Business Math

Calculating Interest Rates SCREE LEA 501 144 076

Standards BCS-LEB-14: The student identifies the elements needed to develop a financial plan and to obtain business financing.

Agenda Bell Ringer: Scholarship Screenleap College Credit Now Recap Essential Questions Assessment

Essential Questions How do businesses use math everyday? How can technology be use to mathematically predict success or failure?

Scholarships Shell Oil Company Technical Scholarship Program $2,500-$5,000 Engineering/Math http://www.shell.us/aboutshell/careers-tpkg/students-and-graduates/scholarships.html

Bell Ringer What’s better simple or compound interest if you are an investor? Why?

Interest Payments Borrowing money to start your business

How do bank make money? They receive interest from lending money

Definition Principal? Amount of $ borrowed Rate of Interest % of that is the basis for interest paid/earned Term Number of YR/MON the agreement is for

You still owe $100,000 or you collateral will be confiscated? Example You still owe $100,000 or you collateral will be confiscated? Principal $100,000 Interest Rate of 9.5% 5 Year Term SIMPLE INTEREST How much interest would you pay per year? How much at the end of the term? $100,000 x 0.095 = $9,500/yr $9,500 x 5 = $47,500

Confiscated Example Karate vs. Rich Lady

When borrowing $, lower interest rates are better Problem #2 When borrowing $, lower interest rates are better Principal $40,000 Interest Rate of 5% 10 Year Term SIMPLE INTEREST How much interest would you pay per year? How much at the end of the term? $40,000 x 0.05 = $2,000/yr $2,000 x 10 = $20,000

Calculating Interest Interest is usually calculated daily Not Annually 2 types of Interest calculation Exact Interest Method Ordinary Interest Method

Exact Interest 365 Days Bank, US Govt, Businesses $100K, 5%, 55 days Principal x Rate X Days = Interest Owed 365 $100,000 x 0.05 X 55 = $753.42 365

Ordinary Interest 360 Days Banker’s Interest $100K, 5%, 55 days Principal x Rate X Days = Interest Owed 360 $100,000 x 0.05 X 55 = $763.89 360

Markups & Markdowns Markup Markdown Amount added to cost price to determine the sales price. Markdown Amount deducted from the retail price to determine the sales price.

Cost x Rate X Markup % = Markup Calculating Markups You sell shirts Cost you$20.00 Need a 35% markup to be profitable How much to you sell the shirt for? Cost x Rate X Markup % = Markup $20.00 x 0.35 = $7.00 $20.00 + 7.00 = $27.00

Easier Calculating Markups Cost x Rate X Markup % = Markup Vs. Add 1 $20.00 x 0.35 = $7.00 $20.00 x 7.00 = $27.00 $20.00 + 1.35 = $27.00

Calculating Markdown Regular Price: $149.95 Reduced Price: $99.95 What’s the markdown %? Original Price – Sale Price = Difference $149.95 – 99.95 = $50.00 Difference/Original Price = Markdown % $50.00/$149.95 = .33 or 33%

Calculating Markups You sell hats Cost you $14.00 Need a 40% markup to be profitable How much to you sell the hat for? $14.00 x 1.4 = $19.60

Practice Calculating Markdown Regular Price: $265.95 Reduced Price: $150.95 What’s the markdown %? Original Price – Sale Price = Difference $265.95 – 150.95 = $115.00 Difference/Original Price = Markdown % $115.00/$265.95 = .43 or 43%

Discounts & Due Dates

Original Price X Discount % = Discount Question What’s a discount? Reduction in the price How is discount calculated? Like a Markup Discount is the same thing as markdown Original Price X Discount % = Discount $20.00 x 0.35 = $7.00

Due Dates Due Date? Same date at final day of month Date Money is due Borrowed Nov 15th 4 month note March 15th

Due Date: Last day of Month Due last day of month owed 4 month Note Issued December 31st April 30th

Due Date: In Days Count forward…or Subtract 90 day Note issued May 20th 90 days -11 days 79 days -30 days 49 days -31 days 18 days Length of Note May Days left is May Days left is June June July Days left is July August 18 due day

Last Day for Discount Business sometimes give discount to customers to pay invoices early Ex. 2/10, net 30 Translation: bill is due in 30 days 2% off if paid in 10 days Or pay full amount in 30 3/15, net 30