Chapter i Mana mone calculate earnings (wages and salaries) in different situations use and manipulate formulae to calculate simple and compound interest solve problems related to simple and compound interest ‘apply what you already know about percentages to work out discounts, profit and loss in everyday contexts use a calculator effectively to perform financial calculations read and interpret financial data provided in tables and charts Use exponential growth and decay in relation to finance.> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK ‘Smartphone technology has changed how many people bank and manage their money as well as how people receive and make payments in everyday life. What banking and ‘money apps do you know of? How do they work? What makes them safe to use? Ina survey, a leading business magazine found that 63% of adults agreed that financial skills should be taught in schools. Personal financial skills are important for everyone and they become more important as you get older and have to manage your own ‘money. How well or poorly) you understand the basics of budgeting, saving, debt and investing will affect many aspects of your lif, Good financial skills can often be the difference between wealth and poveriy. In this chapter you will apply some of the maths skills you already know to solve finance-related problems. You will use your calculator to find the answers quickly and efficiently. 1. The box contains some of the terms people use to talk about money and finance. earnings wages salary commission —_ deductions Pet income grass income _ simple interest compound growth + investment eostpprice selling price Profit loss. markup discount. —_ principal amount rate of interest appreciation depreciation inflation rate annually eredit’ ~— obit. transaction 8 Copy this table. Nveneverheard | Ihave heard this | I know what this this before but! am not sure | means and can what it means | explain it to others ‘Write the terms from the box in the appropriate columns. ‘Work in pairs. Find the meanings of any words you wrote in the first two columns. If you can, explain the words you know to each other, not, find out what they mean in financial contexts. How would you: & increase $40 by 5%? b decrease $40 by 10%? The formula for simple interest is |= Rr Use what you leamed in ‘Chapter 6 to change the subject ofthis formula to: ap ber eT KEY WORDS compound interest cost price discount interest interest rate loss principal profit selling price simple i17.1 Earning money When people are employed they are paid for their work. Earnings can be worked out in different ways: ‘+ Wages - pay based on a fixed number of hours worked, usually paid weekly. Extra hours of work are called overtime and these are usually paid at a higher rate ‘+ Salary —-pay based on a fixed yearly amount, usually paid monthly. Overtime may be paid, or workers may be given time off in exchange for extra time spent at work, ‘+ Piece work ~ pay based on the number of items produced, + Commission - pay is based on a percentage of sales made; sometimes a low wage, called a retainer, is paid as well as commission. Emmanuel makes beaded necklaces. He is paid in South African rand at arate cof R24.50 per completed necklace. He is able to make 55 necklaces per week. Calculate his weekly earnings from the sale of necklaces. Answer Earnings = 55x 24.50 Multiply tems produced by the rate paid. = 1347.50 Sanjay works as a sales representative for a company that sells mobile phones in the United Arab Emirates. He is paid a retainer of 800 Dhs (dirhams) per week plus a commission of 4.5% of all sales. a How much would he earn in a week if he made no sales? How much would he ear if he sold four phones at 3299 Dhs each in aweek? Answers 800 Dhs Ihe made no sales, he would earn ‘no commission, only his retainer. 1b Commission = 4.5% of (3299 x 4) Calculate 4.5% of the total sales = 0.045 x 13196 Sanjay made. = 593.82 Dhs Eamings = retainer + commission Add this to the retainer of 800 Dhs. = 800 Dhs + 593.82 Dhs = 1393.82 Dhs 17 Managing money You learnt about the decimal equivalents of percentages in Chapter 5. 553 >> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK Josh's hourly rate of pay is $12.50. He is paid ‘time-and-a-half’ for work after hours and on Saturdays and ‘double-time’ for Sundays and Public Holidays. ‘One week he worked 5.5 hours on Saturday and 3 hours on Sunday. How much overtime pay would he earn? Answer Saturday overtime = 1.5 x $12.50 x 5.5 (time-and-a-half = 1.5 x normal = $103.13, time) Saturday overtime = 2x $12.50 x 3 (double-time = 2 x normal time) = $75 Total overtime = $103.13 + $75.00 = $178.13 Exercise 17.1 1. Awaiter earns $8.25 per hour. How much would she earn for a six-hour shift? 2 How much would a receptionist earn for working a 35-hour week if the rate of pay is $12.25 per hour? : 3 Calculate the hourly rate for each of the following payments: @ $67.50 for five hours b $245.10 for a 38-hour week © $126.23 for 13.5 hours 4 $394.88 for five 65 hour shifts — $71.82 for working five hours and 15 minutes. 