Consumer

arithmetic
Mr. Moreau
 Objectives
 Use ready reckoners
 Change money from one currency to another
 Solve problems involving cost price, selling price, and percentage
profit or loss
 Calculate simple and compound interest
 Solve problems involving payments by instalments
 Calculate rates and taxes
 What’s the point?
Decisions on where to bank, calculations on how much tax you pay, and
whether to pay cash or use hire purchase are important in everyday life.
 Before you start
You should know:
1. How to multiply fractions.
𝟔
E.g. × 45
𝟏𝟎𝟎
2. How to use a calculator when working with decimals.
E.g. calculate 3.16 × 4.2
3. How to rearrange a formula.
𝑎
E.g. if a = bc, then c = (divide both sides by b)
𝑏
 Money management (Ready reckoners)
Ready reckoners are books of tables that you can use instead of doing
long calculations.
Part of a ready reckoner is shown below. It gives the cost of n articles, if
each article costs 29 cents.
 Ready reckoners (cont.)
Ready reckoner for a unit cost of 29 cents
No. $ No. $ No. $ No. $
1 0.29 11 3.19 21 6.09 31 8.99
2 0.58 12 3.48 22 6.38 32 9.28
3 0.87 13 3.77 23 6.67 33 9.57
4 1.16 14 4.06 24 6.96 34 9.86
5 1.45 15 4.35 25 7.25 35 10.15
6 1.74 16 4.64 26 7.54 36 10.44
7 2.03 17 4.93 27 7.83 37 10.73
8 2.32 18 5.22 28 8.12 38 11.02
9 2.61 19 5.51 29 8.41 39 11.31
10 2.90 20 5.80 30 8.70 40 11.60
 Ready reckoners (cont.)
From the table you can see for example, that 12 articles at 29 cents cost
$3.48.
The complete table shows the cost of up to 1000 articles. But even using
just this part of the table, you can work out a great many costs quickly.
For example
Find the cost of 284 candles at 29 cents each.
(reference pg.71 of textbook)
 Practice question
Use the ready reckoner at the start of the section for this exercise.
If the unit cost for each item is 29 cents, write down the cost of:
a) 17 stamps
b) 29 rulers
c) 16 kg of rice
d) 37 mangoes
e) 6 m of cotton
f) 22 spools of thread
 Money management (Bills)
In many types of bill the unit cost depends on the number of units
bought or used.
For example: In an electricity bill, the cost of units is as follows:
The first 50 units cost 30 cents per unit.
Further units cost 20 cents per unit.
*You can also work out the number of units used from a bill*
(Reference pg. 72 in textbook)
Bills (cont.)
 Practice question
The electricity rates for private homes are:
The first 50 units cost 30 cents per unit.
Further units cost 20 cents per unit.
What is the electricity bill for someone who uses:
a) 30 units
b) 51 units
c) 50 units
d) 85 units
Money management (Foreign exchange)
In Barbados, the unit of currency is the Barbados dollar, Bds $. In St.
Lucia, the Eastern Caribbean dollar, EC $, is used. To buy goods in St.
Lucia a man from Barbados must change his Bds $ to EC $. The current
rate of exchange is:
Bds $1.00 = EC $1.35
Example
Change Bds $80 to EC $
(Reference pg. 74 in textbook)
 Foreign exchange (cont.)
To change EC $ to Bds $ you will need to divide:
EC $1.35 = Bds $1.00
So, EC $1.00 = Bds $1.00 ÷ 1.35
Example
Change EC $80 to Bds $
(Reference pg.74 in textbook)
 Foreign exchange (cont.)
Conversions to other currencies can be done in a similar way.
Example
If Bds $1.00 = EC $1.35 and
Bds $1.00 = TT $2.25
Change EC $90 to TT $.
(Reference pg.75 in textbook)
 Practice question
Use this exchange rate to answer the questions:
EC $1.00 = Bds $0.74
Change these into EC $
a) Bds $60
b) Bds $16.25
c) Bds $25
d) Bds $481.96
 Profit and loss (Using percentages)
Fractions with denominators of 100 can easily be written as percentages.
For example:
13
= 13%
100
You can write other fractions as percentages by first changing their
denominators to 100.
For example:
3 3 ×25 75
= = = 75%
4 4 ×25 100
 Using percentages (cont.)
Another way to change any fraction to a percentage is to multiply it by
100%.
Example:
Write as a percentage:
2
a) 5
3
b) 7
(Reference pg. 76 in textbook)
 Using percentages (cont.)
To find the percentage of an amount convert the percentage to a fraction
and multiply by the amount.
Example:
a) What is 15% of $20?
b) What is 13% of $18.50?
 Practice questions
Write as percentages:
1
a) 2
3
b) 8
15
c) 16
22
d) 27
23
e) 25
 Profit and loss
Mrs. Walcott bought a radio for $50 and sold it for $60. Her profit was
$60 - $50 = $10.
