1. Business Math

2. Calculating Interest Rates
SCREE LEA

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

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

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

6. Scholarships Shell Oil Company Technical Scholarship Program
$2,500-$5,000
Engineering/Math

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

8. Interest Payments
Borrowing money to start your business

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

10. 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

11. 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 = $9,500/yr
$9,500 x 5 = $47,500

12. Confiscated Example
Karate vs Rich Lady

13. 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

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

15. 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

16. 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

17. 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.

18. 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
$ = $27.00

19. 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
$ = $27.00

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

21. 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

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

23. Discounts & Due Dates

24. 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

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

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

27. 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

28. 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