Test 2 Review Definitions can be found on the website under the Week 5 slides. MATCHING interest in business is usually never below the original purchase price of an item, but it is below the mark up price. tax are found in situations where a person receives an amount of money (tip) for providing a service . markup are seen in situations where a sales person sells a product for a company, and receives compensation in the form of a percentage of the total sell. profit an amount added to a good or service as a fee. markdowns the amount of money you make. gratuities the amount that a business adds to the original purchase price of an item in order to generate a profit commissions an amount added to a base or principal amount.

Interest Your farm is running short on funds this year for planting. You take out a loan at 4.3% for a $1,000.00. The next year you need another $1,000.00 loan, but the bank tells you the interest rate has increased by 200%. What is the new rate in terms of percent compared to the old rate? In terms of dollars how much more are you going to spend on interest for the new loan versus the old loan? Answer must be in a complete sentence.

200% is added to the original 100% so it now looks like When working story problems it is very important to look at the wording of the problem. In this problem we have the original amount loaned at a rate of 4.3% on a total loan of $1,000 200% is added to the original 100% so it now looks like As you can see we added 200%, but we have 300% total of the original rate. The key idea is that the second loan is still only $1,000.00 .It is just being loaned at a greater rate of interest. Key Idea The above represent a total of 12.9 % interest on a loan of $1,000. 4.3% interest charged on 100% of the original amount or$1,000.00 The two additional blocks represent the 200% that is added on. This is the original 100% 4.3% interest 4.3% interest charged on 4.3% interest charged on

To find the new rate we simply take 4 To find the new rate we simply take 4.3% and multiply it by 3 to get 12.9% 12.9% Key idea The loan amount is still $1,000. What has changed is the rate is being charged for taking the loan out. Now we can address the second part of the question that asks per $1,000.00 how much more is the new rate in dollars compared to the old rate in terms of dollars. This is the rate The two additional blocks represent the 200% that is added on. 4.3% interest charged on 100% of the original amount. 4.3% interest charged on 100% of the original amount. 4.3% interest charged on 100% of the original amount.

The two additional blocks represent the 200% that is added on. Please refer to Week 7 Percent Problem Guide for more in depth explanation. 100% =1. 1% = .01 So: 100%= $1,000 So: 1% = $10.00 So: 12.9% = $129 12.9% $129 per $1,000 Answer on the next slide This is the original 100% The two additional blocks represent the 200% that is added on. 4.3% interest = $43 per $1,000 4.3% interest = $43 4.3% interest =$43

Solution to Interest Problem We now know that Answers The new rate is 12.9%. The increased cost in terms of dollars is $86.00 found by subtracting $43.00 from $129.00 First Loan New loan Rate = 4.3% Rate = 12.9% $ = $43 per $1,000 loan $129.00 per $1,000 loan

Tax True or False 20 pts Daniel makes $45,400 a year and has a wife and three kids. At this income level he is taxed at 25% of his income for the year. Daniel has been offered a new job for $62,000 a year, but this will change his current tax bracket. If he accepts the position he will be taxed at 45% of his income. True or False (show your work)

How To Tax Job 1 Job 2 Income $45,400 $62,000 Tax rate 25% Amount he gets to keep X Amount he gets to keep Y

Tax How To Continued Step 1: Find 1% of each income (Week 7 Percent guide provides and in depth explanation. Job 1 $45,400.00 = 100% of income for Job 1 1% = $454.00 Found by moving the decimal two places to the left. Job 2 $62,000 = 100% of income for Job 2 1% = $620

Tax How To Continued Step 2: Multiply the 1% of each job by the percent they get to keep. This is found by subtracting the tax rate from 100% of the income. For job 1 it is 100%-25% or 75%. Algebraically we are saying 100-25 = X The next slide depicts this in a model.

Job 1 Amount kept Amount Taxed 25%25% 75% Job 2 Amount kept Amount Taxed $45,400 55% 45% The small rectangles represent 1% of the Total rectangles. For Job 1 it is $454 and for Job 2 it is $620 Multiply the 1% by the percentage kept1 Job 1 = %34,050 Job 2 = $34,100 $62,000

Tax Answer To figure out which job he should keep look at how much money he would keep in each position. In this case Job 2 would be more profitable by $50.00 per year. A complete sentence answer would be: Daniel would make $50.00 more a year with job 2 versus job 1.

