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Spending
money
3
syllabus ref
efer
erence
ence
Strand:
Financial mathematics
Core topic:
Managing money 1
• Spending money
In this cha
chapter
pter
3A Discount
3B Profit and loss
3C Budgeting
3D Cost of services
3E Credit cards
3F The exchange rate
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66 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
Introduction
Karla is now earning better money. Her first fort-
nightly pay of $985 was deposited into her bank
account on Friday, 24 January. Less than two weeks
later her account balance was $28. Karla could not
believe that she had spent over $950. Where did it
all go? She sat down and wrote out all the things
she had spent money on, and how she had parted
with it. Much had been spent at retail stores buying
groceries, clothes, books and CDs. She had paid for
her purchases in cash. Perhaps,
she thought, she should get a
credit card, but she found that
there were service charges for
credit cards, as well as interest.
Perhaps she could buy more
when there were discounts. She
wondered whether she should
have a budget. Clearly, she
needed a better understanding of
the details of handling her hard-
earned money, or it was just
going to leak away.
Discounts, credit card charges, the costs of ser-
vices and budgeting are topics that affect us all and,
like Karla, we owe it to ourselves to understand how these work so that we can make
the best use of our money.
These and other related topics will be discussed in the following sections of this
chapter.
5 Fifty-five litres of
detergent cost $66. What
will sixty litres of
detergent cost?
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WORKED Example 1
A vacuum cleaner is discounted from $180
to $126. Find the percentage discount.
THINK WRITE
1 Find the discount in dollars. Discount = Original price − Sale price
= $180 − $126
= $54
Discount
2 Write the formula for the percentage % discount = --------------------------------- × 100%
discount. Original price
54
3 Substitute the values of the discount % discount = --------- × 100%
and the original price into the formula 180
and evaluate. = 30%
4 Write the answer. The vacuum cleaner was discounted by 30%.
When the original price and the percentage discount are known, there are two methods
of finding the sale price.
Method 1
1. Find the discount in dollars (by finding the percentage of the original price).
2. Subtract the discount from the original price.
Sale price = Original price − percentage of the original price
Method 2
1. Treat the original price as 100%.
2. The sale price is then represented by (100% − % discount).
Sale price = (100% − percentage discount) of the original price
The choice of method depends on the problem. If the problem requires you to find
the discount in dollars and hence the sale price, use method 1. If the actual amount of a
discount is not needed, use method 2 (which gives the sale price straight away).
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68 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
WORKED Example 2
Find the sale price on a $42 kettle after a 12.5% discount has been applied.
THINK WRITE
Method 1
1 Find the discount in dollars. Discount = 12.5% of $42
12.5
= ---------- × 42
100
= $5.25
2 Find the sale price by subtracting the Sale price = Original price − Discount
discount amount from the original = $42 − $5.25
price. = $36.75
Method 2
1 Express the sale price as a percentage Original price = 100%, Discount = 12.5%
of the original price. Sale price = 100% − 12.5%
= 87.5%
2 Find the sale price in dollars. Sale price = 87.5% of the original price
87.5
= ---------- × 42
100
= $36.75
Sometimes we are given a discount and the sale price and need to find the original
price, as shown in the following example.
WORKED Example 3
After a 20% discount, a kilogram of scotch fillet steak costs $16.00. Find the original price
and the amount of money saved per kilogram.
THINK WRITE
1 Identify the unknown. Let the original price be x.
2 Express the sale price as a percentage Original price = 100%, Discount = 20%
of the original price in terms of x. Sale price = Original price − Discount
= 100% − 20%
= 80%
So sale price = 0.8x
3 Form an equation by equating an 0.8x = $16.00
expression for the sale price with the x = $16.00 ÷ 0.8
sale price in dollars and solve for x. = $20.00
4 Find the amount saved. Amount saved = Original price − Sale price
= $20.00 − $16.00
= $4.00
5 Write the answer. The price of 1 kg of scotch fillet steak before
the sale was $20.00. The amount of money
saved per 1 kg is $4.00.
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3A Discount
WORKED 1 Find the percentage discount for each of the following items.
