’s house. The fee is called interest. It is usually computed as a percentage
called the interest rate or rate of interest. Suppose the rate of interest is 5% annually,
i.e. per year. This means the interest of Rs.100 is Rs.5 at the end of 1 year. You have
already done percentage in unit (4 ). You can also use that concept to find interest. Thus
5% of 100 i.e. Rs.5 is the interest, this means that if you deposit Rs.100, then you
would get Rs.105 after 1 year. The money on which the interest is calculated is called
principal. So in the example above Rs.1000 is the principal. The interest rate is usually
charged by years. It may be charged quarterly or six monthly. In such cases it is
converted to yearly, rate of interest.
Now, let us try to find a rule or a formula to compute the simple interest.
Suppose you invest Rs.1000 at 5% rate of interest for 1 year, then
If interest of Rs.100 at the end of one year = Rs.5
therefore interest of Rs.1000 at the end of one year = 5% of 1000 = Rs.50
Now suppose you invest Rs.2000 at 5% interest rate annually. How much interest will
5
you get at the end of one year? It will be × 2000 = Rs.100, which is double of the
100
interest of Rs.1000.
Again if you invest Rs.5000 for 1 year at 5% rate of interest, then the return on
investment is Rs.250, which is 5 times the interest on Rs.1000.
From the above, it is clear that the amount deposited or the principal amount is one of
the factors which determines the interest you would get after 1 year. Now the question
arises, are there other factors affecting the interest on your investment? Let us try to
find an answer to this.
Suppose you invest Rs.1000 at the rate of interest 5% annually for 2 years, then
If interest on Rs.1000 at the end of one year = Rs.50
therefore interest on Rs.1000 which we will get after 2 yrs. = Rs.50 × 2 = Rs.100
This means each year Rs.50 will get added to the principal amount which you have
deposited.
Thus the interest on Rs.1000 at the end of 5 years is Rs. 50 × 5 = Rs.250.
Therefore the time or duration for which the principal is invested is another factor
affecting interest.
6 Now, let us see, what happens if the rate of interest is changed.
Since interest on Rs.100 at 5% after one year = Rs.5 Commercial Mathematics
therefore interest on Rs.100 at 10% after one year Rs.10% of 100 = Rs.10
Also interest on Rs.100 at 20% after one year = 20% of 100 = Rs.20.
It is clear that rate of interest is another factor which determines the interest on
investments.
From the discussion above , it is clear that the rate of interest, principal and time (in
years) are the factors of simple interest, which can be formulated as below:

Interest I = P×r×t
where P = Principal (The amount of money borrowed or invested)
(1)
r = Annual rate of interest
t = Time in years

The amount after t years is A = Principal + Interest

= P+I
Now let us take up a few examples to illustrate the above formula.
1
Example 1: What is the interest on Rs.2000 for six months at 7 % annual rate of
2
interest?
Solution:
Here it is given that,P = Rs.2000
6 1
t = 6 months = = year
12 2
1
r = 7 % = 0.075
2
Now applying the formula given in (1), we get
1
Interest = P × r × t = 2000 × 0.075 ×
2
= Rs.75.
Note that the time is converted in years.
∗∗∗
Example 2: Find the total amount you will pay back on taking a loan of Rs.5000 at an
annual rate of interest 12% at the end of 30 months.
Solution:
Given that, P = Rs.5000
12
r = 12 % = = 0.12
100
30
t = 30 months = years = 2.5years
12
Therefore interest = 5000 × 0.12 × 2.5
= Rs.1500
Total amount due at the end of 30 months = Principal + Interest
= Rs.5000 + Rs.1500
= Rs.6500
∗∗∗
So far we considered those examples where rate of interest is annual. There are
situations where the rate of interest is half-yearly or quarterly. In the next example we
consider such a situation. Semi-annually is half yearly
and quarterly is three
Example 3: If you borrow Rs.1000 at 12% rate of interest semi annually, how much months interval.
must you repay at the end of 9 months?
Solution: Given is P = Rs.1000
Here rate of interest is given semiannually. Since there are two half years in a year,
therefore the rate of interest will be doubled and will be considered annually. 7
Handling Investments
and Data 12
r = 12% semiannually = × 2 annually
100
= 0.24 annually.
9
t = 9 months = years = 0.75 years
12
Therefore interest = 1000 × 0.24 × 0.75
= Rs.180.00
The amount for repayment = Principal + Interest
= Rs.1000 + Rs.180
= Rs.1180.00
In this situation you must have noted that if the rate of interest is r% for half yearly,
then the interest rate is 2r% annually and if it is quarterly, then it is 4r% annually.

∗∗∗
Try some exercises to test your understanding.

E1) Find the simple interest paid on Rs.2000 at 7% rate of interest in 4 years.
E2) Suppose some of your bill of Rs.1500 is due from 5 years at a simple interest 5%
per annum. Then what amount will you have to deposit now?
E3) If you borrow Rs.5000 at 4% rate of simple interest quarterly, how much must you
repay at the end of 15 months?

As you have seen above, the simple interest I depends upon three factors P, r and t. If
any three out of I, P,r,t are known, then the fourth can be obtained by following method.
As we know I = P × r × t
I I I
therfore P = ,r = and t = .
r×t P×t P×r
Let us now consider the problems of finding P,r, and I.
Example 4: If you invest Rs.10,000, after some time you get Rs.12000. Find the time
for which you invested if the rate of interest is 5% annually.
Solution:
Here we are given that, P = Rs.10, 000
I = Amount − Principal = Rs.12, 000 − Rs.10000 = Rs.2000
r = 0.05
I 2000
t = = = 4 years.
P×r 0.05 × 10000
∗∗∗
Example 5: A certain sum of money was deposited for 4 years. Simple interest at the
rate of 12% was paid. Calculate the sum deposited if the simple interest received by the
depositor was Rs.1200.
Solution: Let the sum deposited be Rs. P
Given that, I = Rs.1200
t = 4 years
r = 0.12
I 1200
P = = = Rs.2500
t×r 0.12 × 4
∗∗∗
Example 6: At what rate of interest will simple interest be half the principal in 5
years?
8 Solution: Here we are not given principal. So let us assume the principal P. Since the
simple interest is half the principal in 5 years, therefore the interest is P/2. Commercial Mathematics

I P/2
So r = = = 0.10 = 10%
P×t P×5
∗∗∗
Now try some exercises:

E4) Find the missing quantity against each of the following:

i) P = Rs.4500, t = 4 years, A = Rs.6000 , r = ?
ii) I = Rs.800, r = 0.08, P = Rs.1000, t = ?
iii) P = Rs. 8000, t = 8 years, r = 6%, A = ?
iv) A = 2P, t = 6 years, r =?

E5) In how much time will simple interest be 1/4th of the principal at the rate of 10%
per annum?

E6) Suppose you are offered the following two schemes by the bank. Then in which
scheme you would prefer to deposit and why?
i) Rs.10000 deposited for 5 years at 4% per annum, or
ii) Rs.8000 deposited for 6 years at 5% per annum?

