Percentage, Profit-Loss and Interest

Percentage
The meaning of ‘Percent’ is parts per hundred. It is basically a ratio between two numbers where the
second number is 100. That is, x:y or x/y where y = 100. Whenever we use the term ‘percent’ or the
symbol “%” it means 1/100.

For example, 20% = 20 x (1/100) = 20/100 = 1/5

Percentage is a concept evolved so that there can be a uniform platform for comparison of various
things. (Since each value is taken to a common platform of 100). For example: To compare three
different students depending on the marks they scored we cannot directly compare their marks until
we know the maximum marks for which they took the test. But by calculating percentages they can
directly be compared with one another.

If we want to measure ‘x %’ of a number ‘y’, we simply multiply ‘y’ by ‘x %’

For example: 20% of 50 = (20/100) x 50 = 10.

100% of a number is the number itself

For example: 100 % of 50 = (100/100) x 50 = 50

To calculate what % of a number ‘x’ is another number ‘y’, we multiply (y/x) by 100.

For example: 10 is what % of 50?

Answer: (10/50) x 100 = 20.

If a number ‘x’ increases by 20 %, the result is x + 20 % of x

For example: If 50 increases by 20 %, the result is (50 + 20 % of 50) = (50 + 10) = 60

We can also say if a number ‘x’ increases by 20 %, the result is x multiplied by 1.2

For example: If 50 increases by 20 %, the result is 50 x 1.2 = 60

As, {(50 x 1) + (20/100) x 50} = {(50 x 1) + (0.2 x 50)} = 50 x (1 + 0.2) = 50 x 1.2 = 60

If a number ‘x’ decreases by 20%, the result is x – 20% of x

For example: If 50 decreases by 20%, the result is (50 – 20 % of 50) = (50 - 10) = 40
We can also say if a number ‘x’ decreases by 20 %, the result is x multiplied by 0.8

For example: If 50 decreases by 20 %, the result is 50 x 0.8 = 40

As, {(50 x 1) - (20/100) x 50} = {(50 x 1) - (0.2 x 50)} = 50 x (1 - 0.2) = 50 x 0.8 = 40

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Percent – Fraction Conversion

Fractions and Percentage are interchangeable. For faster calculations we can convert the
percentages or decimal equivalents into their respective fraction notations. The following tables show
the conversions of percentages and decimals into fractions:

Example: The price of a pen is 80 Taka. A seller increases the price by 12.5%. What is the cost of the
pen now?

a. 85.5 b. 87 c. 88 d. 90 e. 92.5

Solution:

Here, the seller increased the price by 12.5%.

We know, 12.5% = 1/8

So, the seller increased the price of the pen by (1/8) of 80 = 10 Taka.

So, the new cost of the pen = (80 + 10) = 90 Taka

So, the correct answer is option (d) 90

Calculating % Change
Calculating % change becomes easier if we assume the base value to be 100 or a multiple of 100. This
helps us get integer value of quantities.

Example: Jawad’s income is 25% less than Shahriar. If Baka earns 50% more than Shahriar, what % of
Jawad’s income does Baka earn?

a. 100 b. 150 c. 200 d. 225 e. None of these

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Solution:

Let, Shahriar’s income be 100 Taka

So, Jawad earns 100 x (1 – 0.25) = 100 x 0.75 = 75 Taka

And, Baka earns 100 x (1 + 0.5) = 100 x 1.5 = 150 Taka

So, Baka’s earning is,

(150/75) x 100% = 2 x 100% = 200% of Jawad’s income

Here, the correct answer is option (c) 200

While calculating percent change, we have to remember that if a number ‘x’ increases by a certain %
andwe get ‘y’ as a result, we can’t decrease ‘y’ by the same % to get ‘x’ as the result again.

For example: If the price of a book is 100 Taka, and we increase the price of the product by 10%, it
increases by (100 x 0.1) = 10 Taka and becomes 110 Taka. However, if the price of the book now
decreases by 10% from 110 Taka, it decreases by (110 x 0.1) = 11 Taka and becomes 99 Taka.

