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Math 1100 - Chapter 9-12
Math 1100 - Chapter 9-12
1 Markup on Cost
Selling Price: price for product offered to public
Markup, margin, or gross profit: difference
between the cost and the selling price
Basic formula: Cost + Markup = Selling Price
(in this section markup is based on cost)
CM S
9.1 Markup on Cost
Example: A coffee maker is purchased for $15 and
sold for $18.75. Find the percent of markup based
on cost.
R B P R $240 $96
96
R 0.4 40%
240
reduced price $240 $96 $144
10.1 Markdown
Markdown equations:
I PRT
7
$144.08 $2600 R 1516.67 R
12
144.08
R .095 9.5%
1516.67
11.2 Simple Interest for a Given
Number of Days
To find the exact number of days between two
dates (2 methods):
M P I $7800 P $300
P $7500
120
I PRT $300 $7500 R $2500 R
360
$300
R 0.12 12%
$2500
11.4 Inflation and the Time Value
of Money
Inflation: continuing rise in the general price
level of goods and services
Consumer Price Index (CPI): one way to
measure inflation. The CPI reflects the average
change in prices from one year to the next.
Time Value of Money: the idea that loaning
money has value and that value is repaid by
returning interest in addition to principal.
11.4 Inflation and the Time Value
of Money
Present value: principal amount that must be
invested today to produce a given future value.
Future value: amount that a present value grows
to; also called the maturity amount.
M
M P(1 RT ) or P
1 RT
11.4 Inflation and the Time Value
of Money
Time Value of Money with simple interest of
5% per year.
180
T 0.5
360
M $1985.50
P
1 RT 1 0.09 0.5
P $1900
12.1 Simple Interest Notes
Promissory note: Legal note in which a person
agrees to pay a certain amount of money at a
stated time and interest rate to another person
Face value of note: principal (P)
Maturity value: M = P + I = P + PRT = P(1 + RT)
Term of the note: T often given in days (convert
to years for formulas)
12.1 Simple Interest Notes
Example: For a promissory note with face value of
$9500, term of 200 days, rate of 10%, and date
made of March 18, find the due date and the
maturity value.
Using table 11.1, March 18 = day 77
77 + 200 = day 277 = October 4 (due date)
200 5
T
360 9
5
M P (1 RT ) $9500(1 0.10 )
9
M $10,027.78
12.1 Simple Interest Notes
Example: For a simple interest note with maturity
value of $7632, term of 240 days, and rate of 9%,
find the principal.
240 2
T
360 3
M $7632
P
1 RT 1 0.09 2
3
P $7200
12.2 Simple Discount Notes
Simple discount note: interest is deducted in
advance from the face value written on the note.
M = face value = maturity value (not the principal)
B = bank discount (similar to interest)
D = discount rate (similar to rate of interest)
T = time in years
B MDT similar to I PRT
12.2 Simple Discount Notes
Maturity for simple interest:
M P I P PRT
M P (1 RT )
Maturity for discount notes:
(similar but you subtract the discount from the
maturity)
P M B M MDT
P M (1 DT )
12.2 Simple Discount Notes
Example: For a simple discount note with a
maturity value of $6800, discount rate of 10%, and
time of 180 days, find the discount and the
proceeds.
180
T 0.5
360
B MDT $6800 0.10 0.5 $340
P M B $6800 $340 6460
12.2 Simple Discount Notes
Example: For a simple discount note with a
maturity value of $8200, discount of $205, and
date made of 2/9, due date of 5/10, find the
discount rate, time in days, and the proceeds.
T ( days ) 19 31 30 10 90
T ( years ) 90
360
0.25
B MDT $8200 D 0.25 $205
$205
D 0.10 10%
$8200 0.25
P M B $8200 $205 $7995
12.3 Comparing Simple Interest
and Simple Discount
Similarities between simple interest notes
and simple discount notes:
1. Borrower receives money at the beginning
of each note.
2. Both notes are repaid with a single
payment at the end of the period.
3. Length of time is generally less than 1
year.
12.3 Comparing Simple Interest and
Simple Discount
Differences between simple interest notes and simple
discount notes:
1. Formulas
Discount notes: P M B M MDT
P M (1 DT )
240 2
T ( years)
360 3
R 0.08
D 0.0759
1 RT 1 0.08 3
2
D 7.59%