In simple interest, the interest is always calculated on the principal. Principal is a fixed
quantity. Now consider another situation in which principal changes every year.

14.2.2 Compound Interest

Here we will discuss another form of interest. Suppose you borrows money from some
landing agent for a fixed time period then simple interest is the extra money paid by you
for the use of landing agent’s money for that time period. If the money is not returned in
time, then the interest is added to the principal and now the sum becomes the principal
for the next time period, i.e. you will pay interest on the principal money as well as on
the interest accrued for the first year. Therefore, you will have to pay more interest for
the second year. This way of calculating interest is called compound interest.
When the interest is paid on the principal only, it is called simple interest. But if
interest is paid on the principal as well as on interest, it is called compound interest.
Let us try to understand it.
Example 7: Suppose you deposit Rs.1000 in a bank at 10% compound interest
annually for 4 years. Then for the first year your principal P = Rs.1000.
The amount after 1 year(P1 ) = P + P × r × t(where r = 0.10 and t = 1)
= P(1 + r × t)
= 1000(1 + 0.10 × 1)
= 1000(1 + 0.10)
= P(1 + r)
This amount P1 will be treated as principal for second year, therefore the amount at the
end of second year is (P2 ) = P1 (1 + rt)
= P1 (1 + 0.10 × 1)
= P1 (1 + 0.10)
= P(1 + r)(1 + r)[Substituting the value of P1 ]
= P(1 + r)2
Again the amount P2 at the end of second year will be principal for the third year,
therefore at the end of third year the amount is 9
Handling Investments
and Data (P3 ) = P2 (1 + rt) = P2 (1 + 0.10 × 1)
= P(1 + r)2 (1 + r)[substituting the value of P2 )
= P(1 + r)3
Similarly, amount, at the end of fourth year will be P4 = P(1 + r)4 .
Now if you look at the above calculations for compound interest you would notice a
pattern that leads you to a general formula for computing compound interest in general.
The amount in your bank computed after one, two, three, four years is given by
P(1 + r), P(1 + r)2 , P(1 + r)3 , P(1 + r)4 respectively.
These consecutive amounts form a geometric progression, whose first term is P(1 + r)
and the common ratio is (1 + r) continuing this, the amount at the end of nth year is
P(1 + r)n . Therefore, we write

A = P(1 + r)n , (2)

where A : Amount at the end of nth year

P: Principal
r: rate of interest annually
n: number of years.
∗∗∗
Note: Later we shall be discussing the case, where n is not in years. Let us now
illustrate Formula (2) through an example.
Example 8: Calculate the compound interest on Rs.10000 for 2 years at 8% per
annum.
Solution:
Given that P = Rs.10000
n=2
r = 8% = 0.08
Amount after 2 years = P(1 + r)n
= 10000(1 + 0.08)2
= 10000 × 1.08 × 1.08 = Rs.11664
Therefore the compound interest after 2 years = Amount after 2 years − Principal
= Rs.(11664 − 10000)
= Rs.1664.
∗∗∗
Now, try an exercise.

E7) Surbhi deposited three different sums in three different schemes, which are given
below. Find the compound interest in each of the following.
i) P = Rs.10000, n=4, r = 6%
ii) P = Rs.5000, n=3, r=10%
iii) P = Rs.4000, n=2, r=12% .

For the calculation of compound interest, time period is generally taken in years. The
compound interest can be calculated semi-annually (after 6 months), quarterly (after 3
months), monthly or even daily. The unit of time after which interest is compounded is
called the conversion period. If conversion period is not in years, then the compound
interest is computed for the no. of conversion periods and rate of interest is
compounded conversion period wise. For instance, if in a bank, interest is quarterly
compounded for one year, then the number of conversion periods is four because there
10 are four quarters in a year.
For a better understanding of the concept let us go through the following examples. Commercial Mathematics

Example 9: Calculate the compound interest on Rs.10000 for 1 year at the annual rate
of interest 12% compounded (i) quarterly (ii) semi-annually.
Solution:
i)
12
r = 12% annually = or 3% quarterly = 0.03 quarterly
4
and n = 4[∵ 1 year = 4 quarters]
∴ A = P(1 + r)n
= 10000 (1 + 0.03)4
= 10000 × 1.03 × 1.03 × 1.03 × 1.03
= 11251.9081
Compound Interest = Rs. (11251.9081 − 10000)
at the end of 1 year = Rs. 1251.90
ii) If Interest is compounded semi-annually, then
12
r = or 6% semi-annually = 0.06
2
and n = 2 [∵ 1 year = 2 half years ]
∴ A = P(1 + r)n
= 10000(1 + 0.06)2
= 10000 × 1.06 × 1.06
= Rs. 11236
Compound Interest = Rs.(11236 − 10000) = Rs.1236.
∗∗∗
1
Example 10: Calculate the compound interest on Rs.15000 for 1 years at the rate of
2
10% per annum when the interest is compounded annually.
Solution: Given that P = Rs.15000
1 3
and n = 1 years. = years.
2 2
Amount A = 15000(1 + 0.10)3/2 = Rs.17325.
Therefore, the required compound interest = Rs. (17325 - 15000) = Rs. 2325
In another way, here the interest is compounded annually, therefore at the end of one
year, the amount will be
A = 15000(1 + 0.10) = 15000 × 1.10
= Rs.16500.
The amount after 1 year will be the principal for next 6 months,
10
and the rate of interest for 6 months = or 5% semi-annually = 0.05
2
1
and the amount after 1 years = 16500 (1 + 0.05)
2
= 16500 × 1.05
= Rs.17325
1
∴ Compound interest after 1 years = Rs.(17325 - 15000) = Rs. 2325.
2

∗∗∗
Example 11: At what rate of interest per annum would the compound interest on
1
Rs.12500 be Rs.9100 in 1 years, interest being compounded half-yearly?
2
Solution: Let r be the rate of interest compounded half-yearly. 11
Handling Investments
and Data
 
1
Given is, n=3 ∵ 1 years = 3half years
2
and A= Rs.(12500 + 9100) = Rs.21600
Again using the formula,
A = P(1 + r)n , we get
⇒ 21600 = 12500(1 + r)3
216
⇒ = (1 + r)3
125
 3
6
⇒ = (1 + r)3 ⇒ 1 + r = 6/5 ⇒ r = 1/5 = 0.2
5
r = 20% half yearly
or r = 40% yearly.
∗∗∗
Let us try some exercises.

E8) Find the rate of interest at which Rs.8000 amounts to Rs.9261 in 3 years, if the
interest is compounded annually.

E9) Rajni purchases National saving certificates (NSC) for Rs.10000. Find the rate of
interest, if she gets double the amount after 6 years.

E10) A sum of money becomes Rs.18522 in 3 years and Rs.19448.10 in 4 years at the
same rate of interest when the interest is compounded annually. Find the sum and
the rate of interest per annum.