4 Truck drivers are paid $15.45 per tonne of wood pulp delivered to a factory in Malaysia. Ifthe drivers deliver 135 tonnes to the factory, how much will they earn? 5 Ateam of workers in a factory is paid $23.25 per pallet of goods produced. If a team of five workers produces 102 pallets in a shift, how ‘much will each person in the team have earned that shift? & An estate agent is paid a retainer of $150 per week plus a commission on sales. The rate of commission is 2.5% on sales up to $150000 and 1.75% ‘on amounts above that. How much would she earn in a week if she sold @ hhouse for $220000 and an apartment for $125 000? ‘Commissions like these are on a sliding scale. So ifthe agent had sales of '$160000, she would be paid 2.5% of $150000 and 1.75% Of the $10000 that's, above this threshold. 554)APPLY YOUR SKILLS CONTINUED 7 Here is the time sheet for five workers in a factory. Calculate each person's income for the week i their standard rate of pay is $8.40 per hour. Worker | Normal hours | Hours overtime at | Hours overtime at worked time-and-a-half double-time 35, 2 25 3 30 15 40 0 20 Deductions from earnings Gross income (earnings he total amount a person earns. Deductions, such as income tax, pension contributions, unemployment and health insurance, and union dues are oftén taken from the gross earnings before the person is paid. The amount that i left over after deductions is called the net income. [Net income = gross income ~ deductions Exercise 17.2 1 For each person shown in the table: ‘2 caloulate their net income 'b calculate their net income as a percentage of their gross income. Give your answers to the nearest whole percent, Employee | Grossweekly | Tax(S) ‘Other earnings ($) deductions ($) BWillis 675.90 235.45 123.45 M Freeman 456.50 (245.20 52.41 J Malkovich 1289.00 527.45, 204.35 H Mirren 908.45 402.12 123.20 M Parker 853.30 399.10 90.56 2. Use the gross weekly earnings of the employees in question 1 to work out: 2 the mean weekly earnings b the median weekly earnings € the range of earnings. 17 Managing money Gross earnings, deductions and net income are normally shown on a payment advice (slip) which is given to each worker when they get paid. In Chapter 5 you learnt how to write ‘one number as a percentage of another number look back if you need to remind yourself. [eee secs SSE tea 555)> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK 3. Study the following two pay advice slips. For each worker, calculate: a the difference between gross (excluding medical and car allowances) and net income the percentage of gross income that each takes home as net income. Poovan's Plastics Pty Ltd PAYMENT ADVICE EMPLOYEE DETAILS SEPTEMBER M Badru Income tax no 09876543214 Employee no: MBN 0987 Bank details Big Bucks Bank Account no. 9876598 EARNINGS | DEDUCTIONS Details ‘Taxable amount _| Payable amount_| Description ‘Amount Salary 12876.98 12876.98 [Unemployment insurance Fund (UIF) | 89.35 Medical 650.50 0.00 First aid course fees Carallowance | 1234.99 0.00 Group life insurance ne? Union membership Ua PAYE aos 3690.62 14 762.47 12876.98 395857 NET PAY: 8922.46 Nehru-Kapoor Network Services | Employee name: _B Singh ID number: 630907000000 Job title: ‘Clerk Hours/Days Earnings Deductions Normal hours 84.00 | Wages 1402.80 | Income tax 118.22 Oftime @ 1.5 hours ‘11.00 | Overtime @ 1.5 275.58 | UIF 18.94 Pension fund 105.21 Loan 474.00 Sick pay 8.42 Year-to-date Taxable 2288140 Benefits 0.00 Tax paid 509.30 ‘Current period TOTAL EARNINGS TOTAL DEDUCTIONS ‘Company contributions 358.12 1678.35 724.79 NET PAY 953.56IVS Types of tax Income tax is a form of direct taxation. Carry out some research of your own, to find out about each type of tax below. who pays this tax, how it is paid, and the rate/s at which itis charged in your country. a Value added tax b General sales tax € Customs and excise duties 4 Capital gains tax e Estate duties Property taxes 9 Airpassenger tax h Corporate tax Information from tax tables In most countries, employers deduct taxes from earnings and pay them over to the tax authority. The tax authority publishes a table of tax rates every year so that employers ‘can work out how much tax to deduct. Here isa portion of a tax table: TAXABLE INCOME (in $) [RATES OF TAX (0-132000 18% of each $1 132001-210000 $23760 + 25% of the amount above $132000 fechsrcanentn 21001-29000 $43260 + 30% of the amount above $210000 people pay a portion 29001-41000 '$67 260 + 35% of the amount above $290000 410001525000 '$109260 + 38% of the amount above $410000 a 525001 and above 5152960 + 40% of the amount above $525000 17 Managing money you study business fF economics you will need a good Understanding of financial mathematics as well asthe ability to apply formulae, draw and interpret ‘graphs and calculate rates of change using percentages and real money amounts. In some Islamic countries, tax is KED EXAMPLE 4 Mr Smit’s taxable income is $153772.00 per annum. How much tax must he pay: a peryear? b permonth? Answers @ To work out the yearly tax, find his tax bracket on the table. His income is in row two because it is between $132001 and $210000. He has to pay $23 760 + 25% of his earnings above $132000. $153772 - $132000 = $21772 25% of $21 772 = $5443 Tax payable = $23 760 + $5443 = $29203 per year b $29203 + 12 = $2433.58. To find the monthly tax, divide the total from part (a) by 12. Per annum means each year or annually. Itis often abbreviated to pa. ss7 >> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK Exercise 17.3 as 1. Use the tax table on the previous page to work out the annual tax payable and the monthly tax deductions for each of the following a $98000 b $120000 © $129000 d $135000 $178.00 2 Use the following tax table to answer the questions that follow. $0-$8375 10% of the amount over $0 '$8375-$34000 | $837.50 plus 15% of the amount over $8375 '$34000-$82400__| $4681.25 plus 25% of the amount over $34000 $82400-$171850_|$16781.25 plus 28% of the amount over $8240 $171 850-8373 650 | $41 827.25 plus 33% of the amount over $171 850 $373 650+ '$108.421.25 plus 35% of the amount over $373 650, ‘a U-Gon has a taxable income of $40.000 for this tax year. He tells his friends that he isin the 25% tax bracket. i Isthis comrect? Does it mean that he pays $10000 in income tax? Explain why or why not. ‘When Li-Gon checks his tax return, he finds that he only has to pay $6181.25 income tax. Show how this amount is calculated by the revenue services. b How much tax would a person earning $250000 pay in this tax year? € Cecelia earned $30.000 in taxable income in this year. Her employer deducted $320.25 income tax per month from her salary. i Will Cecelia have to pay any additional tax at the end of the tax year or will she be due for a tax refund as a result of ‘overpayment? ii How much is the amount due in part ()? 17.2 Borrowing and investing money - You are normally charged larly, when you save or invest money, you are terest by the bank or financial institution in return for allowing them to keep and use your money. ST sse )Simple interest ‘Simple interest isa fixed percentage of the original amount borrowed or invested. In other words, if you borrow $100 at an interest rate of 5% per year, you will be charged $5 interest for every year of the loan. Simple interest involves adding the interest amount to the original amount at regular intervals. The formula used to calculate simple interes is: P= the principal, which is the original amount borrowed or saved R= the interest rate T= the time (in years). In slam, interest (riba) is forbidden so Islamic banks do not charge interest on loans or pay interest on investments. Instead, Islamic banks charge a fee for services which is fixed at the beginning of the transaction (murabahe). For investments, the bank and its clients share any profits or losses incurred over 2 given period in proportion to their investment (musharaka). Many banks in Islamic countries have the responsibility of collecting zakat on behalf of the government. Zakat isa religious tax which Muslims who earn above @ threshold amount (nisab) are obliged to pay. Its usually calculated at about 2.5% of yearly personal wealth. Zakat is intended to help the less prosperous ‘and to uplift communities in need. '$500 is invested at 10% per annum simple interest. How much interest is earned in three years? Answer 10% of $500. The interest rate is 10% per annum. Multiply by the number of years. 17, Managing money> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK yeas route Sam invested $400 at 15% per annum for three years. How much money would the investment be worth at the end of the period? Answer ‘Atthe end of the period he would have P+ I the principal plus the interest paid). 1= PRL ond P = 400, so: 0 (400 x 15 x 3) x 15x Prt = 400+ Sons = 100 + 180 = $580 How long will it take for $250 invested at the rate of 8% per annum simple interest to grow to $310? Answer Amount = principal + interest Interest = amount ~ principal - Interest = $310 ~ $250 = $60 Rate = 8% per annum = 5; x 250 = $20 So the interest per yearis $20. Tota interest (60) + annual interest (20) = 3 So itll take three years for $250 to grow to $310 atthe rate of 8% per annum simple interest. Calculate the rate of simple interest if a principal of $250 grows to $400 in You can manipulate three years. the formula to find any of the values Interest paid = $400 - $250 = $150 ar PRT Change the subject of the formula to pa 1001 me Rto find the rate. RT 1001 = PRT R= pol = 1001, 100 150, Re pr 2503 720 7. iol PR ESE 560 > So, the interest rate = 20%17 Managing money Exercise 17.4 11 Calculate the simple interest earned on each amount. Principal amount ($)_| Interest rate (%) 2 500 1 b 650 07s 1000 1.25 1200 4 e 875 55 f 900 é 9 699 7.25 3.75 years h 1200 8 ‘9 months i 150000 3 18 months 2 Calculate how much would have to be repaid in total for each of the following loans. [| Principal amount ($)_ [Interest rate (%) _|__Time invested a 500 45 2 years b 650 5 years € 1000 é 2 years d 1200 12 18 months e 875 15. 