It is important to note that if a number ‘x’ is 20% more than another number ‘y’, then the number ‘x’ is
1.2 times the number ‘y’. However, the number ‘y’ is not 80% or 0.8 times of the number ‘x’.

For example: 120 is 20% more than 100. However, 80% of 120 = (120 x 0.8) = 96

Similarly, if a number ‘x’ decreases by a certain % and we get ‘y’ as a result, we can’t increase ‘y’ by the same
% to get ‘x’ as the result again.

Zero Net Change

 If a number increases by X/Y, then to restore it back to it’s original value, we need to decrease
it by X/(X+Y).

For example: If a number increases by 20%, we can say it increases by 20/100 = 1/5
Here, X = 1 and Y = 5.
So, to restore it back to it’s original price, we need to decrease the number by 1/(1+5) = 1/6
We know, 1/6 = 0.1666 = 16.67%
So, to restore it back to it’s original price, we need to decrease the number by 16.67%

 If a number decreases by X/Y, then to restore it back to it’s original value, we need to increase
it by X/(Y-X).

For example: If a number decreases by 20%, we can say it decreases by 20/100 = 1/5
Here, X = 1 and Y = 5.
So, to restore it back to it’s original price, we need to increase the number by 1/(5-1) = 1/4
We know, 1/4 = 0.25 = 25%
So, to restore it back to it’s original price, we need to increase the number by 25%.

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Calculation of Successive Increase/Decrease

If a number undergoes successive change in percentage. For example, it changes by a% and then
again changes by b%, the number doesn’t simply change by (a+b) %.
Rather, it follows the formula ‘ a + b + (ab/100) ‘

Example: The price of an item is 50 Taka. It increased by 30% in a month and then again increased by
40% in the next month. What is the new price of the item?

a. 80 b. 85 c. 90 d. 91 e. 95

Solution:
Here, the total change in price is,
30 + 40 + (30 x 40)/100 = 30 + 40 + 12 = 82%
So, the new price of the item is 50 x (1 + 0.82) = 50 x 1.82 = 91 Taka
So, the correct answer is option (d) 91

Profit-Loss

Some important terms:

 Cost Price (CP): The price, which is paid by the seller to acquire the product, is called cost price.

 Selling Price (SP): The price which is paid by the customer to the seller.

 Marked Price (MP): The price, which is listed or marked on the product, is also known as
quotation price/printed price/catalogue price/invoice price. This term is generally used to
denote initial selling price which is subject to change.

 Profit: If selling price is greater than Cost price, then (SP – CP) is called Gain or Profit.

 Loss: If selling price is less than Cost price, then (CP – SP) is called Loss.

 Markup: Markup is the ratio between the cost of a good and its selling price. It is used to show
by how much a seller increases the CP to gain a profitable SP.

For example: If the CP of a good is 50 Taka and markup is 20%, the selling price of the good is
then (50 + 20% of 50) = (50 + 10) = 60.
Markup can be applied on SP as well.

For example: The good which has a SP of 60 Taka can have a further mark up of 20% and the
new SP becomes (60 + 20% of 60) = (60 + 12) = 72.

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 Markdown: Markdown is the reduction of SP of a good.

For example: A seller marks down the price of a good which had a marked price of 60 Taka by
20%. So, the new SP of the good is 60 x (1-0.2) = 60 x 0.8 = 48 Taka

Note that,
Markdown is always applied on SP and almost never on CP.

Percentage of Profit and Loss is always calculated on Cost Price unless specified otherwise.

Example: A businessman makes a loss of 25% by selling an item for 210 Taka. If he had sold it for
20% profit, what would be his selling price?

a. 336 b. 330 c. 300 d. 280 e. 288

Solution:
Here, the businessman makes a loss of 25% or 1/4 of his cost price.
So, he sells the item at 75% or 3/4 of his cost price
A/Q, (3/4) x CP = 210 Taka
So, CP = (210 x 4) / 3 = 280 Taka
Now, at 20% profit, he would sell at 280 x 1.2 = 336 Taka

So, the correct answer is option (a) 336

Interest

Some important terms:

 Principal: The initial sum of money that is kept in a bank or lent out to others. Interest rate is
calculated on principal.