E11) Find the difference between simple interest and compound interest for 2 years at
10% per annum, where the interest is compounded semi-annually, on Rs.8000.

E12) If you invest Rs.5000 at an annual rate of interest of 18% compounded (i)
annually (ii) semi-annually (iii) quarterly, what amount you will get after 2 years.

E13) How long will it take money to double itself if it is invested at the interest rate of
10% compounded annually?

E14) How much should you invest now at 10% compounded quarterly to have
Rs.1,00,000 in 5 years.

E15) What is the better way to invest Rs.2000 for 2 years at 5% simple interest or 4.8%
interest compounded quarterly or 6% interest compounded semi-annually?

So far, we discussed simple and compound interest and how to apply these in different
context. For our convenience, we usually invest our savings in banks to get interest for
a specific time period. The most popular account used for this purpose is savings bank
account. Now we will discuss saving bank account.

14.2.3 Saving Bank Account

We always try to save some money for future use, for this purpose the most popular
account offered by the banks is savings bank account. In a particular bank, anyone can
open this account with an initial investment of Rs.1000, with the facility of
Cheque-Book.
The bank pays interest for the money that an account holder keeps in the account.
Money can be deposited/withdrawn in cash as well as through cheques. In a savings
12 bank account,
(i) Different banks offer different rate of interest. For example, a particular bank has Commercial Mathematics
the current rate of interest 4% per annum compounded semi-annually, and the
interest is credited to the account in every six months.
(ii) The bank pays interest for the month on the minimum closing balance from the
10th day of the month to the last day of the month. If account is opened after 10th
of the month, no interest is payable for that month.
(iii) In any month if the account is closed, no interest is payable for the month.
Let us illustrate the above with some examples.
Example 12: A page from the pass book of saving bank account is given below:
Date Particulars Amount withdrawn Amount deposited Balance
2004
Jan 8 By cheque - 10000.00 10000.00
Feb. 8 By cheque - 20000.00 30000.00
March 15 To cheque 5000.00 - 25000.00
April 6 By cash - 10000.00 35000.00
April 25 To cheque 10000.00 - 25000.00
May 5 By cheque - 5000.00 30000.00
June 15 To cheque 20000.00 - 10000.00
Find the minimum balance of each month on which interest will be earned. Also, find
the sum on which the interest will be earned from January 2004 to June 2004.
Solution: As we have already noted, the amount for the interest is the minimum
balance between the 10th and the last day of the month.
Let us see how we calculate the minimum balance i.e., principal of each month from
January to June and find the total of that.

Principal for January = Rs.10000.00

Principal for Febuary = Rs.30000.00
Principal for march = Rs.25000.00
Principal for April = Rs.25000.00
Principal for May = Rs.30000.00
Principal for June = Rs.10000.00
Total = 130000.00
Thus, we got that the minimum balance is Rs.1,30,000 on which the interest will be
earned from January to June.
∗∗∗
Example 13: Madhu’s pass book has the following entries:
Date Particulars Amount Withdrawn Amount deposited Balance
2003
Jan.1 B/F - - 5000.00
Jan. 15 By cheque - 5000.00 10000.00
Jan.24 To cash 4000.00 - 6000.00
Feb.8 To Cash 4000.00 - 2000.00
March 15 By cash - 8000.00 10000.00
April 12 By cheque - 5000.00 15000.00
May 04 By cash - 10000.00 25000.00
Aug. 16 To cheque 15000.00 - 10000.00
October 4 By cash - 5000.00 15000.00
Dec.7 By cheque - 5000.00 20000.00
Dec.28 By cheque - 5000.00 25000.00
If the rate of interest is 4% per annum, and is credited to the account at the end of every 13
Handling Investments
and Data June and December, then find the interest earned by madhu at the end of Dec., 2003 on
her saving bank account.
Solution: The qualifying amount for the interest credited in the month of June is as
follows:
Principal for Jan. 5000.00
Principal for Feb. 2000.00
Principal for March 2000.00
Principal for April 10000.00
Principal for May 25000.00
Principal for June 25000.00
Total 69,000.00

Since the principal is calculated for each month therefore the interest is computed per
1
month i.e. time is one month which is year.
12
1
Interest credited to madhu’s savings account on 30th June = 69, 000 × 0.04 ×
12
= Rs.230.00
Let us calculate the interest credited in the month of Dec.. The interest paid in the
month of June will be credited in Madhu’s account on 30th June. Therefore the
minimum balance at the end of June is Rs. 25230.
Now minimum balance of each month for July to Dec. is:

Minimum balance in July = 25230.00

Minimum balance in Aug. = 10230.00
Minimum balance in Sep. = 10230.00
Minimum balance in Oct. = 15230.00
Minimum balance in Nov. = 15230.00
Minimum balance in Dec. = 20230.00
Total = 96,380.00
96380 × 04 × 1
Interest earned in the month of December is = = Rs.321.26
100 × 12
∗∗∗
Example 14: Ashok opened a saving bank account with a bank on 6th Jan., 2003 with
a cash deposit of Rs.5000. Subsequently he deposited Rs.1000 on the 6th day of every
month. He withdraw Rs.2000 on 15th March and Rs.3000 on 20th May 2003. Write all
the entires of the passbook. If the interest rate is 4% per annum, calculate the interest
upto the last day of 30th June and make the entry in the passbook alongwith the balance.
Solution: The entires in the passbook are as given below:

Date Particulars Amount withdrawn Amount deposited Balance

2003
6th Jan. By cash - 5000.00 5000.00
6th Feb. By cash - 1000.00 6000.00
6th March By cash - 1000.00 7000.00
15th March To cash 2000.00 - 5000.00
6th April By cash - 1000.00 6000.00
6th May By cash - 1000.00 7000.00
20th May To cash 3000.00 - 4000.00
6th June By cash - 1000.00 5000.00
Monthwise principal for the calculation of interest is
14
 January 5000.00 Commercial Mathematics
February 6000.00
March 5000.00
April 6000.00
May 4000.00
June 5000.00
Total 31000.00

Here, P = Rs. 31000

r = 0.04
1
t = 1 month = years
12
1
∴ Interest upto 30th June = 31000 × 0.04 ×
12
= Rs.103.33 = Rs.103.00(Approx.)
The entry in the passbook is as given below:
Date Particulars Amount withdrawn Amount deposited Balance
1st July By Interest - 103.00 5103.00
∗∗∗
Now try some exercises:

E16) Ritu opens a saving bank account with a bank on 9th July, 2003 with a cash
deposit of Rs.10000. Subsequently she deposited Rs.5000 on 8th day of every
month. She withdrew Rs.4000 on 3rd September and Rs.6000 on 9th November
2003. If the bank pays interest at the rate of 4% per annum, payable at the end of
June and December. Write all the entries, including interest, which are made upto
1st January, 2004.