Example
1 a A dress, discounted from $80 to $60
b A watch, discounted from $365 to $185
eBook plus c A clock, discounted from $47 to $34
d A lamp, discounted from $59 to $42
Digital doc:
SkillSHEET 3.4
e A coffee table, discounted from $270 to $239
Expressing one f A set of kitchen knives, discounted from $49 to $36
quantity as a
percentage of another g A cordless phone, discounted from $119 to $89
h A tablecloth, discounted from $25 to $18
i A bookshelf, discounted from $70 to $63
j A scientific calculator, discounted from $30 to $24
2 Below are some items from a Home Shopper direct marketing brochure.
a b
c d
Next to each item is the retail price and the Home Shopper’s price. For each item,
find:
i the discount amount in dollars when the goods are purchased direct
ii the percentage discount.
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70 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
b c
CO
t
ii the percentage discount.
LO
Delight Condtio
UR
Delight $
& ner
399 957
Bright
Shampoo
545
$ Save $ Save
200ml 1.00 46c
Save up to 99c
Hair Colour Varieties Hand cream
c Mirror 40 30%
8 multiple choice
The ring that will cost $78 after a discount of 33 1--- % is:
3
A a friendship ring, normally $104
B a mother of pearl ring, normally $130
C a sapphire ring, normally $260
D a Russian band ring, normally $117
E a ruby ring, normally $234
WORKED 9 After a discount of 15%, a jar of Kenya Gold coffee costs $10.15. Find:
Example
3
a the original price
b the amount saved on each jar.
10 A Byer shareholder has a special card which allows a 5% discount on any purchase
made at Byer’s supermarkets (excluding items that are already on sale).
a What is the total cost of goods purchased by the shareholder who, after producing
the card, pays $166.25. (There are no sale items included.)
b What is the amount saved?
11 Before the beginning of a winter sale, a shop assistant was asked to reduce the prices
of all items in the store by 12.5%. She calculated the new prices and attached new tags
to the goods. At the end of the sale she was asked to put the old prices back. Unfortu-
nately, the shop assistant had thrown the old tags away as she did not think she would
need them again. She decided to add 12.5% to the sale prices. If the shop assistant
proceeds in this manner, will she get back to the original prices? Explain your answer.
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72 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
WORKED Example 4
Find the percentage profit on an item that was bought for $30 and later sold for $38.
THINK WRITE
1 Identify the cost price (CP) and the selling CP = $30; SP = $38
price (SP).
2 Write the formula for the profit. Profit = SP − CP
(SP > CP)
3 Substitute the values of CP and SP into the Profit = $38 − $30
formula and evaluate. = $8
Profit
4 Write the formula for the percentage profit. Percentage profit = ------------- × 100%
CP
8
5 Substitute the values of profit and CP into the Percentage profit = ------ × 100%
formula and evaluate. 30
= 26.67%
WORKED Example 5
Find the percentage loss if an item was bought for $220 and sold later for $180.
THINK WRITE
1 Identify the cost price (CP) and the selling CP = $220; SP = $180
price (SP).
2 Write the formula for the loss. Loss = CP − SP
(SP < CP)
3 Substitute the values of CP and SP into the Loss = $220 − $180
formula and evaluate. = $40
Loss
4 Write the formula for the percentage loss. Percentage loss = ----------- × 100%
CP
40
5 Substitute the values of the loss and CP into = --------- × 100%
the formula and evaluate. 220
= 18.18%
When the cost price and percentage profit/loss are known and we need to find the
selling price, there are two methods that can be used (see the following example).
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Method 2
1 Treating the cost price as 100%, CP = 100%; profit = 20%
express the selling price as a percentage SP = (100 + 20)%
of the CP. = 120% of CP
2 Substitute the values of the CP and SP = 120% of $22
substitute. 120
= --------- × 22
100
= $26.40
Finally, there are cases when the selling price and the percentage profit (or loss) are
known and we need to find the CP. The next example shows how to deal with such
problems.
WORKED Example 7
A retailer sells a TV set for $732, making herself a profit of 22%. Find the wholesale price
of the TV set.