18 months f 900 15 3 years 9 699 20 9 months h 1200 21.25 8 months i 150000 18 1} years 3 $1400 is invested at 4% per annum simple interest. How long will it take for the amount to reach $1624? 4 The simple interest on $600 invested for five years is $210. What isthe rate Percentage per annum? 561 >> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK aanareleieuey 5 Ifyou invest a sum of money at a simple interest rate of 6%, how ong will it take for your original amount to treble? Jessica spends $ of her income from odd jobs on books, on transport and 3 on clothing, She saves the rest 2 If she saves $8 per month, how much is her income each month? How much does she save in a year at a rate of $8 per month? ‘She deposits one year’s savings into an account that pays 8.5% interest for five years. How much interest will she earn? # How much will she have altogether in te end? Ms Mazumder took a personal loan of $8000 over three years. She repaid $325 per month in that period. @ How much did she repay in total? b How much interest did she pay in pounds? € At what rate was simple interest charged over the three years? Hire purchase Many people buy items such as TVs, furniture and carson a system of payment called | in HP agreements, hire purchase (HP). the deposits On HP you pay a part of the price as a deposit and the remainder in a certain number ‘sometimes called the of weekly or monthly instalments. Interest is charged on outstanding balances. It is down-payment. Useful to be able to work out what interest rate is being charged on HP as it is not When interest is always clearly stated. calculated as a proportion of the WORKED EXAMPLE 9 amount owed itis called a flat rate The cash price of @ car is $20000. The hire purchase price is $6000 deposit of interest. Ths is and instalments of $700 per month for two years. How much more than the the same as ‘cash price is the hire purchase price? simple interest. Deposit ‘One instalment = $700 24 instalments = $700 x 24 = $16 800 (once per month over two years is 24 monthly instalments) Total HP price = deposit + 24 instalments = $6000 + $16800 = $22800 The hire purchase price is $2800 more than the cash price.‘Apperson bought a car for $30000 on hire purchase. The deposit was 20% ‘and interest on the outstanding balance for the period of repayment is at 10% per annum. If the balance is to be paid in 12 equal instalments, calculate ‘each instalment. “Answer Cash price = $30000 Deposit of 20% = 2; x 30.000 = $6000 Outstanding balance = $30000 - $6000 = $24000 Interest of 10% = 10; x 24000 = $2400 ‘Amount to be paid by instalments = outstanding balance + interest. = $24000 + $2400 = $26 400 Each instalment = 26400 .. $2200 divide by total numberof instalments) Exercise 17.5 1 Ashopkeeper wants 25% deposit on a bicycle costing $400 and charges 20% interest on the remaining amount. How much is: a thedeposit? b theinterest? ¢ the total cost of the bicycle? 2. Aperson paid 30% deposit on a fridge costing $2500 and the balance in ‘one year with interest of 20% per year. How much did the person actually pay for the fridge? 3 Astudent bought a laptop priced at $1850. She paid 20% deposit and 12 equal monthly instalments. The interest rate is 15% per annum on the outstanding balance. a How much was each monthly instalment? bb What was the total cost of buying the laptop on HP? 4 Allarge flat screen TV cost $999. Josh agreed to pay $100 deposit and 12 monthly payments of $100. ‘2 How much interest will Josh pay? b What rate of interest was he charged? 5 Asecond:-hand car is advertised for $15575 cash or $1600 deposit and 24 monthly payments of $734.70. ‘a What's the difference between the cash price and the HP price? b What annual rate of interest is paid on the HP plan? 17 Managing money> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK Compound interest Simple interest is calculated on the original amount saved or borrowed. It is more ‘common, to earn or to be charged compound interest. With a loan where you are ‘charged compound interest, the interest is added to the amount you owe at regular intervals so the amount you owe increases forthe next period. When you invest money for a fixed period, you can earn compound interest. In this case the interest earned is added to the amount each period and you then earn interest on the amount plus the interest for the next period One way of doing compound interest calculations is to view them as a series of simple interest calculations. This method is shown in Worked example 11. ‘When a virus is out of control in a population of animals, itis often true that the number of cases starts to increase by a similar percentage each day. The mathematics that describes this kind of growth is very similar to ‘compound interest. Both start with an initial value ~ the investment in financial ‘mathematics and the original population