E17) A page from the passbook of saving bank account is given below:

Date Particulars Amount withdrawn Amount deposited Balance

01/7/02 B/F - - 5000.00
08/07/02 By cheque - 4000.00 9000.00
09/08/02 To cheque 5000.00 - 4000.00
10/09/02 By Cash - 8000.00 12000.00
04/10/02 To cash 2000.00 - 10000.00
06/11/02 By cash - 5000.00 15000.00
10/12/02 To cheque 4000.00 - 11000.00
22/12/02 To cash 1000.00 - 10000.00

The account is closed on 15th Jan.2003 . Find the amount received if the rate of
interest is 5% per annum.

So far we have done simple interest, compound interest and saving bank account. Now,
in next section we shall discuss profit and loss.

14.3 PROFIT AND LOSS

All financial transactions about buying and selling are done for profit. Due to greater
supply of goods or sub-standard goods things are to be sold on loss. Suppose, a
shopkeeper buys a product in Rs.100 and sells it for Rs.120 then the shopkeeper earns a
profit of Rs.20. If the shopkeeper sells it for Rs.80 then the loss of shopkeeper is of
Rs.20. The price at which a product is purchased is called its cost price (C.P.) and the 15
Handling Investments
and Data price at which a product is sold is called its selling price (S.P.) when S.P. > C.P., then
there is a profit and when C.P. > S.P. then there is a loss. Profit and loss are calculated
as follows:
Profit = S.P.
 − C.P. 
Profit
and Profit % = × 100 %
C.P.
Loss = C.P.
 − S.P. 
Loss
and Loss % = × 100 %
C.P.
Remember that profit or loss is always calculated on cost price (C.P.).
Let us try to find the profit or loss in the following situations.
Example 15: A retailer bought an almirah from a wholesale dealer for Rs.4000, and
sold it for Rs.4500. Find her profit or loss percent.
Solution: C.P. of almirah = Rs.4000
S.P. of almirah = Rs.4500
Here S.P. > C.P.
That means there is a profit and this Profit = S.P. − C.P
= Rs.(4500 − 4000)
= Rs.500
 
500
Profit % = × 100 %
4000
= 12.5%
∗∗∗
Example 16: A person paid Rs.120 for a basket of 40 oranges. He found that 4 of
them were bad and threw them away. He sold 2/3 of the remaining oranges at a profit of
20% and the rest at a loss of 5%. What was his profit or loss.
120
Solution: Cost of 1 orange = = Rs.3
40
He lost 4 immediately so he sold 36 oranges in all.
2
2/3 of these 36 oranges = × 36 = 24 Oranges
3
Therefore, he sold 24 oranges at a profit of 20%.
Now S.P. of one orange = C.P. + Profit
20
= Rs.3 + Rs.3 ×
100
= Rs.3.60
S.P. of 24 such oranges = 24 × 3.60
= Rs.86.40
Rest oranges (sold at a loss of 5%) = 36-24 = 12 oranges 
5
S.P. of 12 such oranges = 12 × 3 − 3 ×
100
= Rs.34.20
Total income from sales = Rs.86.40 + Rs.34.20
= Rs.120.60
Profit = Rs.0.60
0.60 1
Profit % = × 100 = %.
120 2
∗∗∗
Example 17: By selling a scooter to a customer for Rs.24600 a dealer makes a profit
of 20%. Find the cost price of the scooter.
Solution: Given that, Selling price of the article is Rs.24600 and profit % is 20%.
16 Suppose cost price of the article = x
Thus, profit = 24600 − x Commercial Mathematics
24600 − x
and Profit % = × 100,
x
Now equating this profit % with given profit %, we get
24600 − x
⇒ × 100 = 20
x
24600 − x 1
⇒ =
x 5
⇒ 6x = 5 × 24600
⇒ x = 5 × 4100
⇒ x = Rs.20500.00

Therefore cost price of a scooter is Rs.20500.00 .

∗∗∗
Example 18: A shopkeeper sold two wrist watches at Rs.1500 each. On selling one
wrist watch she gained 20% and on selling the other she lost 20%. Find the
shopkeeper’s gain or loss percent.
Solution: S.P. = Rs.1500
Suppose Cost price of the one wrist watch = Rs. x
20x x
Then at 20% profit, the Profit = =
100 5
x
Therefore, the S.P. = x + = Rs.1500 (given)
5
we get, x = Rs.1250.
Hence the cost price of each wrist watch is Rs.1250.
So shopkeeper gained Rs.250 on selling first wrist watch.
For the other wrist watch, again suppose the C.P. of the watch is Rs.y.
20 y
Then loss = y=
100 5
y
S.P. = y − = 1500(given)
5
1500 × 5
⇒ =y
4
⇒ y = Rs.1775.
So the loss on selling the second wrist watch is Rs.(1775-1500) = Rs.275
from the above, it is clear that the shopkeeper has a gain of Rs.250 and a loss of Rs.275.
Overall the shopkeeper’s loss is Rs.(275-250) = Rs.25.
Here, though the loss and gain are of same percent yet the amounts are different.
∗∗∗
Example 19: A bookseller gains 20% by selling a book for Rs.360. For how much
should she sell it to gain 25%.
Solution: Suppose C.P. = Rs.x
20
Profit = ×x
100 x
S.P. = x + = Rs.360 (given)
5
6x
⇒ 360 =
5
therefore x = Rs.300
25
and required Profit = 300 ×
100
= Rs.75
Therefore, the sales price to gain 25 % = Rs.(300 + 75) = 375.
∗∗∗ 17
Handling Investments
and Data Now try some exercises to check your understanding of profit and loss.

E18) A dealer buys a wall clock for Rs.280 and sells it for Rs.320. Find his profit or
loss percent.

E19) A vendor loses 20% by selling 80 pencils for Rs.160. How many pencils should
he sell for Rs.121, to have a profit of 10%?

E20) A cooler was sold at a profit of 10%. Had it been sold for Rs.200 more, the profit
would have been 15%. Find the cost price of the cooler.

When you buy some article say a dress or book, you find some price is written on the
packing or sometimes the shopkeeper offers you articles on a lesser amount than
whatever is printed on the tag. This difference is called discount, and the tag price is
called marked price. in next subsection we shall discuss the discount.

14.4 DISCOUNT

Many times you must have seen the advertisements around you of discount like
discount upto 60%. Here 60% discount means 60% of the marked price will be
subtracted from the marked price. For instance, if an article costs Rs.800 and the
discount is 20%. Then 20% of Rs.800 that is Rs.160 will be reduced from Rs.800. Thus
the article is sold for Rs.640. The marked price after discount is called the net sales
price. Discount is the reduction in the marked or list price.
Let us consider a few examples to illustrate.

Example 20: In a book fair, the study material of a course of IGNOU is sold at a
discount of 10%. If the cost of the course material is Rs.225 then find its net selling
price.
Solution: Given marked Price = Rs.225
10
10% discount on marked price = Rs. 225 × = Rs.22.50
100
Net sales price = Marked Price − discount
= Rs. (225 − 22.50)
= Rs.202.50.
Therefore, the Net sales price of the material is Rs.202.50.
∗∗∗

Example 21: An article is marked at Rs.60 and is being offered at Rs.48. Find the
discount percent.
Solution: Given that, Marked Price = Rs.60
and the Net sales price = Rs.48
Discount = Marked Price − sales price
= Rs.(60 − 48) = Rs. 12
So, on Rs.60, you get a discount of Rs.12.

