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Mathematics ofFinance


The word, percenf comes from the Lattn per centum, meaning "per hundred." A percent

i5 simlrly a ratio of some number to 100. So,

-100 !

=i.5N, on6 -l- - x%o.


Procedure to Change a Fraction to a Percent

l. DMde the numerator by the denominator. 2. Multiply the quotient by 100 (which has the effect of moving the decimal point two

places to the dght).

3. Add a percent sign.

Note that steps 2 and 3 together are the equivalent of multiplying by 100%. Since 100% = 100/100: 1, we are not changing the valrie of the number, we are simply changhg the number to a percent.

Example I

Converting a Fruction to a Percent

Ch"r'gg 1Z1s s ta.cet1.



Follow the steps in the procedure above.

2. 0.85 x 100:85

l. i7-20:0.85


'20 {=35%


Procedure to Change a Decimal Number to a Percent

I . Multiply the decimal number by 100.

  • 2. Add a percent sign.

This procedure is equivalent to moving the decimal point two places to tlre right and adding a percent sign.

Example 2

Converting a Decimtl Nuntber to a Percent

Change 0.235 to perc€nt.

Solution: 0.235 = (0.235 x 100)Yo=23.5% Procedure to Change a Percent to a Decimal Nunber

  • 1. Divide the number by 100.

2. Remove the percent sign.

This procedure is equivalent to moving the decimal point two places to the left and removing the percent sign. Another way to remember this is: percent means per hundred

(or to divide by 100).

Example 3

Converting a Percent lo a Decimal Number

  • a) Change 35% to a decimal number.

  • b) Change YzVo to a decimal number.


  • a) '

35o/o=:L=0.35. n Thus. 35%:0.35.




:% =0.5%=*=0.005.








Example 4 How Old is OLd?


A Yahoo! Question of the Week asked, "At what age do you consider someone old?'l Out ofthe 3496 people that responded 1017 said age 80 is old. What percent of respondents feel that age 80 is old?

Solution To find the percent that feel age 80 is old, divide the number ofthose who responded that age 80 is old by the total number of respondents. Then move the decimal

poinl two places to the right and add a percent sign:


who feit age 80 i, old =



- 0.2909 = 29.09%


Thus about 29.1% (to tle nearest tenth ofa percent) felt that age 80 is old.


Percent Change

The percent increase or decrease, or percent change, over a period of time is found by the

foilowing formula:

If tle latest amount is greater than the previous em6u14 fls qnswer will be positive and will indicate a percent increase. Ifthe latest amount is smaller than the previous amount, the answer will be negative and will indicate a percent decrease.

Example 5

Most Improved Baseball Record

In 1999, the Major League baseball team with the most improved record was the Oakland

Athletics. In 1998, the Athletics won 74 games. In 1999, the Athtetics won 82 games.

Find the percent increase in number of games won from 1998 to 1999. (Source: IJSA



The previous period is 1998, and the latest period is 1999.








Percent change: r: 0.1756x100


Therefore, there was about a 17.60/o increase.

Example 6

Labor Union Membership

In 1990 thee were approximately 10,247,000labor union membem in the United States.

By 1998 this number had dropped to 9,306,000. Find the percent change in labor union membership from1990 to 1998.


The previous period is 1990, and the latest period is 1998.

Percent change

_ 9,3060m-r0,242000 xt00






Thus, union membership decreased by about 9.2Vo over this period.

A formula similar to the above is used to calculate percent markup or markdown on cost.

A positive answer indicates a markup and a negative answer indicates a markdown.

Example 7

percent marku o oo "o"r:selling


price -

Dealer' s cost ,roo


Determining Percent Markup

Holdren Hardware stores pay $48.76 for glass fueplace screens. They regularly sell them

for $79.88. At a sale they sell them for $69.99. Find the following.

  • a) The percent markup on the regular price

  • b) The percent markup on the sale price

  • c) The percent decrease of the sale price from the regular price


  • a) We determine the percent markup on the regular price as follows.

Percent markup = s79.88 - $48.76 rl00


rc 0.6382x100

x 63.8%o





Thus, the percent rnarkup was about 63.8%. b) We determine the percent markup on the sale price as follows.