THINK WRITE
1 Identify the unknown. Let the CP be x.
2 Express the SP as a percentage of the CP CP = 100%
in terms of x. Profit = 22%
SP = (100 + 22)% = 122%
So SP = 122% of CP
= 1.22 × CP
= 1.22x
3 Form an equation by making the expression 1.22x = 732
for the selling price equal to $732.
4 Solve for x. x = 732 ÷ 1.22
x = 600
5 Write the answer. The wholesale price of the TV set was $600.
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74 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
remember
remember
1. Profit = Selling price (SP) − cost price (CP)
Profit
2. Percentage profit = ------------- × 100%
CP
3. Loss = CP − SP
Loss
4. Percentage loss = ----------- × 100%
CP
76 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
1
1 A tennis racquet is discounted from $240 to $180. Calculate the percentage discount.
2 A pair of running shoes is advertised at $140. What does a customer pay if a 25%
discount is applied.
3 After bargaining with the salesperson, Sue has the price of a computer reduced from
$1200 to $1050. Express this reduction as a percentage of the original price.
4 A carton of drinks is marked at $28. If all stock is reduced by 15%, calculate the cost
of the drinks.
5 A shopkeeper buys a 12-kg case of tomatoes for $20. If he sells all of the tomatoes for
$2.50 per kg, calculate the percentage profit.
6 Karen pays $12 each for fake name brand watches. When she sells them she wants to
make an 80% profit. What price should she sell these watches for?
7 Michelle buys and sells second-hand skateboards. She makes a 40% profit on each
sale. If she sells a skateboard for $56, what did she originally pay for the skateboard?
8 John paid $50 for a dozen trophies. If he sells them for $14 each, calculate the
percentage profit.
9 P-Mart make 30% on all their sales. If they pay $600 for a dining suite, what price
should they sell it for to make the desired profit?
10 Hans sells a restaurant for $198 000. He calculates that he has made a 10% profit on
the buying price. What did he pay for the restaurant originally?
t i gat
es Dealing in diaries
io
ion v
in
n inv
t i gat
es Just before Christmas a shopkeeper purchased a box of 50 diaries for $120.
1 Find the cost price of each diary.
2 If he sold 30 diaries before Christmas at $5 each, calculate the profit that he
would make.
3 Find the percentage profit.
4 If, after Christmas, the shopkeeper sold the remaining diaries for $1 each, find
the percentage loss on each of these diaries.
5 After the shopkeeper had sold the leftover diaries (at $1 each), find the total
profit that he made.
6 Express the total profit as a percentage of the cost price.
7 Find the profit that the shopkeeper could have made had he managed to sell all
of the diaries before Christmas (at $5 each).
8 What was his loss (in dollars) by not selling all of his diaries before Christmas?
9 Express the loss as a percentage of the potential profit.
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78 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
WORKED Example 8
Karla’s monthly budget.
Income Expenses
Salary after tax $2050 Rent of 1-bedroom flat $520
Dividends from shares $23 Electricity $70
Phone $40
Health insurance $30
House contents insurance $10
Car registration $27
Car insurance $42
Petrol $35
Food $110
Clothing $150
Entertainment $150
Sport $100
Miscellaneous $40
Total: $2073 Total: $1324
THINK WRITE
a Identify the fixed expenses and add them a Fixed expenses:
up. Rent $520
Health insurance $30
House contents insurance $10
Car registration $27
Car insurance $42
Total = 520 + 30 + 10 + 27 + 42 = $629
b Calculate the total of variable expenses b Total of variable expenses
by subtracting fixed expenses from the = total expenses − total of fixed expenses
total. = 1324 − 629
= $695
c Calculate monthly savings by c Monthly savings
subtracting expenses from the income. = monthly income − monthly expenses
= 2073 − 1324
= $749
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THINK WRITE
d Calculate the number of months required d To save $3500 at the rate of $749 per month:
to save for the holiday. 3500 ÷ 749 = 4.67 or approximately
5 months
e 1 Identify the number of months e To save one month sooner than
within which the money is to be calculated in part d means 5 − 1 = 4
saved. months
2 Calculate the amount required to be Monthly savings needed = 3500 ÷ 4
saved monthly. Monthly savings needed = $875
3 Calculate the extra amount which is Extra monthly savings needed
to be saved per month. = $875 − $749
= $126
4 Suggest cuts in variable expenses. Cuts could be made as follows:
Phone bills: cut from $40 to $30
gives $10
Clothing: cut from $150 to $80 gives
$70
Entertainment: cut from $150 to
$104 gives $46
This gives 10 + 70 + 46 = $126, which is
the required extra saving.