in biology - and then a fixed Percentage increase occurs at regular intervals. Priya invested $100 at a rate of 10%, compounded annually. How much is the investment worth after three years? Answer Year Fey OE IOZ 1 6 510 Use the formula for simple interest. P+1=$100+$10= $110 Year2 PRE MO*IOK1 gy Pfor year 2 is $110; Tis one year as you are only finding the interest for year 2. P+ i= 110411 =$121.00 Year3 PRT _ 121 * 10x 1 ep AU IO*1 $12.10 for year 3 $121; Tremains one y P+ I= $133.10 When the principal rate and time ere the seme, compound interest will be higher than simple interest. The exception is when the interest is only calculated for one period (for ‘example one year), in that cate, the compound interest and the simple interest will be the same,17 Managing money This table and graph compare the value of two $100 investments. The firs is invested at 10% simple interest, the second at 10% compound interest. Year (T) Tals | Total aaa] 10% simple interest_| 10% interest compounded annually _ 1 110 110 2 120 121 3 130 133.10 4 140 146.41 5 150 161,05 - 6 160, 177.16 7 170 194.87, 8 180 214.36 9 190 235.79 10 200 259.37 Comparison of growth of $100 under 10% ‘simple and compound intrest Amount) OT Tiaseraow Time in years It is clear that choosing a compound interest rate is to the advantage of the investor. Remember, though, that the same effet is elt with borrowing ~ the outstanding debt increases each period as the interest is compounded.> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK ‘You can also calculate compound interest using a multiplier. The calculations in the third column of the table show how this is done. Year (T) Total $ Working using a multiplier 10% interest compounded a annually 1 10 100 x 1.1= 110 2 121 400% 1.1% 1.1= 121 3 133.10 100 1.1% 1.1.x 1.1 = 133.10 4 146.41 00 (1.1) = 146.41 5 161.05 100 x (1.1)5 = 161.05 6 177.16 100 x (1.1) = 177.16 Wns 7 194.87 4100 x (1.1)? = 194.87 CoN Nene 8 214.36 100 % (1.198 = 214.36 Re cantebot 9 235.79 100 x (1.1)? = 235.79 indices in Chapters Vand 2, 10 259.37 100 x (1.1)! = 259.37 «Add the annual interest rate to 100 to get a percentage increase (subtract for a decrease): 100% + 10% = 110% , 110 ‘Multiply the decimal © Express this asa decimal: 19 = 1,1 iply the Pres ese 100 by itself the same + Multiply the principal by a power of the decimal using the number of years as the | number of times as power. So, for ive years: 100 x (1.1) the number of years. ‘You can also insert values into a formula to calculate the value (V) of an investment Eos fee ous when it is subject to compound intrest. Mead or (1a not 1.13. v=P(1 +75) Pis the amount invested ‘ris the percentage rate of interest nis the number of years of compound interest. You are expected to know this formula, WORKED EXA\ {$1500 is invested at 5% p.a. compound interest. What will the investment be worth after five years? ‘Answer v aP(i es Ingert value in the formula and then use your calculator. = 150011 + 0.0515 = $1914.4217 Managing money ‘A.sum of money is invested at a rate of 5% interest, compounded yearly. After five years it grows to $2500. What was the initial sum invested? ‘Answer veP(1 +755) Substitute values for V, rand n. 2500= A(1 +785)" = Px 1,055 a 1.055 = $1958.82 P. Rearrange to solve for P. Exercise 17.6 1 Calculate the total amount owing on a loan of $8000 after two years at an interest rate of 12%: @ compounded annually b calculated as a flat rate, 2 Calculate the total amount owing on a housing loan of $60000 after ten years if the interest rate is 4% compounded annuélly. 3 Suyin bought an apartment in Manila for (US)S320000 as an investment. If the value of the apartment appreciates (grows) at an average rate of 3.5% per annum, what wil it be worth in five years’ time? 4 How much would you have to repay on a credit card debt of $3500 after two years if the interest rate is: ‘a 19.5% compounded annually? b 19.5% compounded half-yearly (the interest rate will be half of 19.5 for half year)? Look back atthe three methods of working out compound interest. + Which method makes most sense to you? Why? + What are the main advantages of working with the formula? + What are the most important things that you need to remember when you use the compound interest formula? + What can you do to remember the formula and how to use it? 367)CORE & EXTENDED COURSEBOOK INVESTIGATION Personal finances Finances are a major source of stress for many adults Read these statistics for the USA (2019). + Nearly half of adults do not have enough cash to cover a $400 ‘emergency. 