# Problems on Profit and Loss

**Pages:**14 (2085 words)

**Published:**March 13, 2011

ILOCOS SUR POLYTECHNIC STATE COLLEGE

COLLEGE OF BUSINESS MANAGEMENT

NORTH CLUSTER

STA. MARIA, ILOCOS SUR

IN PARTIAL FULLFILLMENT

TO THE REQUIREMENTS

OF THE SUBJECT

BUSINESS MATH

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...

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