12
∴ the discount % = × 100 = 20%
60

∗∗∗
18 Now, try some exercises.
 Commercial Mathematics
E21) Is a 10% discount, and a 2% discount, same as a 12%discount? why?

E22) A shirt is marked at Rs.500. If a discount of 10% is offered, find its selling price?

E23) A person pays Rs.2800 for a cooler listed at Rs.3500. Find the discount percent
offered.

E24) A TV with marked price Rs.11500, is sold at 10% discount. Due to festival
season, the shopkeeper allows a further discount of 5%. Find the net selling of the
TV.

In this section, we discussed the discount. Let us discuss an important liability, which is
paid to the government and is known as tax.

14.5 TAXES

Government provides us facilites for education and health, and performs many other
functions like removal of poverty, removal of unemployment, maintaining law and
order, etc. The money for this is raised through taxes. Whenever you avail some service
you pay money for it, the money paid for these services is nothing but tax. If you
inherit some money, purchase some property, use roads, use water you pay an
additional amount to the government as tax. sometimes an individual has to pay tax to
the government directly like income tax, wealth tax, property tax, water tax,
professional tax etc., these taxes are known as direct taxes. And the taxes like sales tax,
entertainment tax, value added tax, central excise tax, etc., which are not paid directly
to the governement, are known as indirect tax. Now let us discuss few important taxes.
Income Tax:
An improtant direct tax is nothing but income tax. It is also a significant source of
revenue of the government. Every person, whose taxable income exceeds from the
minimum taxable limit is liable to pay the income tax to the govenment. The income The balance left after sub-
tax is always computed for a financial year. It means a period of twelve months tracting the allowable de-
beginning from 1st April and ending on 31st March. For example financial year 2004 - ductions from the total gross
05 means 1st April 2004 to 31st March 2005. Now let us discuss the step by step income is taxable income.
procedure to compute the income tax.

Step I: Income from salaries, housing property, profits of business or profession and
income from other sources are added to compute the gross total income.

Step II: From the gross total income computed in step I, various deductions like NSC,
ULIP, GPF, PPF, etc., which are permissible under various sections like 80C, 80D, etc.,
are subtracted. The balance left after deducting the allowable deductions from gross
total income is taxable income.

Step III: After computing taxable income, income tax is computed by using the
following rules (These rules are amended by the government time to time):
Taxable income Income tax
(i) Upto Rs.1,35,000/- NIL
(for woman employees)
Upto Rs.1,00,000/- NIL
(for other employees)
(ii) Rs.1,35,001 to Rs.1,50,000/- 10% of the income
(for woman employees) exceeding Rs.1,35,000/-
Rs.1,00,001 to Rs.1,50,000/- 10% of the income
(for other employees) exceeding Rs.1,00,000/- 19
Handling Investments
and Data (iii)Rs.1,50,001 to 2,50,000/- 20% of the income exceeding
Rs.1,50,000/- + Rs.1,500/-(for
woman employees)/Rs.5,000/-
(for other employees).
(iv) Rs.2,50,001/- and above 30% of the income exceeding
Rs.2,50,000/- + Rs.21,500/- (for
woman employees)/Rs.25,000/-
(for other employees.)
Step IV: An education cess @ 2% on income tax is computed and is added to the
income tax. The total of income tax and education cess is the total payable income tax.
If any advance tax paid or tax deducted or collected at source, then the net payable tax
is the balance after subtracting tax paid from the total payable tax.
Let us apply these steps rules in the following situations.
Example 22: The annual income of vibha is Rs.1,95,000/- during the financial year
2005-06. She earned Rs.15,000/- from other sources and invested Rs.25000/- in various
permissible schemes. How much tax she will have to pay throughout the year.
Solution:Let us apply every step one by one in this situation.
Annual income of vibha = Rs.1, 95, 000
Income from other sources = Rs.15, 000
The total gross income = Rs.(1, 95, 000 + 15, 000)
= Rs.2, 10, 000
As she made investments of Rs.25,000/- which are allowable under various permissible
schemes. Therefore vibha’s taxable income
= Rs.(2, 10, 000 − 25, 000)
= Rs.1, 85, 000
Therefore, the total taxable income of vibha is Rs.1,85,000/-. This taxable income falls
in between Rs1,50,000/- and 2,50,000/-.
Hence the income tax = Rs.1, 500 + 10%of the income exceeds by Rs.1, 50, 000
= Rs.1, 500 + 10%of Rs.(1, 85, 000 − 1, 50, 000)
= Rs.1, 500 + 10%of Rs.35, 000
= Rs.1, 500 + Rs.3, 500
= Rs.5, 000
The education cess = 2%of Rs.5000
= Rs.100
Therefore the net income tax to be paid by vibha = Rs.(5000 + 100)
= Rs.5100.
∗∗∗
Now try the relevant exercise.

E25) Vivek Mohan, furnished the undernoted particulars of his income for the year
ended 31st March, 2006:
i) Basic pay Rs.1,44,000/-
ii) Dearness Allowance Rs.38,000/-
iii) Contribution to GPF Rs.48,000/-
iv) LIC premium Rs.12,000/-
20 v) Profit on business Rs.1,54,000/-
 Compute Vivek Mohan’s taxable income and net tax for the financial year Commercial Mathematics
2005-06.

Sales Tax:
Sometimes, you must have seen that after buying some article you pay an additional
amount other than the marked price to the shopkeeper. This additional amount is called
sales tax. Sales tax is the amount which is levied on the sales of the goods. Suppose, an
article is to be sold for Rs.800 and the rate of sales tax is 5%, then
5
Sales Tax = Rs.800 × = Rs.40.
100
Price including sales tax = Rs.800 + Rs.40
= Rs.840.

Therefore, the selling price with sales tax will be Rs.840. One such tax which is levied
on the sale of products is called sales tax. Government levies such taxes to have earning
called revenue. The sales tax may or may not be levied on some commodities. The
sales tax is different for all commodities. This sales tax is always calculated over the
net sales price i.e. after discount if any, and its rate is expressed as a percentage.
Example 23: The marked price of a shirt is Rs.320. If the rate of sales tax is 5%, find
the amount to be paid for the purchase of the shirt by the customer.
Solution: Given Marked price = Rs.320
5
∴ Sales Tax = 320 × = Rs.16.
100
Therefore, the customer has to pay Rs.320 + Rs.16 = Rs.336.
∗∗∗
Example 24: A pair of shoes is sold for Rs.1100 including sales tax. If the rate of
sales tax is 10%. Find the list price for the shoes.
Solution: Suppose list price = Rs.x.
10x
Sales tax at 10% = . And also sales tax = 1100-x
100
10x
Therefore 1100 − x =
100
∴ x = Rs.1000.
Hence, the list price of a pair of shoes is Rs.1000.
∗∗∗
Example 25: I give you a discount of 20% on Rs.500 and charge 20% sales tax, what
is the final price?
Solution: Given that: Cost Price is Rs.500.

