We move on to the chapter about mathematics in practical situations, and today we study profit, loss, simple interest, and compound interest. These topics are not new for most students.

Profit is achieved when the selling price is bigger than the cost price. The difference is the profit. Profit over the cost defines the profit percentage.

When the selling price is lower than the cost, you have a loss, which is defined as the difference between the cost and the selling price. The loss over the cost defines the cost percentage.

Banking usually deals with interest. The original amount you deposit into a bank account is called the principal. The interest is calculated based on an interest rate, which usually is given as an annual percentage.

In simple interest calculation, the interest calculation is based solely on the principal. So interest $I earned on the principal $P at the interest rate of i% annually for a period of n years is given by:

I = P x i% x n

In compound interest calculation, interest is calculated on prior interest accumulated over a period of time. Suppose an initial principal $P is invested at i% per period with compound interest for n periods, let An be the amount after n periods, then:

An = P(1 + i%)^n

Homework:

Workbook Page 41, #1 – #4, #13 – #16.