t i gat
es The Australian budget
io
ion v
in
n inv
t i gat
es Budgets can be prepared for individuals, families and small organisations. However,
there is also a budget for each country. Investigate the last Australian budget.
1 Who prepares the budget?
2 What is the budget’s period?
3 What is/are the source/s of income?
4 What are the items in the expenditure section (that is, where does the money go)?
5 Was there any deficit in the last budget?
remember
remember
1. A budget is a table that contains an estimate of income and expenditure.
2. The two major categories of expenses are fixed and variable expenses.
3. Both budget and expenses can be calculated weekly, monthly, quarterly or
yearly. Depending on the budget, all expenses should be recalculated for the
same time interval.
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80 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
3C Budgeting
WORKED 1 The table below shows the monthly budget for a couple with one school-aged child.
Example
8
Income Expenses
2 List as many variable expenses as you can that are missing from the budget in question 1.
3 A university student who lives with her parents has the following expenses: she pays
her parents $70 per week for board and food; a monthly ticket for public transport costs
her $80; she spends on average $45 a month on books and stationery; her single health
insurance premium is $68.55 a month; entertainment and snacks cost her about $90 a
month; the university enrolment fee takes $900 a year and she also needs clothes and
accessories which cost approximately $80 per month.
a Prepare a monthly budget if the student’s income consists of Austudy (which is
$355.40 per fortnight) plus birthday and Christmas presents ($250 a year).
b Calculate the amount of money that she can save per month.
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5 The student in question 3 is offered a part-time job in the university cafeteria, where
she will be able to earn $116 per week.
a Calculate her total monthly savings if she accepts this position.
b Our student is considering moving in with her friends. By doing so she will save the
$70 per week that she is paying to her parents in board and food, but she will have
to pay $100 per month for her share of the rent. She will also have to contribute
$45 per month for electricity and phone bills and $60 per week for food. With the
new job can the student afford to move out of home? Support your answer with
appropriate calculations.
6 Prepare your personal monthly budget (or your family budget if you do not have any
income). Are there any possibilities for cutting some of the expenses?
7 Members of a welfare group are discussing the budget for the next year. Their income
will come from three sources: a government subsidy of $4200; annual membership fees
of $25 per person and profits from the various events. They estimate that the auction
will bring in $400, profits from the food stalls (at the picnic and the three local fairs)
will be $230 each time and profits from the two concerts will yield about $1800 each.
They also estimate that about 650 people will renew their membership. The money will
be spent as follows: rent of the premises at $500 a month; publishing the newsletter
$240 per quarter; expenses of $180 associated with each Sunday School for 40 weeks a
year; electricity and phone bills at $220 a month; public liability and contents insur-
ance, $1860 per year. Advertising will cost $30 per month and stationery $250 per year.
After buying a new computer (for about $3500) and allowing $2000 for unexpected
eBook plus expenses, the rest of the money will be spent on charity.
a Prepare a yearly budget for the welfare group.
Digital doc: b Calculate the amount of money left to use for charity.
WorkSHEET 3.1
c Express your answer to b as a percentage of the annual income.
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82 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
t i gat
es The club’s end-of-season break-up
io
ion v
in
n inv
t i gat
es Work in groups of three.
Karla is a member of the committee of her local netball
club and she has been asked to organise food and drinks
for the club’s breakup. It is to be a BBQ held at the
club grounds. Everyone who attends will be asked
to pay a certain amount and the club will supply
food and drinks.
Last year about 100 people attended and the
number is expected to be the same this year.
Your task:
1 Help Karla plan a menu, indicating what
each person could be expected to eat and
drink.
2 Prepare a shopping list with
definite, specific quantities and
prices.