20
Discount = 500 × = Rs.100
100
After Discount Net amount = Rs.(500 − 100)
= Rs.400
20
As, I charge sales tax, therefore sales tax = Rs.400 ×
100
= 680
Hence the final Net amount = Rs.(400 + 80) = Rs.480.
∗∗∗
Try some related exercises.

E26) The marked price of a machine is Rs.4000. If the sales tax on the machine is at the
rate of 4%, find how much a customer has to pay for purchasing the machine. 21
Handling Investments
and Data E27) A washing machine is available for Rs.13915 which includes sales tax. If the sales
tax is at 10% rate, find the listing price of the washing machine.

E28) Radhika bought a CD player for Rs.1870, after getting 15% discount on the
marked price, and then 10% sales tax on the reduced price. Find the marked price
of the CD Player.

E29) You go to buy an article and find shopkeeper A offers 10% discount and 10%
sales tax after discount, and shopkeeper B sells it as it is. If the cost of the article
is Rs.5000, then from which shopkeeper you would like to buy and why?

Service Tax:
Service tax is an indirect tax. This tax is collected by the service provider from the user
and deposited to the government. When you pay bills to the hotels, courier services,
petrol pumps, telecommunication services, you must have paid some amount charged
under service tax. Some percentage of the gross total is paid as service tax. For
example, if your telphone bill is of Rs.1500/- and you pay 10% service tax, then the
service tax paid by you is Rs.10% of 1500 = Rs.150/-.
Therefore you will pay Rs.150/- as service tax and the net amount of the bill
including service tax = Rs.(1500 + 150)
= Rs.1650.
Value Added Tax (VAT):
This tax is also an important tax. This tax is also computed as sales tax. VAT is a
modified form of multiple point tax on sales, where the burden of the tax is shared
rationally by all the dealers. Tax paid on purchase of trading goods/raw
material/packing material is subtracted from the tax payable on the sales of trading
goods/manufactured goods. This total ultimate tax collected is evenly distributed. For
example, A shopkeeper purchases any item taxable @ 4% for Rs.100 and pays Rs.4/-
tax thereon to the manufacturer. Total purchase size comes to Rs.104/-. Now suppose
he sales this item to its customer for Rs.120/-. On this sales tax @ 4% which comes to
Rs.4.80, will be charged from the customer by the shopkeeper. Now the tax for Rs.4/-
paid while purchasing good will be deducted in the sale invoice and only the balance of
Rs.0.80 will be paid by the shopkeeper.

Example 26: Mohan buys medicines of Rs.800/- and pays 4% value added tax to the
medical store. Find the amount of tax paid by mohan.
Solution:
Value added tax paid by mohan = 4% of Rs.800
= Rs.32.

Therefore mohan pays Rs.32/- to the medical store as value added tax.
∗∗∗

E30) Ashok pays Rs.525/- to a petrol pump which includes service tax. If the service
tax is at 5% rate. Find the actual price of the petrol he used.

E31) If on purchase of an article of Rs.2500/- you pay 4% value added tax, then find the
total amount paid to purchase the article.

22 Now we shall discuss shares and debentures in the next section.

 Commercial Mathematics

14.6 SHARES AND DEBENTURES

Whenever any company (business or industry) is started, a large sum of money is

needed. In general, it may not be possible for one or more individuals to invest such a
large amount. In such cases, interested individuals get together and form a company
called joint stock company. Then the estimated money is divided into small/equal
units called shares. Each person, who purchases the shares of the company, is called its
shareholder. The company issues a share-certificate to each of its shareholder stating
the number of shares. We use the following terms for sale and purchase of shares.
• The original value of a share is called the face value, or nominal value, or printed
value.
• Shares can be sold any time as other things. The price of a share quoted in the
market is called its market value.
• If the market value is same as the face value, then shares are called at par. ’par’ means ’level’.
• If the market value is more than the face value, then the difference is called
premium or above par. Suppose the face value of a share is Rs.100, and it is sold at
Rs.150. Then, it is said to be selling at a premium of Rs.50 or at Rs.50 above par.
• If the market value is less than the face value, then the share is called at discount or
below par. Suppose, a share with face value Rs.100 is sold at Rs.75. Then, it is
said to be selling at a discount of Rs.25 or at Rs.25 below par.
• Whatever profit, a share holder gets for his investments from the company is called
dividend. The dividend is always calculated on face value irrespective of the
market value, and is expressed as some percent of the face value.
• Shares are of two types: preferred shares and common (or ordinary) shares.
Preferred shares carry an advantage that dividend of a specific percent must be
paid to preferred shareholder before any dividend is paid to common share holders.
Sometimes, the company may not be having profit after expenses. In such cases,
no dividend is given to the preferred shareholders.
• Suppose you have 1000 shares of any company of par value Rs.10 each, then you
hold Rs.10000 stock of the company. If the dividend on Rs.100 stock is Rs.10, it is
called 10% stock. Like shares, stocks can also be purchased and sold in the market.
• In share market, shares and stocks are sold and purchased through a stock broker.
Stockbrokers charge some money, called Brokerage from both seller and
purchaser.
To illustrate the concept of shares let us discuss some examples.
Example 27: A person purchases 1000 shares of a company paying 10% annual
dividend of par value Rs.10 each. Find its annual dividend.
Solution:
Given is shares = 1000
Par value of one share = Rs.10
Annual dividend = 10%
Total par value of 1000 shares = 1000 × 10
= Rs.10, 000
10
Annual dividend = 10000 ×
100
= Rs.1000.
∗∗∗ 23
Handling Investments
and Data Example 28: Razia invested Rs.20000 in a company. If the total dividend declared by
the company is Rs.1500, find the rate of dividend paid by the company.
Solution:
Given that: Total invested amount = Rs.20000
Total Dividend paid by the company = Rs.1500
 
1500
∴ Rate of dividend paid by the company = × 100 %
20000
1
= 7 %
2
∗∗∗
Example 29: Madhav buys 100 preferred shares and 150 common shares of par value
Rs.50 each. If the company declares a semi-annual dividend of 10% for preferred
shares and an annual dividend of 7% for common shares, find the annual dividend
received by Madhav.
Solution: Given is, preferred shares = 100
Common shares = 150
Par value of each shares = Rs.50
Dividend for preferred shares = 10%semi annually
= 20%annually
Dividend for common shares = 7%annual
Total investment for preferred shares = 100 × 50
= Rs.5000
Investment for common shares = 150 × 50
= Rs.7500
20
Annual dividend for preferred shares = 5000 × ×2
100
= Rs.1000
7
Annual dividend for common shares = 7500 ×
100
= Rs.525
Total dividend received by Madhav = Rs.(1000 + 525)
= Rs.1525.
∗∗∗
Now, try some exercises.