You can write:
Profit = selling price – cost price
Mrs. Walcott’s profit as a fraction of the cost
10
Price =
50
10
Her percentage profit = × 100% = 20%
50
 Profit and loss (cont.)
To find the percentage profit you write:
𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 − 𝑐𝑜𝑠𝑡 𝑝𝑟𝑖𝑐𝑒
Percentage profit = × 1.00%
𝑐𝑜𝑠𝑡 𝑝𝑟𝑖𝑐𝑒

You find the percentage loss in the same way.

Example:
Ann Felix bought a car for $20 000 and sold it for %15 000. What was
her percentage loss?
(Reference pg. 77 in textbook)
 Profit and loss (cont.)
If the cost of an item and the percentage profit/loss is known, you can
find the selling price.
Example:
Find the selling price of a stove bought for $1200 and sold at a 15%
profit.
(Reference pg. 77 in textbook)
 Practice question
Jason made a table for $80. He sold it for $100.
a) What was his profit?
b) What was his percentage profit?
 Finding the cost price
You can work out the cost price of an item if the selling price and the
percentage profit are known.
Example:
Find the cost price of a glass sold for $6.50 at a profit of 30%.
(Reference pg.78 in textbook)
 Finding the cost price (cont.)
Notice you cannot work out the profit directly as you do not know the
cost price.
You find the cost price in a similar manner if the percentage loss or
discount is given.
Example:
Find the cost price of a car sold for $18 000 at a loss of 10%.
 Practice question
A vase is sold for $12 at a 20% profit. What was the cost price?
 Simple interest
Interest is the payment or fee made to a bank for the use of loaned
money.
The borrower has to pay back:
a) The original loan
b) The interest on the loan
In the same way a bank will pay you interest on any money you lend to
(deposit in) the bank.
 Simple interest (cont.)
Simple interest is calculated as a percentage per year of the loan. This
percentage is called the rate of interest.
Example:
Find:
a) The interest
b) The total repayment on a loan of $10 000 for 3 years if the rate of
interest is 16% per annum.
(Reference pg. 79 in textbook)
 Simple interest (cont.)
You can calculate interest quickly using the simple interest formula:
𝑃 ×𝑅 ×𝑇
I=
100
Where I = interest, P = principal (amount loaned), R = rate and T = time
in years.
Example:
1
Find the simple interest on a loan of $800 for 4 years at 6%.
2
(Reference pg. 80 in textbook)
 Practice question
David puts $900 in his credit union. How much money does he have
altogether after two years if the interest rate is 4% per annum?
 Compound interest
Banks use compound interest to calculate interest payments. The interest
after each year is added to the principal and the following year’s interest
is found from that new principal.
Example:
Find the compound interest on a loan of $600 for 2 years at 12%.
(Reference pg. 81 in textbook)
 Compound interest (cont.)
Notice that because the interest is compounded, the interest in the
second year is $80.64 and not $72 as under simple interest.
Some items decrease or depreciate in value as they get older. In such
cases the annual depreciation is subtracted to find the new value.
Example:
A car cost $30 000. find its value after 2 years if it depreciates at a rate
of 8% per annum.
(Reference pg. 81 in textbook)
 Practice question
Kimberly Barry deposits $2000 in her bank. What is the amount in the
bank after 3 years compound interest at 4%?
Using the compound interest formula
The calculation for compound interest for periods longer than two years is
greatly simplified using the following formula:
A = 𝑃(1 + 𝑟)𝑡
Where:
A = total amount
P = principal
r = rate of interest
t = time in years
 Using the compound interest formula
(cont.)
Example:
Find the compound interest on an investment of $12 000 at 5% for 8
years.
(Reference pg. 82 in textbook)
 Practice question
How much do you end up owing, if you borrow $9000 for:
a) 3 years at 13% compound interest
b) 7 years at 14% compound interest
c) 9 years at 11% compound interest
d) 6 years at 10% compound interest
 Hire purchase
Many expensive goods cannot be bought easily by cash these goods
may be offered on hire purchase (H.P.). That is, the purchaser pays an
initial deposit and pays the balance in a series of monthly or weekly
instalments. The hire purchase price is more expensive than the cash
price. The difference is really the interest payable on the loan of the
goods.
 Hire purchase (cont.)
Example:
A television can be purchased for $1800 cash or on H.P. for a deposit of
20% and 18 monthly payments of $90. Find:
a) H.P. price
b) Interest charged
c) Percentage interest charged
(Reference pg. 83 in textbook)
 Practice question
A gas stove has a cash price of $1500. it can be bought for an H.P. price
of $1800. If the deposit for hire purchase is 10%, find:
a) The total monthly instalments
b) The monthly instalment if 12 monthly payments are made
 Mortgages
Few people can afford to pay cash when they buy a house. Houses are
usually bought on a type of hire purchase agreement made with a bank.