38% of households have an average credit card debt of $16 000 with an annual percentage rate (APR) of 16.47% (this is the interest paid on the debt each year) 33% of adults have zero retirement savings. Financial advisors estimate that many adults will need to support themselves for 30 years of life after retirement at 60. Most college students (65%) are graduating and entering th workplace with very high levels of student loan debt. (The mean debt is approximately $3000.) (Source: Data rom Forbes) For each statistic, discuss: a What are the possible cSnsequences of this situation? How could financial literacy and knowledge change the situation? Exponential growth and decay ‘When a quantity increases (grows) in a fixed proportion (normally a percentage) at regular intervals, we say that the growth is exponential. Similarly, when the quantity, decreases (decays) by a fixed percentage over regular periods of time, itis called exponential decay. Increasing exponential functions produce curved graphs that slope steeply up to the right. Decreasing exponential functions produce curved graphs that slope steeply down to the right, Exponential growth and decay can be expressed using formulae. For growth: y= a(1 +1)" For decay: y = a(1 ~ 7" ‘Where ais the original value or principal, ris the rate of change expressed as a decimal and mis the number of time periods. MATHEMATICAL CONNECTIONS ‘When financial investments increase or decrease in value at an exponential rate we talk about appreciation (growth) and depreciation. When the number of individuals in a population increase or decrease exponentially over time, we usualy talk about growth or decay. You will deal with exponential curves in more detail in Chapter 18.17, Managing money NN $100 is invested subject to compound interest ata rate of 8% per annum. Find the value of the investment correct to the nearest cent after a period of 15 years. Answer Value = alt + ri Use the formula for exponential growth and substitute the given = 10011 + 0.08 waked = 100(1.08)'5 = 317.2169114 Value of investment is $317.22 (correct to the nearest cent). The value of a new computer system depreciates by 30% per year. it cost $1200 new, what will it be worth after two years? Answer Value = a(t = rh Use the formula for exponential decay eeronas ‘and substitute the given values. = 1200.7? = 588 Value after two years is $588. Lo Exercise 17.7 4 InDecember 2021 there were approximately 7.874 bil Earth, The annual growth rate was estimated to be 1.04%. Assuming this growth rate continues, estimate the population of the world in December: a 2025 b 2030 < 2050. 2 In 2021 there were an estimated 1800 giant pandas in China. Calculate the likely panda population in 2030 if there is: ‘a anannual growth in the population of 0.5% ban annual decline in the population of 0.5%.> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK 3. A population of microbes in a laboratory doubles every day. At the start of the period, the population is estimated to be 1 000000 microbes. @ Copy and complete this table to show the growth in the population, This is essentially the same as Time (days) ofi[z[3]4]sleé|7]e the compound interest formula. Total numberof [| > | 4 microbes (millions) b_Drawa graph to show growth in the population over 8 days. ‘¢ Use the graph to determine the microbe population after: i 25 days ii 3.6 days. d Use the graph to determine how long it will take the microbe population to reach 20 milion. 4 This graph shows how a r over time. \ctive substance loses its radioactivity ” 100: 5 10 15 7 Time (minutes) The half life of the substance is how long it takes to decay to halt its original mass. What is the half life of this substance? bb What mass of the substance is left after 20 minutes? 5. Ms Singh owns a small business. She borrows $18 500 from the bank to finance some new equipment. She repays the loan in full after two years. Ifthe bank charged her compound interest at the rate of 21% per annum, how much did she repay after two years? anaes (eseiaiile ieh een) sm)EEK 6 The value of a cardeprec es each year by 8%. A new small car is priced at $11 000. How much wi_ his car be worth in 2 1 year? b 3 vans? © Byears? 4 nyears? 7 Nils invests his savings in a account that pays 6% interest compounded half yearly fhe puts $230¢_ ito his account and leaves it there for two years, how much money wil. .e have at the end of the period? 8 The total population of a developed country is decreasing at a rate of 0.6% per year. In 2022, the population of the country was 7.4 million people. Whats the population likely to be in 2028 if it decreases at the same rate? b How long wilt take for the population to drop below 7 ion people? 