E32) A company declared a semi-annual dividend of 8%. Find the annual dividend
received by a person owning 2000 shares of the company having a par value of
Rs.100 each.

E33) Find the cost of purchasing 200 shares of a company, each of par value Rs.100
quoted at Rs.150 each in the market, from the shareholder. Also, find the gain to
the new shareholder if he sells each share at a premium of Rs.100.

E34) A person buys 100 shares of par value Rs.10 each of a company which pays
annual dividend of 12% at such a price that she/he gets 10% on his investments.
Find the market value of a share.

So far, you have read that shares can be sold and purchased by the public. Now,
suppose a good running company wants to increase its business, for this purpose it
requires a huge amount of money. Then, for the company, it is not necessary to float
fresh shares again. Another way to borrow money from the shareholders or public is to
float debentures in the market. Like shares, the total required amount is again divided
into small units. Each unit is called a debenture. The basic difference in share and
24 debenture is that the debenture holders do not have any right on the profits declared by
the company. Debentures are issued by giving a debenture certificate to the holder. Commercial Mathematics
However, the interest at fixed rate and fixed time is payable to the debentureholder,
whether the company is running at a profit or a loss.
Let us discuss some examples to illustrate the concept.

Example 30: Find the income percent on 8% debenture of face value Rs.100 whose
market value is Rs.160.
SolutionGiven; Face value = Rs.100
Market value = Rs.120
100 × 8
Interest on Rs.100 debenture = = Rs.8
100
The market value of a debenture is Rs.160.
∵ Income on Rs.160 = Rs.8
8
∴ Income on Rs.100 = × 100 = 5%.
160
Therefore income percent is 5%.
∗∗∗
Example 31: Rajni has 1000 shares of par value Rs.10 each and 500 debenture of par
value Rs.50 each of a company. The company declares an annual dividend of 6% on the
shares and 8% on its debentures. Find the total income of Rajni. Also find the rate of
return on her investments.
Solution: Investment for 1000 shares = Rs.(1000 × 10)
= Rs.10000
Investment for 500 debentures = Rs.(500 × 50)
= Rs.25000
6
Annual Dividend on 1000 shares = 10000 ×
100
= Rs.600
8
Annual Dividend on 500 debentures = 25000 ×
100
= Rs.2000
Annual income on her investments = Rs.(2000 + 600)
= Rs.2600
 
Income
Rate of return on her investments = × 100 %
Total investments
 
2600
= × 100 %
10000 + 25000
3
= 7 %.
7
∗∗∗
Now try some exercises

E35) Find the income percent on 10% debenture of par value Rs.80, whose market
value is Rs.100.

E36) A man holds 100 shares of a company at par value Rs.600 each on which the paid
dividend is 6%. When the shares rise to Rs.800, the person sells them and invests
half the sale proceeds in 8% debentures of par value Rs.200 each and other half of
the sale proceeds in 10% stock at Rs.250 each. Find the change in his income.

Let us sum up what we have covered in this unit. 25

Handling Investments
and Data

14.7 SUMMARY
In this unit we have explained and illustrated the computation in different contexts of
the following:
1) Simple and Compound interest
2) Interest for a savings bank account.
3) Profit and loss
4) Discount and sales tax.
5) Various taxes.
6) Annual income on the investments on shares and debentures.

14.8 SOLUTIONS/ANSWERS
E1) P = Rs.2000
r = 7% = 0.07
t=4
I = Prt = Rs.(2000 × 0.07 × 4)
= Rs.560
E2) P = Rs.1500
t = 5 years
r = 5% = 0.05
Amount after 5 years = P(1 + rt)
= 1500(1 + 0.05 × 5)
= Rs.1875.
E3) P = Rs.5000
r = 4% = 0.04 quarterly = 0.04 × 4 annually = 0.16 annually
15
t = 15 months = years = 1.25 years
12
Interest = 5000 ×0.16 × 1.25 = Rs. 1000
The amount you repay at the end of 15 months = Rs. (5000 + 1000)
= Rs.6000.
E4) i)
A = P(1 + rt)
6000 = 4500(1 + r × 4)
4
= 1 + 4r
3
1
or r = = 0.0633
12
= (0.0633 × 100)%
= 6.33%
ii) I = Prt
800 = 1000 × 0.08 × t
⇒ t = 10 years.
iii) A = P(1 + rt)
= Rs.8000(1 + 0.06 × 8)
= Rs.8000 × 1.48
26 = Rs.13440
 iv) A = P(1 + rt) Commercial Mathematics
2P = P(1 + r × 6)
1 100 2
r= = % = 16 %
6 6 3
E5) I = P/4
r = 10% = 0.10
t=?
I = Prt
P
⇒ = P × 0.10 × t
4
⇒ t = 2.5 years.
E6) i) I = Rs.(10000 × 5 × 0.04) = Rs.2000
ii) I = Rs.(8000 × 6 × 0.05) = Rs.2400
Thus, the earned interest is more in second case.
E7) i) Amount = 10000(1 + 0.06)4 = 12624.77
Interest = Amount − Principal = 2624.77
ii) A = 5000(1 + 0.10)3 = 6655
I = A − P = 1655
iii) A = 4000(1 + 0.12)2 = 5016.80
I = A − P = 1016.80
E8) P = Rs.8000
A = Rs.9261
n=3
Using formula (2), we get
A = P(1 + r)n
9261 = 8000(1 + r)3
9261
= (1 + r)3
8000
 3
21
= (1 + r)3
20
1 3
 
1+ = (1 + r)3
20
1
r = = 0.05 = 5% per annum.
20
E9) P = Rs.10000
r=?
n=6
A = Rs.20000
we have,
20000 = 10000(1 + r)6
2 = (1 + r)6
1 + r = (2)1/6
r = (2)1/6 − 1
E10) A1 = Rs.18522
n1 = 3
A2 = Rs. 19448.10 27
Handling Investments
and Data n2 = 4
r1 = r2 = r (let) and P1 = P2 = P (let)
Now, we get
A1 = 18522 = P(1 + r)3 and A2 = 19448.10 = P(1 + r)4
Dividing both, we get
18522 1
=
19448.10 (1 + r)
19448.10
1+r=
18522
r = 0.05.
E11) S.I = 8000
 × 2 × 0.10 = Rs.1600
and C.I. = Rs. 8000(1 + 0.10)2 − 8000 = Rs. (8000 × 1.1 × 1.1 − 8000)


= Rs.(9680 − 8000) = Rs.1680.