3 Suggest to the committee a
cost per person that should cover
expenses plus 10%.
Cost of services
An important part of being able to prepare a personal budget is to understand how
various organisations charge for their services.
The following questions are designed to help you investigate the cost of services,
such as electricity and gas charges, water and council rates and the costs of using a
telephone.
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3D Cost of services
Study the electricity bill shown below and answer the following questions.
84 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
You will notice that the amount of gas consumed is given in megajoules (MJ) and is
calculated indirectly from the meter readings. A correction factor and a heating value
are used to convert the meter readings to megajoules.
a What is the difference between the meter readings?
b Explain how the consumption, in megajoules, is calculated from the difference
between meter readings.
c What is the supply charge for 90 days? What is this as a rate per day?
d What is the cost of gas as a rate in cents per megajoule?
e Using the cost-of-gas rate given in the bill, calculate the cost of 6000 MJ
(excluding GST and other charges).
f How is the third party charge of $5.67 calculated?
6 In the October quarter last year, the
average daily consumption of gas
was 50 MJ. If there were 92 days in
this quarter, calculate the:
a total gas consumption for the
quarter
b total cost of this gas (excluding
GST and other charges)
c supply charge and third party
charge
d total gas charges, including the
supply charge, the third party
charge and GST.
7 In the January quarter last year
the average daily consumption of
gas was 42 MJ. If there were 91
days in this quarter, determine
the total gas charges for this
quarter, including the supply
charge, the third party charge
and GST.
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86 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
Questions 8 to 11 refer to the Brisbane City Council Rates notice shown below.
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88 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
90 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
Credit cards
Karla has decided that it is time for her to obtain a credit card.
A credit card will allow her to purchase goods and services without paying for them
on the spot. They can also be used for obtaining cash advances, paying bills and
making purchases over the phone or on the Internet.
Common credit cards used in Australia include MasterCard, Visa, Diners Club and
American Express.
When applying for a MasterCard or Visa, a customer is given a choice of having
either an interest-free period (usually up to 55 days) for a small annual fee (around
$30), or no fee payable and no interest-free period (with the interest rate usually being
lower for the second option). Each cardholder is offered a certain limit of credit.
A monthly statement showing all transactions for the previous month is issued for
every cardholder. Upon receiving a monthly statement, a customer may decide to pay
the bank in full by the due date indicated on the statement and hence not have to pay
any interest with an interest-free period card. Alternatively, the customer may choose to
make the minimum payment only. In this case interest will be charged on the unpaid
balance. The minimum payment is usually a certain percentage of the unpaid balance
or a certain fixed amount — whichever is larger. Variations in interest rates occur from
time to time and cardholders are notified of these changes in advance.
Annual rates
As of 1 May 2008, the annual
percentage rates for the
Commonwealth Bank’s
standard credit cards have been:
• 19.64% for MasterCard and
Visa (up to 55 interest-free
days with an annual fee)
• 18.24% for MasterCard and
Visa (no interest-free days with
no annual fee).
Minimum payments
For the examples and exercises in this
chapter, minimum credit card account
payments are calculated as follows.
Balance less than $25
If the closing balance of the statement
is less than $25, then the minimum
payment is the same as the closing
balance.
Balance more than $25
Where the closing balance is greater than $25, the payment
to be made is the greater of:
1. $25, or
2. 2% of the closing balance (rounded down to the nearest dollar).
This means that the payment is 2% of the closing balance if the balance exceeds $1250.
Note: If the closing balance is greater than the credit limit of the card, then the
minimum payment must also include the excess of the balance over the credit limit.
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For the ‘no interest-free period’ option the interest charged on the outstanding amount
of each purchase and cash advance is charged from the date of the purchase (or cash
advance) and until the purchase (or cash advance) is repaid in full. The same is true for
cash advances, obtained with ‘55 days interest-free period’ cards. An extract from the
Commonwealth Bank brochure explains the procedure.
No interest-free days cards • then we multiply the average by the daily percentage
We charge interest on the outstanding amount of each rate applying to your card account; and
purchase, permitted transaction and cash advance • finally, we multiply the result we get from the prior step
from the date the purchase, permitted transaction or by the number of days in the statement period.
cash advance is debited to your card account until you The result we get from the last step is the amount of
repay the purchase, permitted transaction or cash interest we charge to your card account in the
advance. statement period.