9 Acolony of bacteria grows by 5% every hour. How long does it take for the colony to double in size? as Is it worth it? Sal says he would never buy a brand new car because it would lose value as soon as he drove it out of the dealership. a Salis correct about cars depreciating. Do your own research to find out how ‘much new cars depreciate in the first year and then every year after that. b A motoring magazine says that most cars lose between 15-30% of their value annually. This is quite a large range. What factors might affect the rate at which a new car depreciates? © Once you have driven 150000km, your car is worth approximately 30% of its initial price. What would a car that cost $42000 when new be worth at this stage? d Given what you have found out, what advice would you give a young person about to buy their first car? 17.3 Buying and selling ‘When people trade, they buy goods, mark them up (decide on a price) and then sell them. “The price the trader pays for goods is called the cost price, ‘The price the goods are sold at is called the selling price. If the selling price is higher than the cost price, the goods are sold at a profit. If the selling price is lower than the cost price, the goods are sold ata loss. Profit = selling price ~ cost price Loss = cost price ~ selling price 17 Managing money | esesteecnmerneer a sea ar) =)> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK Calculating the selling price, cost price and mark up People who sell goods have to decide how much they have to decide by how much they will mark up Cost price + % mark up = selling price “The cost price is always 100% If you add 10% mark up, the selling price will be 110%6. profit they want to make. In other words, the cost price to make the selling price. ‘Ata market, a trader makes a profit of $1.08 on an item selling for $6.48. ‘What is his percentage profit? Answer Cost price = $6.48 - $1.08 = $5.40 Subtract the profit from the selling price to find the cost price of the item. profit Percentage prof ~ = gg * 100 1.08, 5.49 * 100 = 20% Find the selling price of an article bought for $400 and sold at a loss of 10%. Answer Cost price = $400 Loss = 10% of $400 10 Bx 400 = $40 Selling price = cost price — loss = $400 - $40 = $360 s74>17, Managing money WORKED EXAMPLE 20 A trader sells her product for $39. her mark up is 30%, what is the cost price of the product? Answer Cost price + mark up = selling price Selling price = 130% of the cost price So, $39 = 130% x selling price To find 100%: 22 x 100 $30 Divide by 130 to find 1% and then 130 multiply by 100 to find 100% (which The cost price is $30. is the cost price). Exercise 17.9 1. Find the price that each of each of the following items sold for: 2 cost price $130, profit 20% b cost price $320, profit 25% © cost price $399, loss 15% costco 347, 2 Find the selling price of an article that was bought for $750 and sold at a profit of 12%, 3 Calculate the selling price of a car bought for $3000 and sold ata profit of 7.5%, 4. Hakim bought a computer for $500. Two years later he sold it at a loss of 28%. ‘What was his selling price? An article costing $240 is sold at a loss of 8%. Find the selling price. Kwame makes jewellery and sells it to her friends. Her costs to make ten rings are $377, She wants to sell them and make a 15% profit. What should she charge? 7 Tim sells burgers for $6.50 and makes a profit of $1.43 on each one. What is his percentage profit on cost price? APPLY YOUR SKILLS ime an item is sold on. The original cost of an item is $112.00. The item is sold to a wholesaler, who sels it on ‘The retailer sells it to the public 2 How much tax will the item have incurred? b Express the tax as a percentage of the original price.> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK Discount If items are not being sold as quickly as a shop would like or if they want to clear stock as new fashions come out, then goods may be sold at a discount Discount can be treated inthe sume way as perecinage change (loss) as long as you remember that the percentage change is always calculated as a percentage of the original amount. Menicuanuntrs) During a sale, a shop offers a discount of 15% on a pair of jeans originally priced at $75. Whatis the sale price? Answer Discount ~ 15% of$75 15, “F00 7s = $11.25 Saleprice = original price ~ discount = $75 - 11.25 = $63.75 You can also work out the price by considering the sale price as a percentage of 100%. 100 - 15 = 85, so the sale price is 85% of $75: 85, 700 * 75 $63.75 Exercise 17.10 1. Copy and complete the following table. (Original price ($) | % discount | Savings(S) | Sale price (S) 89.99 5 125.99 10 599.00 12 22.50 75 65.80 25 10000.00 23 57% >17. Managing money 2 Calculate the percentage discount given on the following sales. Round your answer to the nearest whole per cent. Original price (S) | Sale price(s) | _% discount 89.99 79.99 125.99 120.00 599.00 ‘450.00 22.50 18.50 65.80 58.99 10.000.00 9500.00 ‘Choose emojis to reflect your thinking atthe start of this chapter and your [progress as you worked through the topics in this chapter. Explain why you chose each emoji. People in employment earn money for the work they do. ‘or as.a fee per item produced (piece work). “Gross earnings refers to how much you earn before deductions. Gross earnings ~ deductions = net earnings Net earnings are what you actually receive as payment. ‘Companies are obliged by law to deduct tax and certain other amounts from earnings ‘Simple interest i calculated per time period asa fixed percentage of the original amount (the principal). ‘The formula or fing simple interes = 282, ‘money can be paid as wages, salaries, commission ‘Compound interest is interest added to the original amount at set