Markup 20 pts You need to buy a car. The dealer will sell you a Dodge truck with four wheel drive for $57,200. The dealer bought the truck for $45,600. What is the markup of the truck? Circle the best answer (show your work) A) approx. 25% B) approx. 12% C) approx. 42% D) approx. 18%

Story problems will give you a lot of information Story problems will give you a lot of information. Some of it you will need and some you will not. Try organizing the information in a table to Identify what you need and do not need. Sell Price Purchase Price $57,200 $45,600 X (unknown or percent of markup 100% (based on purchase price of the dealer

Purchase price of dealer =100% of his or her cost Sell Price $57,200 Purchase Price Markup Purchase price of dealer =100% of his or her cost $45,600 X% %11,600 The purchase price minus the sell price will give you the dollar amount of the mark up. Written algebraically it would be $57,200 – $45,600 = X Now we can find 1% of $45,600. by dividing by 100 or recognizing that we can move the decimal to the left by two spaces (See percent problem guide week 7 for an in detail explanation). 1% = 456. (Problem continued on next slide.

Purchase price of dealer =100% of his or her cost Sell Price $57,200 Purchase Price Markup Purchase price of dealer =100% of his or her cost $45,600 X% %11,600 This is 1% or $456. There are 100 $456 squares in the red rectangle totaling $45,600. We can now extrapolate this knowledge by dividing $456 into the $11,600. This will tell us how many of these $456 or 1% squares there are and give us mark up in terms of percent. $11,600 divided by $456 = approximately 25.4% or 24%. Algebraically we are asking: What percent of $45,600 is $57,200 minus 100% or {(X $45,600 = 57,200) – 1} x 100 = Markup

Purchase price of dealer =100% of his or her cost Sell Price $57,200 Purchase Price Markup Purchase price of dealer =100% of his or her cost $45,600 X% %11,600 This is 1% or $456. {(X $45,600 = 57,200) – 1} x 100 = Markup or approx. 25% Written as a formula you would have {(X P = S) – 1} x 100 = X is our unknown P = Purchase Price S = Sell Price

Markdown 20 pts You decided the dealers price is to much so you do some shopping. He calls you back and said that he is willing to give you a good student discount. Instead of $57,200.00 he will sell it to you for $49,800.00. What is the markdown in terms of percent that the dealer is offering you? Answer in a complete sentence.

New Price offered by dealer Sell Price $57,200 =100% New Price Markdown New Price offered by dealer $49,800 X% $7,400 This is 1% or $572. Key Idea: Unlike Mark Up the Sell Price is now the 100%, because it is 100% of the original selling or offered price. We are now comparing in terms of percent the sell price to the new price. Find 1% of the sell price by moving the decimal two places to the left which is $527.00 Find the $ amount that the dealer marked down or took away from the sell price Divide the 1% into the dollar amount that the price has been marked down by. $7,400 divided by $527 = approximately 14%.

Gratuity 20 pts You are excited, because you are on your own and have a new job as a Bellman for a local hotel. Your rent in your new apartment is $960 a month. When you receive a tip from a customer you get to keep 82% of the customers tip, because 18% is taxed. How many customers will you have to carry bags for to make your rent each month if every tip is $2.00? Directions: You must show at least two different models to solve this problem. One of the methods may be an algorithm. Answer in a complete sentence.

Ratio Table In terms of dollars X 1 10 50 100 500 550 570 579 580 Tip 2 20 100 200 1000 1200 1140 1158 1160 Keep 1.66 16.60 83.00 166 830.00 913.00 946.20 961.14 962.80 Bags 1 10 50 100 500 550 570 579 580 Tax .36 3.60 18 36 180 198 205.20 208.44 208.80 You had to car 579 bags in order to make the $960 needed to make rent.

Method 2 You know you have to make at least $960 dollars. You know you get to keep $1.66 of each tip you receive. Divide $960 by $1.66 to get your answer. You get 578.3 bags. Can you only pick up .3 of a bag. Nope so you need 579 bags to make rent.

Commission 20 pts Don sells satellite equipment. He gets 7% of his total sales as compensation each month. Don needs to make $2,300.00 for the fall semester tuition to attend college. How much in sales does he have to have in order to make enough money for college?

How to Commission The key Idea is that the $2300 is equal to 7% of the total sales needed to be made in order to make the $2300. Therefore you can divide $2300 by 7 finding 1% of the total and then multiply by 100 to get the amount need in sales. 2300 divided by 7 = approx. 328.57 328.57 x 100 = $32,857

Model of Commission $32,857.00 = 100% of sales needed The green box is 7% or $2,300 of the total sales needed. The red box is 1% or $328.57 of the total sales found by Dividing the green box by 7. The total sales is found by multiplying the $328.57 X 100 to get $32,857