We calculate interest for a statement period in three When do we debit interest?
steps: We debit your card account on the last day of each
• first, we average the outstanding balances over the statement period with the interest we calculated during
statement period; that statement period up to and including that last day.
92 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
WORKED Example 10
For a ‘no interest-free period’ credit card, calculate the interest charged on the average
outstanding daily balance of $220 with the interest rate of 18.24% p.a. if the statement
covers a 30-day period.
THINK WRITE
annual interest rate
1 Calculate the daily percentage Daily interest rate = ---------------------------------------------
rate. 365
18.24
= -------------
365
= 0.04997%
0.04997
2 Calculate the daily interest Interest = 220 × -------------------
charged on the outstanding 100
= 0.10993
balance.
3 Find the interest charged over the Total interest for 30 days
30-day period and round to the = 0.10993 × 30
nearest cent. = 3.2979
= $3.30 (to the nearest cent)
For ‘up to 55 days interest free’ credit cards, no interest is charged if the amount is paid
in full by the due date, which is usually 25 days from the date of the statement. If the
closing balance is not repaid in full by the due date, the cardholder then temporarily loses
the interest-free option. The interest is usually charged on the outstanding balance from
the day of the first purchase (that is, it is backdated!) until the outstanding balance is paid
in full. Any purchases made before the balance is fully repaid are also added to the total.
Thus, if the balance is not paid in full by the due date, the card is effectively a ‘no interest-
free period’ card, but with the higher interest rate being applied.
WORKED Example 11
For a ‘55 days interest free’ credit card, calculate the amount of interest charged on an
outstanding balance of $450 which was repaid 10 days after the due date, given that the
first purchase was made on the first day of the 30-day statement period and the annual
percentage interest rate was 16.90%. (Assume that no other purchases were made after the
end of the statement.)
THINK WRITE
1 Calculate the length of time for The number of days from the first purchase to the last
which the interest is charged, day of statement = 30 (as the purchase was made on
keeping in mind that it is charged the first day and the period covers 30 days).
from the date of the first purchase The number of days from the date of the statement to
and until the balance was repaid. the due date = 25.
The number of days from the due date to the date of
actual payment = 10.
Total days = 30 + 25 + 10 = 65
5_61_08071_MQA11Qld2E Ch03 Page 93 Monday, July 14, 2008 3:01 PM
WORKED Example 12
Kerry has a credit card with an interest-free period, and interest is then charged on the
outstanding balance at a rate of 18% p.a. Kerry pays a $1200 bill for her council rates on
her credit card.
a Kerry pays $600 off her credit card by the due date. What is the outstanding balance on
the card?
b Calculate the interest Kerry must then pay for the second month.
c An alternative credit card charges 12% p.a. interest with no interest-free period.
Calculate the interest that Kerry would have been charged on the first month.
d Calculate the balance owing after Kerry pays $600 the first month, and then calculate
the interest for the second month.
e Which credit card would be the cheapest to use for this bill?
THINK WRITE
a Subtract the repayment from the a Balance owing = $1200 − $600
balance. = $600
600 × 18 × ----- 1
-
b Use the simple interest formula to b Interest = -------------------------------
12
-
calculate one month’s interest. 100
= $9.00
1200 × 12 × ----- 1
-
c Use the simple interest formula to c Interest = -----------------------------------
12
d 1 Add the interest to the amount of the d Balance owing = $1200 + $12 − $600
bill and subtract the repayment. = $612
612 × 12 × ----- 1
-
2 Use the simple interest formula to Interest = -------------------------------
12
-
calculate the second month’s 100
interest. = $6.12
e Add the two months of interest together e The interest on the second card is $18.12;
for the second card and compare with therefore, the card with the interest-free
the interest for the first card. period is cheaper in this case.
