CONSUMER

ARITHMETIC
PREPARED BY: MS. J COLLINS
OBJECTIVES

By the end of the lesson, you should be able to:

Calculate:
Discount
Sales tax
Profit and loss
Profit and loss percentage
OBJECTIVES

 Express a profit, loss, discount, markup and purchase tax as a percentage

of some value
 Solve problems involving marked price, selling price, cost price, profit,
loss or discount
 Solve problems involving payments by instalments as in the case of hire
purchase or mortgages
 Simple interest
 Compound interest
 Appreciation and depreciation
DISCOUNT

 Sometimes a store may have a sale because the stocks need to be updated
or modernized and therefore old stocks must be sold urgently.
 A discount is the offered on certain articles so that consumers can
purchase articles at a reduced cost called the sale price.
 Cash discount is a discount given if the amount paid is in cash
DISCOUNT

To calculate:
PRACTICE

A boutique is offering a 15% discount for cash. Calculate the

cash price of a dress with a marked price of $125.
A store is offering 18% discount for cash. Calculate the cash
price for a pants with a marked price of $170.
SALES TAX

In a number of Caribbean countries a sales tax is added to the

price of an article.
This tax is also called the Value Added Tax (VAT)
In general, the VAT is a tax paid on goods and services, to a
supplier, for the government.
PRACTICE

1. A woman buys a stove for $1,035 exclusive of VAT. If Vat of 15%

is charged, what amount did she actually paid for the stove?
2. The customs duty on imported vehicles is 25% of the imported
price. Calculate:
(a) The customs duty on a car for which the imported price is
$16,800
(b) The imported price of a truck for which the amount paid,
inclusive of customs duty is $69,750.
PROFIT AND LOSS

Business people normally buy and sell articles at different

prices
The amount of money that they pay is called the cost price.
In order to make a profit, a percentage of the cost price is
added to the cost price of the item being sold.
The price that the consumer pay for the article is called the
selling price.
PROFIT AND LOSS

To calculate:
 PROFIT AND LOSS

 Sometimes a business-person has to sell an article for less than what was
paid for it because it was damaged or out of style, for example. In such a
case, a loss in incurred.
To calculate:
PRACTICE

1. A shopkeeper buys 25 cricket balls at a total cost of $150.

(a) He sells them for $8 each. What was his percentage profit?
(b) He sells them for $5. What was his percentage loss?

( 𝑏 ) 5 ∗ 25
HIRE PURCHASE

 Under the hire purchase agreement a customer is allowed to purchase

goods by making a small deposit.
 Interest is then added to the outstanding balance and the customer is
allowed to pay this sum (amount payable) in a given number of equal
monthly instalments.
To calculate:
QUESTION 1

A businesswoman bought a stove for $1,209.

(a) Calculate the selling price of the stove if she made a profit of
11%.
(b) The stove was damaged in transporting it to the customer.
Determine the selling price of the stove if she incurred a loss
of 8% on the cost price.
SOLUTION

92
( 𝑏 ) 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒= ∗1209
100
PRACTICE

𝐻𝑖𝑟𝑒 𝑝𝑢𝑟𝑐h𝑎𝑠𝑒𝑝𝑟𝑖𝑐𝑒=500+( 18∗50.50 )

120
∗𝑥=1260
100
 115
h𝑖𝑟𝑒 𝑝𝑢𝑟𝑐h𝑎𝑠𝑒𝑝𝑟𝑖𝑐𝑒=190+ (12∗171 ) ∗𝑥=1900
100 ∴ 𝑡h𝑒 𝑠𝑒𝑙𝑙𝑖𝑛𝑔𝑝𝑟𝑖𝑐𝑒𝑖𝑠 $ 1,652.17
SIMPLE INTEREST

 During the adult life of a person, it is normal to borrow money from the
bank or deposit money into the bank.
 When we borrow money from the bank. The amount borrowed is called
the principal
 The bank in turn will charge us a sum of money called the interest for
lending us that money
SIMPLE INTEREST

 The interest paid on the loan is called the simple interest, if the principal
remains the same for the duration of the loan.
 The borrower will have to repay:
1. The amount borrowed (the principal)
2. The interest payable on the loan
 However, if we make a deposit, the bank will have to pay us interest,
simple interest.
SIMPLE INTEREST

To calculate:
PRACTICE

1. Mr. Lord borrowed $10,000 from a bank at a simple interest rate of 8%

per annum for 3 years.
(a) What amount is the simple interest payable?
(b) Calculate the amount accruing (the amount owed) for the loan
(c) Determine the amount of each monthly instalment
SOLUTION

10000∗8∗3
( 𝑎 ) 𝑆𝑖𝑚𝑝𝑙𝑒𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡=
100 ( 𝑏) 𝐴𝑚𝑜𝑢𝑛𝑡𝑎𝑐𝑐𝑟𝑢𝑖𝑛𝑔=10000+2400
12400
( 𝑐 ) 𝑚𝑜𝑛𝑡h𝑙𝑦𝑖𝑛𝑠𝑡𝑎𝑙𝑚𝑒𝑛𝑡=
3∗12
PRACTICE

2. A man invested $600 at 8% per annum simple interest for 5 years.

Calculate:
(a) The simple interest payable
(b) The amount of money the man collected at the end of the 5-year period
3. Calculate the rate percent per annum if $5,760 simple interest is paid
when $12,800 is invested for 6 years
4. Determine the number of years in which $500 invested at 9% per annum
will earn $450 simple interest.
PRACTICE

