COMMERCIAL ARITHMETIC

TOPICS

1. Commercial Arithmetic (simple interest, profit and loss, discount, commission, VAT, hire purchase)
2. Exchange Rate

Simple Interest

If you save your money with a bank, you will be paid some extra money called interest. On the other hand, if you borrow money from a bank you pay interest to the bank. The original money invested or borrowed is known as the principal or capital. The interest rate is often given in percentages and quoted as a rate per annum. For example, a \(5\%\) rate means that the interest paid or received every year is \(5\%\) of the principal.

Example 1:

If you save \(N20000\), then at the end of the year you will have your original money (principal) plus the interest

\(N20000 + 5\%\) of \(N20000 = N20000 + N1000\)

\(= N21000\)

The interest is \(N1000\) and the amount you now have in your saving account is \(N21000\)

Note that (Amount \(=\) Principal \(+\) Interest)

Example 2:

Mr.