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94 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
Debit cards
Next time you are waiting in the queue to pay
at the supermarket, petrol station or department
store, notice how many people pay by using
EFTPOS. For purchases valued over twenty
dollars, few people use cash. The two most
common methods are using credit cards or
cards attached to savings accounts. Both have
the advantage that we do not need to carry
around large amounts of cash and change. Each
of these has its advantages and disadvantages.
The savings account allows you to spend only
money that you already have, whereas the
credit card lets you spend now and pay in the
future. If you (the ‘operator’ of the card) have
good self-discipline, and pay the credit card
promptly when it is due, then all is well. How-
ever, operators who do not have self-discipline
quickly find themselves in trouble. Credit cards
can be used in situations where a savings card
cannot be used directly — such as when
making phone payments or securing bookings.
A compromise between these two types of card is called the debit card, and its popu-
larity is increasing. This card looks and operates like a credit card but any payments it
makes come directly from a savings account. In other words, although debit cards
operate like credit cards, they allow operators to spend money only if they actually
have it.
The costs associated with a debit card are similar to those of a savings card.
remember
remember
1. A credit card is a source of an instant loan to the cardholder.
2. The two options for Visa and MasterCard are:
(a) no annual fee and no interest-free period
(b) an annual fee and a specific interest-free period.
3. The bank requires a minimum monthly payment that is usually the greater of
a certain fixed amount or a specific percentage of the closing balance.
4. For all transactions made with a ‘no interest-free period’ card and for cash
advances obtained with an ‘up to 55 days interest-free period’ credit card,
the interest is calculated from the date of the first purchase.
5. For interest-free period credit cards, if the closing balance is paid in full by
the due date indicated on the statement, no interest is incurred. Otherwise,
interest is charged until the balance is repaid.
6. A debit card allows you to spend money without carrying cash with you.
Payments come directly from a savings account; that is, from money the user
actually has.
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3E Credit cards
WORKED 1 The XYZ Bank requires the minimum payment off credit card balances to be:
Example
9
(a) the closing balance if it is under $25, or
(b) the greatest of:
ii(i) the excess of the closing balance over the credit limit, or
i(ii) 2.5% of the closing balance (rounded down to the nearest dollar), or
(iii) $25.
Calculate the minimum payments on each of the following balances.
a $17.50 b $26.49
c $147.42 d $785.00
e $1326.12 f $2312.58
g $3489.60 h $1954.00 with a limit of $1900
i $2320.48 with a limit of $2300 j $3080.00 with a limit of $3000
WORKED 2 For a ‘no interest-free period’ credit card, calculate the interest charged on an average
Example
10
outstanding daily balance of $430 with a percentage interest rate of 18.24% p.a. if the
statement covers a 30-day period.
3 An ‘up to 55 days interest free’ credit card holder used his card on 15 March to obtain
a cash advance of $365, which he repaid on 20 March. What was the amount of interest
charged on the cash advance at the rate of 20.74% p.a.?
4 Here is some information extracted from a monthly credit card statement:
Statement begins: 1 April; Statement ends: 30 April; Payment due date: 25 May
96 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
c Show how the daily percentage rate is calculated from the annual percentage rate.
d Explain how the minimum amount due was calculated.
e Explain how the amount of available credit was calculated.
2008
2008
1 OF 1
Mr John Citizen
123 Sample st 2345 6789 1234 9299
Sampleville QLD 4444
2008
2008
MR JOHN CITIZEN
7 The closing balance for the statement in question 6 was repaid in full on 20 June. Find
the amount of interest charged, if:
a no further purchases were made until that date
b a further $300 was spent on 31 May.
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t i gat
es Examining bank fees and taxes
io
ion v
in
n inv
es
t i gat
Find three bank accounts into which your pay could be deposited electronically.
Answer the following questions about them.
1 What is the interest rate
payable on the account?
2 Is there a minimum balance
that must be maintained in the
account?
3 What are the features of this
account? (For example, do
you get a cheque book?)
4 Is there a monthly
management fee on the
account?
5 How many free transactions
are you allowed each month?
What are the charges for
exceeding this number of
transactions?
6 Are the transaction fees
applied differently to deposits
and withdrawals? Are they
levied differently for over-the-
counter and automatic teller
and EFTPOS transactions?
