Problems on Profit and Loss

Topics: Compound interest, Interest, Money Pages: 14 (2085 words) Published: March 13, 2011
REPUBLIC OF THE PHILIPPINES

ILOCOS SUR POLYTECHNIC STATE COLLEGE

NORTH CLUSTER

STA. MARIA, ILOCOS SUR

IN PARTIAL FULLFILLMENT

TO THE REQUIREMENTS

OF THE SUBJECT

PRESENTED BY:

MONICA D. APALLA

BSHRM 1A

PRESENTED TO:

MR. MARVIN GALCON

SUBJECT INSTRUCTOR

PROBLEM SOLVING INVOLVING INTEREST

1. You put \$1000 into an investment yielding 6% annual interest; you left the money in for two years. How much interest do you get at the end of those two years?

Given:

P = \$1000

r = 0.06 (because I have to convert the percent to decimal form)

t = 2

Find: I

Solution:

I = Prt

I = (1000) (0.06) (2)

I= 120

2. You invested \$500 and received \$650 after three years. What had been the interest rate?

Given:

P = \$500

I = \$650 – 500 = \$150

t = 3

Solution:

I=Prt

150 = (500) (r) (3)
150 = 1500r
150/1500 = r = 0.10

3. You have \$50,000 to invest, and two funds that you'd like to invest in. The You-Risk-It Fund (Fund Y) yields 14% interest. The Extra-Dull Fund (Fund X) yields 6% interest. Because of college financial-aid implications, you don't think you can afford to earn more than \$4,500 in interest income this year. How much should you put in each fund?

The problem here comes from the fact that I'm splitting that \$50,000 in principal into two smaller amounts:

|I |P |r |t | |Fund X |? |? |0.06 |1 | |Fund Y |? |? |0.14 |1 | |total |4,500 |50,000 |--- |--- | |* The amount in Fund Y is (the total) less or 50,000 – x.

|I |P |r |t | |Fund X |? |x |0.06 |1 | |Fund Y |? |50,000 – x |0.14 |1 | |total |4,500 |50,000 |--- |--- | |* I can now multiply across (right to left) and fill in the "interest" column.

|I |P |r |t | |Fund X |0.06x |x |0.06 |1 | |Fund Y |0.14(50,000 – x) |50,000 – x |0.14 |1 | |total |4,500 |50,000 |--- |--- | |

* Since the interest from Fund X and the interest from Fund Y will add up to \$4,500, I can add down the "interest" column, and set this sum equal to the given total interest:

0.06x + 0.14(50,000 – x) = 4,500
0.06x + 7,000 – 0.14x = 4,500
7,000 – 0.08x = 4,500
–0.08x = –2,500
x = 31,250

Then y = 50,000 – 31,250 = 18,750.

* I should put \$31,250 into Fund X, and \$18,750 into Fund Y.

4. Interest Rate: 6% each year; Starting Balance: \$190; Time Passed: 9 years. How much interest has accrued if we are using simple interest? What is the new total balance?

Solution:

Simple Interest: I = PRT
P = principle = starting balance = \$190
R = interest rate = 6%
T = time = 9 years

I = PRT

I = 190 × 6 / 100 × 9 = \$103

New Balance = starting balance + interest accrued

= \$190 + \$103 = \$293

5. Interest Rate: 1% daily
Starting Balance: \$182
Time Passed: 7 days
How much interest has accrued if calculated as compound interest? What is the new total balance?

Solution:

Total Balance = P (1 + R) T

P = starting balance = \$182
R = 1%
T = 7 years

Total balance = P (1 + R) T

= 182 × (1 + (1 / 100)) 7 = \$195

Interest accrued = total balance - starting balance

= \$195 - \$182 = \$13

6. Interest Rate: 3% annually
Starting Balance: \$114
Time Passed: 10 years
How much interest has accrued if calculated as compound interest? What is the new total balance?

Solution:

Total balance = P (1 + R) T

P = starting balance = \$114
R = 3%
T = 10 years

Total balance = P (1 + R) T = 114 × (1 + (3 / 100)) 10 = \$153

Interest accrued = total balance - starting balance = \$153 - \$114 = \$39

7.  Clay has borrowed \$5000 from the Wilmington Trust Co. in order to get a motorbike. He got the...