Master Financial Literacy: Understanding Simple Interest and Sales Tax

Years	Amount of Simple Interest	Balance
1	1000 * 0.03* 1=$ 30	1000+30=$ 1030
2	1000 * 0.03* 2=$ 60	1000+60=$ 1060
3	1000 * 0.03* 3=$ 90	1000+90=$ 1090
4	1000 * 0.03* 4=$ 120	1000+120=$ 1120
5	1000 * 0.03* 5=$ 150	1000+150=$ 1150

Years

Amount of Simple Interest

Balance

1000 * 0.03* 1=$ 30

1000+30=$ 1030

1000 * 0.03* 2=$ 60

1000+60=$ 1060

1000 * 0.03* 3=$ 90

1000+90=$ 1090

1000 * 0.03* 4=$ 120

1000+120=$ 1120

1000 * 0.03* 5=$ 150

1000+150=$ 1150

Match the given concepts with the correct definitions.

Let's recall the definitions of given concepts so we can pair up the options. Let's start with the sales tax.

Sales tax is an amount charged by the government that the customer pays in addition to the selling price for some product or service.

This means that sales tax is an additional amount of money charged on items or services. Next, let's consider when we might give a tip. In restaurants, we often give extra money to the server voluntarily when we are satisfied with the service. This is called a tip.

A tip is an amount of money above the cost of an item or service that is given in appreciation of the service.

Generally speaking, a store sells items for more than it pays for those items. This is how the store makes a profit. This amount of increase is called the markup. In other words, the markup is difference between the selling price and the cost of the item to the store.

Markup is the amount of increase from what the store pays for an item to the selling price of that item to the customer.

Finally, the selling price of an item or service is the amount that the customer pays for that item or service. It is the final price of the item or service after adding any markups or subtracting any discounts.

The selling price is the amount of that the customer pays for an item or service.

Let's finally pair the concepts and their definitions in a table.

Concept	Definition
Sales Tax	An additional amount that is added to the price of an item by the government
Tip	Money a customer gives a worker above the price in return for a service
Markup	The amount of increase from what the store pays to what the customer pays
Selling Price	The amount that the customer pays for an item

Find the total cost of the given items.

$ 980 laptop; 4 % tax

$ 32 dinner; 15 % tip

We want to find the selling price of the laptop. Let's start by calculating the dollar amount of the tax. We can then add it to the retail price. Let's use the percent equation to find the amount of tax to be paid. part = percent * whole We are given that the price of the laptop is $ 980 and the tax is 4 %. Let p represent the dollar amount of the tax. Our equation then takes the following form. p = 4 % * $ 980 We can write the percent as a decimal before we solve the equation. We do this by ignoring the percent symbol and moving the decimal point two places to the left. 4 % ⇔ 0.04 Now we can do the multiplication. Let's ignore the units for now for simplicity.

We got that p= 39.20. This means that the amount of tax is $ 39.20. Now we can calculate the total cost of the laptop by adding this amount to $ 980. $980 + $ 39.20 = $ 1019.20 This means that the total cost of the laptop is $ 1019.20.

We can use the percent equation again to find the amount of the tip. After that, we will add the tip amount to the price of the dinner to find the final cost. part = percent * whole We know that the dinner is $32, which corresponds to the value of the whole, and that the tip, or the percent, is 15 % of the whole. Let's calculate the value of part by substituting these values into the equation. Remember to rewrite the percent as a decimal number.

Since a tip is an additional amount of money given in return for a service, we will add this amount to the price of the dinner. This will give the total amount of money paid for the dinner. $32 + $ 4.80 = $ 36.80 The total cost of the dinner is $36.80.

A cell phone is on sale for 30 % off. If the sale price is $820, what is the original price of this phone? Round the answer to two decimal places.

We will use the percent equation to find the original price of the cell phone. part = percent * whole We are given that a cell phone costs $ 820 when it is on sale for 30 % off. This means that the sale price is 100 % -30 %, or 70 %, of the original price. If we let p represent the original price, then we have the following equation. $ 820 = 70 % * p Let's write the percent as a decimal before we solve the equation. We can do this by ignoring the percent symbol and moving the decimal point two places to the left.

This means that 70 % is equal to 0.70 or 0.7. $ 820 = 70 % * p [0.3em] ⇓ [0.3em] $ 820 = 0.7 * p Finally, we will solve the equation for p. We can ignore the units for now for simplicity.

We found that the original price of the cell phone is about $ 1171.43.

Select the words that represent an increase in the final amount to be paid.

We want to determine which of the given words increase the final amount of money to be paid. Let's recall the definitions of these terms.

	Definition	Explanation
Discount	A decrease in the usual price of something	Selling Price= Regular Price - Discount
Markup	The amount of increase from what the store pays for an item to the price that the customer pays	Price=Cost to Store + Markup
Tip	Money a customer gives a worker in appreciation in return for a service	Final Cost=Selling Price + Tip
Tax	An amount charged by the government that the customer pays in addition to the price for some product or service	Selling Price=Regular Price + Tax
Markdown	The amount by which the regular price of item is decreased	Selling Price=Regular Price - Markdown
Gratuity	Money paid to a specific service worker to appreciate a job well-done	Final Price=Regular Price + Gratuity

According to the table, we can say that markup, tip, gratuity, and tax represent an increase in the final amount of money to be paid, while discount and markdown reduce the price of an item or service.

Zosia's father received a $5200 loan from the bank. He plans on paying off the loan in 5 years. At the end of 5 years, he will have paid $1300 in interest. What is the simple interest rate on the bank loan?

If we borrow money from a bank, we pay the bank interest for the use of their money. We will use the simple interest formula to calculate the interest rate r that the bank charges on the loan given to Zosia's father. cl I= p r t, where & I =Interest & p& = Principal r& = Annual interest rate t& = Time (in years) We know that Zosia's father received a $5200 loan from the bank. He will pay $1300 interest over 5 years. I=1300 , p= 5200, t= 5 We want to calculate the annual interest rate r. Let's substitute these values into the simple interest formula and solve it for r.

The annual interest rate is 5 %.

Financial Literacy

Catch-Up and Review

Leaving a Tip

Interest

Simple Interest

Calculating the Amount of Interest

Hint

Solution

Who is Correct?

Hint

Solution

Vincenzo's Way

The salesperson's Way

Conclusion

Calculating the Markup and Markdown

Hint

Solution

Calculating a Bonus

Hint

Solution

Paying Back a Loan

Hint

Solution

Calculating the Amount of Tip

Financial Literacy

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