The purchaser first pays a deposit and the bank gives them a loan or
mortgage to cover the balance. The mortgage is repayable monthly over
a long period of time. The interest payments on such loans are high.
 Mortgages (cont.)
Example:
A house costing $80 000 can be bought with a 10% deposit and a bank
mortgage.
Find:
a) The mortgage amount
b) The total repaid to the bank if monthly payments of $720 are made
over 25 years
 Mortgages (cont.)
Notice that in the example the interest on the mortgage amounted to
$216 000 - $72 000 = $144 000. this is more than the cost of the house.
Why do you think the interest charged is so large?
The mortgage in the example is called a 90% mortgage as the purchaser
has made a deposit of 10% and only needs to borrow 90% of the cost of
the house.
 Practice question
A house for sale costs $70 000. What is the mortgage if the deposit is:
a) 10% of the cash price
b) 15% of the cash price
1
c) 7 % of the cash price
2
1
d) 37 % of the cash price
2
 A table for mortgages
Here is a ready reckoner to help you work out mortgage repayments
Mortgage Monthly repayments ($) over:
quickly.
15 years 20 years 25 years
$500 5.50 5.25 5
$1000 11 10.50 10
$5000 55 52.50 50
$10 000 110 105 100
$20 000 220 210 200
$30 000 330 315 300
$40 000 440 420 400
$50 000 550 525 500
$100 000 1100 1050 1000
 A table for mortgages (cont.)
For example, if your mortgage is $35 000, and you are repaying it over
20 years, you will pay $315 + $52.50 = $367.50 a month.
 Practice questions
Use the ready reckoner to answer the questions in this exercise.
If your mortgage is $45 000, how much will you repay each month,
over:
a) 15 years
b) 20 years
c) 25 years
 Rates and taxes
Who pays:
For new roads?
For new schools?
For your teachers?
For the airport?
For the fire brigade?
For the police?
 Rates and taxes (cont.)
The answer is: we all pay!
We pay:
Income tax if we earn more than a certain amount;
Rates if we own land or buildings;
Import taxes if we import goods from overseas.
We pay:
Income tax and import tax to the government; rates to the local council or
government.
 Income tax
Brinsey works in a large store.
He earns a good wage each week, but he cannot keep all of it for
himself. The government the government takes some of it as income
tax.
The government charges income tax to help pay for all the things listed
before.
Working people do not pay tax on all their income. Part of their earnings
are not taxed. This part is called tax-free income.
 Income tax (cont.)
The amount of income that is tax-free depends on the number of
dependants a worker has to look after.
Some examples of dependants are:
• A wife
• A young son or daughter
• An old father who does not work
A tax-free allowance is made for each dependant.
 Income tax (cont.)
Example:
On a certain island, the tax-free allowances are:
Personal tax-free allowances = $2000
Additional allowances:
Wife = $1500
Each child = $500
Any other dependant relative = $400
 Income tax (cont.)
Brinsey earns $10 000 a year.
He has a wife and two children.
a) How much of his income is tax-free?
b) How much of his income is taxable?
(Reference pg. 87 in textbook)
From the taxable income you can calculate the tax payable given the tax
rates.
 Income tax (cont.)
Example:
The rate of income tax on Brinsey’s island is:
Taxable income Tax rate
First $1000 5%
Next $1000 10%
Next $3000 15%
Next $5000 20%
Next $5000 25%
Next $10 000 30%
How much income tax does Brinsey pay?
(Reference pg. 87 in textbook)
 Income tax (cont.)
The amount of money left in Brinsey’s pocket after paying tax
i.e. $10 000 - $700 = $9300, is called his net income.
His salary before tax, $10 000, is called his gross income.
 Practice question
Use this table of tax rates and allowances to answer the question.
Tax-free allowances Tax rates
$10 000 Personal allowance First $5000 – 10%
$2000 Spouse Next $15 000 – 20%
$1000 Child Over $20 000 – 40%

Albert has a wife and one child. He earns $35 000 a year. Find:
a) His tax-free income
b) His taxable income
(Reference pg. 87 in textbook)
 Rates
Rates are taxes on land and buildings. They are levied by the local
council.
The local council decides the rateable value of each building and piece
of land in the council’s area. Each owner is charged rates which are a
percentage of the rateable value of their property.
Sampson has a house and a garden in Top town. The real value of this
property is $45 000. The rateable value is always much lower than the
real value. The rateable value is $1950. Sampson is charged a
percentage of this rateable value.
 Practice question
The rate for all properties in Subryanville is 22%. How much is paid in
rates for a property, if its rateable value is:
a) $2500
b) $1450
c) $3600
(Reference pg. 89 in textbook)