Percentages in Finance
Maths: Edexcel IGCSE Higher, topic 1.6.3
Financial Terms
Profit and loss
- Profit means ‘money made - costs’ and is a percentage increase.
- If ‘money made - costs’ is negative then it is called loss and is a percentage decrease.
Interest
- Interest means ‘new price - old price’ and is a percentage increase.
- The rate of interest is the percentage increase.
Discount
- Discount means ‘original price - discounted price’ and is a percentage decrease.
Original Value After a Percentage Change
A jacket is for sale at £59.50 after a 15% discount. What was the original price?
We know the new price
Write equation
- 15% discount so the old price must be multiplied by 1 - 0.15 = 0.85 to get the new price.
Sub in the new price
Rearrange
Solve on a calculator
Simple Interest
Simple interest means that a percentage of the starting amount is paid at regular intervals.
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Types of simple interest
- Annual interest is paid once per year and can be described as an amount being paid ‘per annum’.
- Monthly interest is paid once per month.
Calculating simple interest
- The amount paid from 9% simple interest per annum on a £200 saving over 3 years would be:
- 3 × 0.09 × £200 = £54.
Test yourself on Percentages in Finance
Which of the following is the calculation for interest?
Which of the following is a percentage increase?
If a company makes £10,000 in a year and has costs of £11,000, what do we call the difference?
If a company makes £10,000 in a year and has costs of £9,000, what do we call the difference?
What type of interest is it when a percentage of the starting amount is paid at regular intervals?