intervals. This increases the principal and | further interest is compounded, Most interest in real life situations is compounded. = P( Hire purchase (HP) is a method of buying goods on credit flat rate of interest added to the original price. ‘When goods are sold at a profit they are sold for more than they cost. When they are sold ata loss they are sold for less than they cost. The original price is called the cost price. The price they are sod for is called the selling price. If goods are sold ata profit, selling price ~ cost price = profit. If they are sold ata loss, cost price ~ selling price = loss. ‘A discount iva reduction in the usual price of an item. A discount of 15% means you pay 15% less than the usual price. ‘The formula for calculating compound interest is instalments which include a 87>> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK use given information to solve problems related to wages, salaries, commission and piece work read information trom tables and charts to work out deductions and tax rates caaleulate gross and net earnings given the relevant information use the formula to calculate simple interest ‘manipulate the simple interest formula to calculate the principal amount, rate of interest and time period of a debt or investment solve problems related to HP payments and amounts i calculate compound interest over a given time period and solve problems related to compound interest f ue exponential growth and deeay in felation to finance and population changes calculate the selling price, percentage profit or loss and actual mark calculate the cost price using given rates and prices ‘work out the actual price of a discounted item and calculate the percentage discount given the original and the new price. Practice questions 1. Kolo paid $10.48 per hour fora standard 36-hour week. He is paid "time-andea- hal?’ for all overtime worked. Calculate: 4 his gross weekly carnngsif he works 43 hours overtime 8 b the hours overtime worked if he earns $420.75 for the week. 8 2 Ahmed bought a book for $15. He sold it to Barbara, making a 20% loss. '@ Calculate how much Barbara paid for it. Bb) ‘Barbara later sold the book to Luvuyo, She made a 20% profit. Caleulate how much Luvuyo paid for it. 8 3 Last year, Salma’s wages were $94 per week. Her wages are now $102 per week. Calculate the percentage increase. B 4 Yasmin is making iced lollies to sell outside her house on a hot day. She spends $25.55 on the ingredients. Yasmin uses all of the ingredients to sell 35 lollies at $1.25 each, Calculate: the total profit made a b the percentage profit. RQ (Me m)17 Managing money EEE 10 " 12 Calculate the simple interest on $160 invested at 7% per year for three years. [2] ‘Senor Vasquez invests $500 in a Government Bond, at 9% compound interest per year, Calculate the value of the Bond after three years. o) ‘Simon's salary has increased by 6% p.a. over the past three years. [tis now $35730.40 pa. 2 Calculate Simon's salary per year three years ago. o Find Simon's gross monthly salary atthe present rate. a The deductions each month amount to 22.5% of the gross salary. Calculate Simon's net pay per month. a ‘Annew car cost $14875. Three years later, the insurance company valued it at ‘310700. Caleulate the percentage reduction in value over the three years. [3] Exercise equipment advertised at $2200 is reduced in a sale to $1950. Calculate the percentage discount. 8 ‘A motor dealer tries to sella car at 35% above the $18 000 which he paid to a supplier. 2 Calculate the dealer's selfing price. 8 b Calculate the percentage reduction the dealer can now apply before making a loss. 8 “The value of an asset, currently priced at $100 000, is expected to increase by 20% per year ‘a Find its value in ten years’ time. 8) b-After how many years will it be worth more than $1 million? 8 ‘The temperature of a cup of water is decreasing. The temperature, T*C, is recorded £ minutes after the water is left to cool. The results are shown in the table. (minutes) 274 [6 [|e [wo [iz [4 Teo), 9% | 806 | 67.7 | 56.9 | 47.2 | 40.1 | 337 ‘a By calculating the percentage change in temperature from one calculation to the next, show that this is exponential decay. Bl b Plot graph to show the data in the table. “4 ‘¢ Estimate the time in minutes after the water was eft to cool that the temperature reached 60°C. eB o>> CAMBRIDGE IGCSE™ MATHEMATICS: CORE & EXTENDED COURSEBOOK see Find any errors in your work. For each one, decide what type of error you made: + careless (writing the wrong number, not following instructions, forgetting to give reasons, not showing steps in calculation) ‘+ computational (miscalculating a value using the basic operations) ‘+ precision (mistakes with signs, decimal places, forgetting brackets or order of operations, missing units, incorrect notation) mathematical ot wing properties or res not completing al the steps needed to solve the problem). ‘Write down three suggestions to help yourself avoid these errors in the future.