Mathenratics of finance

l)ago 3

Percent markup :

$69.99 - $48.76 x 100


= 0.4353x100



Thus, the percent markup was about 43.5Yo. c) Based on the regular price, we determine the percent decrease of the sale price

Percent decrease :

s69.99 - $79.88 x 100




x -l2.4Yo

The sale price is abolt 12.4%o lower than the regular price.

In daily life we may need to know how to solve any one of the following

problems involving percent:

three types of

l.Whatis a 15Yo np on a restaurant bill of$24.66? The problem can be stated as 15% of 524.66 is what number?

  • 2. IfNancy Jobnson made a sale of$500 and received a commission of$25, what percent

of the sale is the commission? The problem can be stated as


What percent of$500 is $25?

  • 3. If the price of a jacket was reduced'by 25% or $12.50, *rhat was the original price of

the jacket? The problem can be stated as

25% of what number is 12.50


Rormd answers to tle nearest tenth of a percenl

1. Toothpaste Sales ln 1997, Proctor & Gamble sold about $370 million worth ofCrest

toothpaste. The total sales for all types oftoothpaste in 7997 werc $1.5 billion. What

percent of all toothpaste sales did Crest account for in 1997?

  • 2. Preschool Child Care

In 1999, 18.6% of all preschool age children with working

mothers were cared for by their fathers while their motlers worked. If the estimated number of preschool age children with working mothers was 10,398,000' how many

children were cared fo{y their fathers v/hile their mothers worked?

  • 3. U.S. Population Increase

The population of the United States rose from

approximately 248.7 million in 1990 to approximately 270.3 million in 1998.

  • a) Find the percent increase in population from 1 990 to 1998.

  • b) What will the population


from 1990 to 1998?

th e yer 2006 if it increases

at the same percent as it did


\'lall: cn ia rics of liinlncc

Pasc 4



Decreasing Sales Volume

In 1996 Montgomery Ward had a sales volume of

$6.6 billion. In 1997 the sales volume was $5.7 billion. Find the percent decrease fiom

1996to 1997.

  • 5. Tax and Tip

According to the Original Tipping Page (\, itis

proper to tip waiters and waihesses 1520Yo of the total restaurant bill-including the tm. Mary and Keith's dinner costs $43.50 before tax, and the tax rate is 6%.

  • a) What is the tax on Mary and Keith's dirurer?

  • b) What is the total bill, including tax, before the tip?

  • c) If Mary and Keith decide to tip 1 5% of dre total bill, how much is the tip?

  • d) What is the total cost of the dinner including the tip?

Group Activity (Journal Iterr)

6. Comparing Mmlcdowns

  • a) a coat is marked down 10%, and the customer is given a second discount of 15%o. Is

this the same as a single discount of 25%o? Explain.

  • b) The regular price of a chair is $ I 89.99. Determine the sale price ofthe chair ifthe

regular price is reduced by 10% and this price is then reduced another 15olo.

  • c) Determine the sale price of the chair ifthe regular price of $ 189.99 is reduced by 25%.

  • d) Examine the answers obtained in parts (b) and (c). Does your answer to part (a)

appear to be correct? Explain.

7. Selling Ties

The Tie Shoppe paid $5901.79 for a shipment of500 ties and

wants to make a profit of 40% of the cost of the whole shipment The store is having two special sales. At the first sale it plans on selling 100 ties for $9.00 eacb, and at the second

special sale it plans on sellingl50 ties for $12.50 each- What should be the selli:rg price of the other 250 ties for the Tie Shoppe to make a 40o/o profit on the whole sbipment?

Simple Interest

Simple fnterest Formula

Interest =

principal x rate x time


In this formula, the principal,

p, is the amormt of money lent, the rate, r, is the rate of

interest expressed as a percent, and the time, l, is the number of days, months, or years for

which the money will be lent Time is expressed in the same period as the rate. For

example, if the rate is 2% per month, the time must be expressed in months. Typically,

rate means the annual rate unless otherwise stated. Principal and interest are expressed in

dollars in the United States. $imple interest is called ordinary interest.

ordinary interesg each month has 30 days and a year has


For computing

6e6[s or 360 days. On the

due date of a simple interest note the borrower must repay the principal plus the interesL

ftample 1

Calculating Interest and Payback Amount