Sales Tax = (tax rate) x (item’s cost)
A student is wanting to buy a 3 drawer rolling organizer which is $24. The local sales
tax rate is 8%.
a) How much tax is paid on the 3 drawer organizer?
b) What is the total cost of the storage unit?
Discount -- % off Sales
Discount Amount = (discount rate ) x (original price)
A TV with original price of $525 is on sale for 30% off.
a) What is the discount amount?
b) What is the TV’s sale price?
c) How much is paid for the TV including taxes if the tax rate is 8%?
Percent Change -- increase or decrease:
1. Create a fraction of the percent increase or decrease
2. Convert fraction to a percent.
A color printer that is reduced by 30% of its original price does not sell so the an
additional 20% is taken off the reduced price. Is the total reduction in price 50%?
If not, what is the percent reduction?
8.2
Simple Interest = interest calculated only on the principal
I = Prt
where I = interest, P = principal, r= rate (annual) and t= time in years
Find the simple interest owed on P = $18,000, r=7.5%, t=18 months
Future value = how much your investment is worth at the end of a specified time period
= the total amount due on a loan ( loan amount + interest paid)
A = P(1+rt)
Where A = future value, P = principal/loan amount, r = interest rate(annual), t = time in years
Determine P needed to have A = $2000 with r=12.6% and t = 8 months.
Discounted Loan = a loan where the interest amount of the loan is collected at the time
the loan is made (deducted from the amount given to the borrower).
In order to purchase a car you borrow $20,000 on a 8.5% discounted loan for 3 years.
a) What is the loan’s discount?
b) Determine the net amount of money you receive?
c) What is the loan’s actual interest rate?
8.3
Compound Interest = interest computed on the original principal as well as any
accumulated interest
A = P ( 1 + r/n)nt
where A = future value, P = principal, r = annual rate, n = # times compound per year
and t = time in years
You invest $5000 for 10 years at a rate of 6.5% , find the accumulated value if the interest is
a) Compounded semiannually?
b) Compounded quarterly?
c) Compounded monthly?
d) Compounded continuously?
Find the present value (principal) needed to have a future value of $1620 in 18 months
if the interest rate is 3% compounded quarterly.
The Effective Annual Yield, or the Effective Rate is the simple interest rate that produces
the same amount of money in an account at the end of one year when the account is
subject to compound interest at a stated rate.
$6000 is deposited into an account that pays 10% compounded monthly.
a)Find the future value after 1 year.
b) What is the effective annual yield?
APY or APR
Y = (1 + r/n)n - 1
What is the effective annual yield of an account paying 8% interest compounded quarterly?