 Interest: The additional money paid back to the lender along with the principal is known as
interest.

 Interest Rate: The proportion of a loan that is charged as interest to the borrower, typically
expressed as an annual percentage of the loan outstanding.

 Time Period: The duration for which the loan is due and the interest is accumulated.

 Amount: The sum total of the Principal and the total interest at the end of the time period. So,

Amount = Principal + Interest

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There are two types of interests –

 Simple Interest: When the interest rate is always based on the principal after each time
period, it is called simple interest.
If Principal = P
Interest = I
no. of time periods = n
interest rate = r
Then, Interest = P X n X r
and, Amount = P + I
= P + Pnr
= P(1 + nr)

Example:

A credit union has issued a 3-year loan of $5,000. Simple interest is charged at a rate of
10 percent per year. The principle plus interest is to be repaid at the end of the third year.
Compute the interest for three year period. What amount will be repaid at the end of the
third year?

` a. $ 4,500 b. $ 5,500 c. $ 6,500 d. $ 7,500 e. $ 8,500

Solution:
Here,
I = Pnr
I = ($5,000) (3) (0.10)
= $1,500
The amount to be repaid is the principle plus the accumulated interest,
that is: $5,000 + $1,500 = $6,500
So, the correct answer is option (c) $6,500.

Example:

Sarah deposits $4,000 at a bank at an interest rate of 4.5% per year. How much interest
will she earn at the end of 3 years?

a. $ 650 b. $ 620 c. $ 500 d. $ 580 e. $ 580

Solution:
Simple Interest = Pnr = 4,000 × 4.5% × 3 = 540
She earns $540 at the end of 3 years.
So, the correct answer is option (d) $ 540

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  Compound Interest: Compound interest (or compounding interest) is interest calculated
on the initial principal, which also includes all of the accumulated interest of previous
periods of a deposit or loan. In compound interest, the principal amount with interest after
the first unit of time becomes the principal for the next unit. When you take out a loan,
interest is calculated for the first period (be it a month or a year). This interest is then
added to the original total. Following on from that, the interest for the next period is
calculated but is based on the gross figure from the first period.

Let's say you borrow $ 2,000 over a 3 year period, pay 10% annual interest on your debt
and are not making regular repayments. In this case, the amount you will have to repay
will look like this:

Year 1: $ 2,000 x 10% = $ 200.

Year 2: $ 2,200 x 10% = $ 220.
Year 3: $ 2,420 x 10% = $ 242.

The total repayment figure after 3 years is $2,662 (the $662 interest is the sum of each
year's interest).

It should be noted that if you make regular repayments on your loan, the total compound
interest will be lower because the remaining principal on the loan will be decreasing at
each compound interval.

The formula used to calculate standard compound interest (including the principal) is as
follows:

n
A = P (1 + r)

A is the final amount you repay at the end of the loan.

P is the principal amount you borrow.
r is the annual rate of interest.
n is the number of periods you borrow/invest over.

If we use the example of our $2,000 borrowed at 10% over 3 years (without repayments)
we get the following calculation:

3
A = 2000(1+0.1) = $ 2,662

And, Total Interest = A – P

n
= P (1 + r) -P

So, total interest, I = $ 2,662 - $ 2,000

= $ 662

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 Example:

An investment earns 10% compounded annually. Find the value of an initial investment of
$ 5,000 after 2 years.

a. $ 6,000 b. $ 6,050 c. $ 5,500 d. $ 5,050 e. None of these

Solution:
Here, r = 0.1
N=2
P = 5000
n
Therefore, Amount = P (1 + r)
2
= 5,000 (1 + 0.1)
= 6,050
So, the correct answer is option (b) $ 6,050.

Example:

The difference between Simple Interest and Compound Interest compounded annually on
a certain sum of money for 2 years at 8% per annum is $ 12.80. Find the principal.

a. $ 2,000 b. $ 3,000 c. $ 1,800 d. $ 1,500 e. $ 2,500

Solution:

Let the principal amount be x.