It is clear from the above, that the difference between compound interest and
simple interest is Rs.80.
E12) i) A = 5000(1 + 0.18)2
ii) A = 5000(1 + 0.09)4
iii) A = 5000(1 + 0.045)8
E13) A = 2P, we get
2P = P(1 + 0.10)n
2 = (1.10)n
E14) A = Rs.100000
r = 0.10
P=?
n = 20
100000 = P(1 + 0.10)20
E15) Comparing interest for the three cases, we get
Case I, S.I. = 2000 × 2 × 0.05 = Rs.200
Case II, C.I. = 2000(1 + 0.048)8 − 2000 = Rs.
Case III, C.I. = 2000(1 + 0.06)4 − 2000 = Rs.
E16) Month wise qualifying amount is as follows:
July = Rs. 10000.00
August = Rs. 18000.00
September = Rs. 22000.00
October = Rs. 30000.00
November = Rs.29000.00
December = Rs. 37000.00
Total = 146000.00
Interest credited at the end of the month of
1
December 2003 = 146000 × × 0.04
12
= Rs.486.67
28 E17) Find the monthwise qualifying amount and then calculate the interest.
E18) C.P. = Rs.280 Commercial Mathematics

S.P. = Rs.320
Since S.P. > C.P. , therefore there is a profit and profit % is
 
320 − 280 2
× 100 % = 14 %
280 7
E19) ∵ Selling price of 80 pencils = Rs.160
160
∴ Selling price of 1 pencil = Rs. =2
80
Let the C.P. of one pencil is x, then we get
x−2
Loss % =
x
0.20x = x − 2
x = Rs.2.50
Again, S.P. = 121 and Profit = 10% = 0.10
121 − 2.50 × n
therefore 0.10 = (where n is number of required Pencils)
2.50 × n
or n = 44.
E20) Profit = 10%
Let the C.P. be x and S.P. be y.
According to 10% profit, we get
y−x
10 = × 100
x
0.10x = y − x
or1.1.x = y (1)
According to 15% profit, we get
y + 200 − x
15 = × 100
x
0.15x = y + 200 − x
or 1.15x = y + 200 (2)
Solving (1) and (2), we get

x = Rs.4000

Therefore the cost price of the cooler is Rs.4000.

E21) No.
 
500 × 10
E22) S.P. = Rs. 500 − Thus net sales price is Rs.450
100
= Rs.450
E23) Discount = Rs. (3500 − 2800) = Rs.700
700
Discount % = × 100 = 20%
3500
 
11500 × 10
E24) After First discount S.P. = Rs. 11500 −
100
= Rs.11350.00
 
11350 × 5
Sales price after further discount = Rs. 11350.00 −
100
= Rs.10, 782.50
Therefore the net sales price is Rs.10782.50 29
Handling Investments
and Data E25) Gross total income of vivek mohan is = Basic pay + Dearness Allowance + Profit
on business = Rs. (1,44,000 + 38,000 + 1,54,000) = Rs.3,36,000/-.
Permissible deductions = Contribution to GPF + LIC premium
= Rs. (48,000 + 12,000) = Rs. 60,000/-
Total taxable income = Rs.(3, 36, 000 − 60, 000) = Rs.2, 76, 000
Income tax = 30% of Rs.(2, 76, 000 − 2, 50, 000) + Rs.25, 000
= 30% of 26, 000 + Rs.25, 000
= Rs.7800 + Rs.25, 000
= Rs.32, 800
Education cess = 2% of Rs.32, 800/− = Rs.656
Therefore, net payable tax of vivek mohan is = Rs.(32,800 + 656) = Rs.33,456.

4
E26) Sales tax = Rs. 4000 × = Rs.160 Thus, the customer has to pay
100
Rs. (4000 + 160) = Rs.4160

E27) Let the listing price be x.

10x
Then sales tax is = 0.10x
100
Therefore13915 = x + 0.10x
13915
or x = Rs.
1.10
= Rs. 12650

E28) Let the marked price be x.

15x
then the discount =
100
15x 85x
The price after discount = x − =
100 100
Now, Radhika paid 10% sales tax on reduced price,
85x 10 85x
therefore sales tax = × =
100 100 1000

85x 85x 935x

and 1870 = + =
100 1000 1000
or x = Rs.2000

therefore the marked price of the CD Player is Rs.2000.

E29) According to Shopkeeper A, the sales prices are as below:

10
After 10% discount the price = Rs.5000 − 5000 ×
100
= Rs.4500
 
4500 × 10
The sales price after adding sales tax = Rs. 4500 +
100
= Rs.4950.

You should buy the article from shopkeeper A as it has less sales price than that of
shopkeeper B.

E30) Let the actual amount paid for the petrol is x.

Then,
30 Actual amount paid for petrol + service tax paid = total amount paid i.e. x + 5% of
 x = 525 Commercial Mathematics
5
⇒ x + x = 525
100
105x
⇒ = 525
100
525 × 100
⇒ x=
105
⇒ x = Rs.500

Therefore the actual price of the petrol used is Rs. 500.

E31) VAT = 4% of Rs.2500

= Rs.100
Therefore the total amount paid to purchase the article = Rs.(2500 + 100)
= Rs.2600.

E32) Total invested amount in shares = Rs.2000 × 100

= Rs.2, 00, 000
Here, dividend rate = 8% semi − annually
= 16%annually
16
therefore annual dividend = Rs.200000 ×
100
= Rs.32000

E33) Market value of a share = Rs.150

Market value of 200 shares = Rs. 150 × 200 = Rs.30000.

Thus, the new shareholder spent Rs.30000 for buying 200 shares. The new
shareholder sold the shares at a premium of Rs.100.
∴ New market value of a share = Rs. (100 + 100)
= Rs.200.

The selling price of 150 shares at new market value = Rs.(200 × 200) = Rs.40000

∴ Gain of the new shareholder in the transaction = Rs.(40000-30000) = Rs.10000.

E34) Per value of 100 shares = Rs. (100 × 10) = Rs.1000

1000 × 12
Dividend received by the man = Rs.
100
= Rs.120
Let the market value of 100 shares be Rs.x.
We have to find x such that 10% of x = 120,
10
i.e. x = 120
100
or x = 1200
i.e., market value of 100 shares = Rs.1200.
Hence, the market value of one share = Rs.12

E35) The market value of a debenture is Rs.100

∴ Income on Rs.100 is Rs.10.

 
10
∴ Income on Rs.80 is Rs. × 80 = Rs.8.
100
i.e. Percent income on the debentures is 8%. 31
Handling Investments
and Data E36) Total Par value of 100 shares = Rs.600 × 100
= Rs. 60000
6
Dividend on these shares = Rs.60000 ×
100
= Rs.3600
Total sale proceeds of 100 shares
at the rate of Rs.800 per share = Rs.(800 × 100)
= Rs.80000
Half of Rs.80000 i.e. Rs.40000 is
invested in 10% stock at Rs.250 each
10
∴ Income on this half = Rs.40000 ×
100
= Rs.4000
with the other half (Rs.40000) debentures are purchased.  
8
∴ Income (in the form of interest) on debenture = Rs. 40000 ×
100
= Rs.3200
∴ Total income = Rs.(4000 + 3200)
= Rs.7200
∴ Change in income = Rs.(7200 − 3600)
= Rs.3600.

32