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98 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
2
1 Find the percentage discount on a music CD if it is discounted from $34.95 to $29.95.
2 A sofa is marked at $1500. If the price is reduced by 20%, calculate the sale price.
3 Find the percentage profit for a case of tinned tomatoes that were bought for $22 and
sold for $28.
4 What are the two types of expenses in a budget?
5 Car insurance costs $440 per year. Write this expense as a weekly amount.
6 John’s after-tax pay is $1800 per fortnight. Express this as a yearly amount.
7 Consider the following readings of an electricity meter:
June 44 500 kWh
September 47 610 kWh
Calculate the electricity consumption for this quarter.
8 If credit card interest is calculated using an annual rate of 18%, what is the daily rate
of interest that is charged?
9 What date is 55 days after March 10?
10 On a credit card statement, what does a figure of $540.65 in the ‘Closing Balance’
mean?
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TAXI
Karla takes her Australian currency to a bank (preferably after prior arrangement)
and they will sell her New Zealand dollars. Using the table above, we see that they will
sell her NZ$1.1027 for every A$1 she hands over.
WORKED Example 13
If Karla exchanges A$400 for NZ$, how much will she get?
THINK WRITE
1 Use the selling price in the table. The bank will sell NZ$1.1027 for A$1.
2 Multiply by 400. A$400 is worth NZ$1.1027 × 400.
3 Write the answer. Karla will receive NZ$441.08.
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100 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
WORKED Example 14
If Karla exchanges NZ$350 for A$ when she returns, how much will she get?
THINK WRITE
1 Use the buying price in the table. The bank will buy NZ$1.2163 for A$1.
2 Divide 350 by 1.2163. NZ$350 is worth A$350 ÷ 1.2163.
3 Write the answer. Karla will receive A$287.76.
remember
remember
1. When you exchange A$ for other currencies the bank sells you the other
currency. Therefore:
multiply by the selling price
2. When you exchange other currencies for A$ the bank buys the other currency
from you. Therefore:
divide by the buying price
summary
Discount
• Discount = Original price − Sale price
Discount
• Percentage discount = --------------------------------- × 100%
Original price
• Sale price = Original price − percentage of the original price
= (100 − percentage discount)% of the original price
Budgeting
• A budget is a table containing an estimate of income and expenditure.
• Expenses can be fixed and unavoidable, or variable.
• Savings can be made by reducing variable expenses.
• All entries in the budget table should be calculated for the same time period as the
budget itself (that is, weekly, monthly, quarterly or yearly).
Credit cards
• For ‘Up to 55 days interest-free period’ cards, the closing balance should be paid in
full by the due date (usually 25 days from the date of the statement). Otherwise,
interest is charged until the balance is repaid.
• For ‘No interest-free period’ cards, interest is calculated from the date of purchase
and until the balance is repaid.
• The bank requires a minimum monthly payment. The amount is shown on the
monthly statement.
Debit cards
• Allow the user to spend money without carrying cash
• Allow payments to come directly from a savings account; that is, from money the
user actually has.
Exchange rate
• The rate at which international currencies may be exchanged varies on a daily
basis.
• To change Australian dollars into another currency, multiply by the selling price.
• To change a foreign currency into Australian dollars, divide by the buying price.
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102 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d
CHAPTER
review
1 If the original price of a ‘Patches’ doll is $40, determine its selling price after a discount of
3A 12.5% is applied.
2 A pair of Italian-made shoes was discounted from $180 to $150. Calculate the percentage
3A discount.
3 The price on a 5-piece cookware set is reduced by 15% to $212.50. What was the price of
3A the set before the discount?
a 200 12%
b 150 142.50
c 98 9.80
d 16.25 113.75
e 20% 332.80
f 33 1--3- % 76
6 Selling a damaged
3B rug at $125 will
incur 37.5% loss.
What was the cost
price of the rug?
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a Prepare a weekly expenditure budget for Rose. (Put all amounts to the nearest dollar.)
b Calculate the approximate amount that she can save per year if her average weekly take
home pay is $570.
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104 M a t h s Q u e s t M a t h s A Ye a r 1 1 f o r Q u e e n s l a n d