4. A woman receives $3,000 in government bonds for 5 years at 7% simple

interest.
(a) Calculate the total interest she receives in 5 years
(b) Calculate the sum that must be invested in bonds to obtain a total
interest of $3,500 in 5 years.
COMPOUND INTEREST

With simple interest, we were assuming that we pocketed the

interest when we received it. In a standard bank account, any
interest we earn is automatically added to our balance, and we
earn interest on that interest in future years. This reinvestment
of interest is called compounding.
COMPOUND INTEREST

𝑂𝑅

( )
𝑡
𝑟
𝐴= 𝑃 1+
100
 SCENARIO A:

Mr. Max earned $10,000 bonus for the month of August 2016 and is considering depositing
this amount in a bank account for 3 years. He met with a bank representative who presented
him with the following options.
Option 1: He may invest his bonus in an account which earns simple interest at a rate of 12
% per annum.
Option 2: He may invest his bonus in an account which earns compound interest at a rate of
12 % per annum.
Using your knowledge of the types of interest, what advice would you give to Mr. Max?
Show all working.
SOLUTION

𝑀𝑎𝑥 𝑠h𝑜𝑢𝑙𝑑 𝑐h𝑜𝑜𝑠𝑒 𝑜𝑝𝑡𝑖𝑜𝑛2 𝑠𝑖𝑛𝑐𝑒 𝑡h𝑖𝑠 𝑜𝑝𝑡𝑖𝑜𝑛𝑔𝑖𝑣𝑒𝑠 h𝑖𝑚 𝑚𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
SCENARIO B:

Mr. Jordan intends to borrow $100, 000 from his local bank to go
towards the purchase of solar panels. The financial institution has
advised him that he may borrow the money for 3 years at a rate of
interest of 5 percent per annum compound interest.
How much will he have to repay the bank at the end of the 3
years?
How much did he receive in compound interest?
SOLUTION

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡=115800−100000
SCENARIO C:

Which is the better investment option? US$ 15, 000 invested at

a rate of 10% p.a. for 5 years compounded annually or the same
sum invested at the same rate for 5 years compounded
quarterly? Show all working.
Based on the scenario above, do you believe that the number of
compounding periods make a significant difference?
SOLUTION
ADDITIONAL PRACTICE QUESTIONS:

1. James invests $3,000 at a 2% interest rate per year compounded

quarterly. Find the balance after 10 years.
2. Calculate the compound interest on investing $12000 for 3
years at 8% per annum.
3. Calculate the compound interest on investing $5600 for 4 years
at 5% per annum.
 SOLUTIONS

( )
10∗ 4
0.02
1. 𝐴𝑚𝑜𝑢𝑛𝑡=3000 1+
4

( )
3
8
2 . 𝐴𝑚𝑜𝑢𝑛𝑡=12 000 1+
100

( )
4
5
3 . 𝐴𝑚𝑜𝑢𝑛𝑡 =5600 1+
100
APPRECIATION
AND
DEPRECIATION

PREPARED BY: MS. J COLLINS

APPRECIATION AND DEPRECIATION

Appreciation refers to an increase in value of an asset or item.

Assets such as land, paintings and antiques. The compound
interest formula can be used to calculate appreciation.
Assets such as cars, machines, buildings and furniture, have a
limited number of years of useful life. These assets lose part of
their worth to wear, age and other causes. This is called
depreciation.
FORMULAE
PRACTICE

1. A Mazda car was bought in January 1986 for $27,000. An

insurance company decides to calculate its depreciation per annum
as 5%.
Determine:
(a) The book value after 3 years
(b) The amount by which it depreciates for the same period
TRY THIS

1. A Mazda car was bought in January 1986 for $27,000. An insurance company decides to calculate its
depreciation per annum as 5%.
Determine:
(a) The book value after 3 years

(b) The amount by which it depreciates for the same period

PRACTICE
SOLUTIONS
PRACTICE
a. D = $16, 738
DEPRECIATION PRACTICE

A Honda civic was bought in January 2005 for $270, 000. An insurance
company decided to calculate its depreciation per annum as 5%. Determine:
 the book value after 3 years
 the amount by which it depreciates for the same period.
PRACTICE

A rare stamp appreciates in value by 10% each year. (i) If it is bought for
$500, what amount will it be worth in 3 years? (ii) Evaluate the book value
after 3 years if it depreciates by 10% each year.
 A man bought a bike for $603, 200. After using it for two years, he
decided to trade in the car. The company estimated a depreciation of 10%
for the use of the first year and 15% in the second year. Calculate the
value of the car after two years as well as the depreciated amount.
PRACTICE
A man bought a bike for $603, 200. After using it for two years, he decided to trade in
the car. The company estimated a depreciation of 10% for the use of the first year and
15% in the second year. Calculate the value of the car after two years as well as the
depreciated amount.

$542 880 after 1 year

$461 448 after 2 years
D=P–A
D = 603200 – 461448
D = $141, 752
the depreciated amount after 2 years is $141, 752
WAGES AND SALARY

 A wage is the amount paid to a worker for each hour of work done during
a period
 The amount of money normally paid for each hour of work is called the
basic rate
 A salary is a fixed amount paid to employees monthly.
FORMULAE
QUESTION 4
SOLUTIONS
SOLUTIONS
SOLUTIONS
ELECTRICITY BILLS
ELECTRICITY BILLS
ABBREVIATIONS
EXAMPLES
SOLUTIONS
𝐵𝑖𝑙𝑙=36.40+ (1428∗8.49 )