Simple Interest = 2x X (8/100) = 4x/25
Compound Interest = x[1+ (8/100)]2 – x
= 104x/625
Therefore, (104x/625) – (4x/25) = 12.80
Solving which gives x, Principal = Rs. 2000.
So, the correct answer is option (a) $ 2,000

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 Class Practice

Type-1: Percentage

1. The price of a laptop is 200% of a TV. If the price of the TV increases by 20% and the
price of the laptop decreases by 20%, what percent of the TV’s original price is the new
combined price of the TV and Laptop?

a. 200 b. 220 c. 280 d. 300 e. 310

2. Oishee’s salary went down from 81,000 Taka to 72,000 Taka as her company faced some loss.
By what % should her salary be increased to restore her original salary?

a. 20% b. 16% c. 9% d. 12.5% e. 11.11%

3. In a box, 40% balls are white and rest are black. 60% balls are made of plastic & rest made of
rubber. 25% white balls are made of plastic and 20 black balls are made of rubber. How many
black balls are made of plastic?

a. 100 b. 80 c. 60 d. 50 e. 25

4. The price of mangoes went down by 20%. As a result, you can now buy 2 more kilos of mango
with 480 Taka than you could do before. What is the previous cost of per kilo of mango?

a. 50 b. 60 c. 48 d. 42 e. 36

5. The cost of a watch is 3900 Taka with tax. If the tax free cost of the watch is 3000 Taka, what
is the rate of tax?

a. 10% b. 20% c. 30% d. 40% e. 50%

6. The price of oil increased by 30% in June. It then went down by 30% in July. If the price of oil
was 100 Taka per liter before the increase in June, what was the price of the oil after the price
went down in July?

a. 90 b. 91 c.95 d. 100 e. 105

7. The cost of a good increased by 25%. Rufaida intends to spend only 10% more than she
already does behind this good. By how much should she cut back her consumption?

a. 9% b. 12% c.12.5% d. 15% e. 20%

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Type 2: Profit – Loss

1. Armin purchased a radio from a store and sold it to Adnan and made a profit of 20%. After few
months Adnan sold the same radio to Fahad and incurred a loss of 15%. If Fahad bought the
Radio for Tk. 510 what was the original price of the radio?
a. 425 b. 450 c. 475 d. 500 e. None of these

2. If the cost price of an article is 66.66% of the selling price, what is the profit percent?
a. 33.33% b. 40% c. 50% d. 66.66% e. 75%

3. Ruth bought candies at the rate of 24 pieces per dollar. How many should she sell per dollar
to gain a 20% profit?
a. 20 b. 22 c. 18 d. 16 e. None of these

4. For an item the profit is 40% when the discount is 30%. What is the profit when the discount
is 40%?
a. 10 b. 20 c. 30 d. 35 e. None of these

Type 3: Interest

1. A sum of money placed at compound interest doubles itself in 4 years. In how many years will
it amount to 16 times itself?
a. 8 b. 12 c. 16 d. 20 e. 32

2. Riyad keeps 5000 Taka in a bank at a x% simple interest rate. After 5 years his money grows
to 6500 Taka. What is x?
a. 5 b. 6 c. 7 d. 8 e. 9

3. Two banks offered interest rates of 5% and 7% respectively on savings account. Adree
deposited a total amount of Tk. 4000 in the banks & in one year his interest income was Tk.
250. Find the investment in the bank with 7% interest.
a. 3000 b. 2000 c. 3500 d. 2500 e. None of these

4. An amount of money grows to 3000 Taka in 3 years and 4000 Taka in 4 years on compound
interest. What was the rate of interest?
a. 25% b. 33.33% c. 18% d. 20% e. Can’t be determined

5. A money lender lent Rs. 1000 at 3% per year and Rs. 1400 at 5% per year. The amount should
be returned to him when the total interest comes to Rs. 350. Find the number of years.
a. 3.5 b. 3.75 c. 4 d. 4.5 e. 5

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