Money

Concept of Money and related calculations:

Money is used to pay for goods and services. There are paper notes and coins available for different denominations. Unit of Indian currency is Rupee.

And

     1 rupee = 100 paisa;

 where paisa is the smallest and basic unit of money. 

Calculations involving money is done using the same operators as with the numbers i.e. addition, subtraction, division, multiplication.

Here are some terms related to Money,

1. Simple Interest 
2. Compound Interest

3. Profit and Loss


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1. Simple Interest :  When you are paying a fixed rate of interest per time period, and in simple interest, interest on interest isn't calculated. 

For example: If Ray has taken 100 dollar on simple interest of 5 % per annum, 

then,
The interest to be paid after 1 year = Dollar 5
The interest to be paid after 2 year = Dollar 10
The interest to be paid after 3 year = Dollar 15
and so on.


     The formula for calculation of simple interest is 
   
     Simple Interest = (P x R x T)/100

     Where, 
                 P = principal Amount
                 R = Rate of interest
                 Time = Time for which amount is lended

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1. Compound Interest : In compound interest, interest on interest is calculated. That is, for computing compound interest, first interest on the principal amount is calculated then the interest on the interest generated during the time period is also calculated and added together to arrive at the compound interest.

For Example,
Ray has taken 100 dollar loan at the rate of 5 % compounded annually.

1.The compound interest generated at the end of first year = dollar 5

2. The compound interest generated at the end of second year = dollar 5  +    Dollar 5 + interest on the interest generated in the first year( 5 % of dollar 5)
      = 10  + .25 = $10.25

3. The compound interest generated at the end of third year = 
    $ 5  + {$ 5 + interest on the interest generated in the first year( 5 % of 
    $ 5)} + {$5 + interest on the interest generated in second year( 5 % of  
     $10.25) }
    = $5 + $5 + $0.25 + $5 + $0.51
    = $15.76 

Now, see the difference in the amount when simple interest is applied versus when the compound interest is applied. Compound interest gives greater return.

The formula for calculating the amount to be received at the end of period 'T' when Principal amount 'P' is given on compound interest of 'R' is

    Amount = p{ 1 + r/100}^T     


3.  Profit And Loss: Profit and Loss occurs when the Cost Price ( C.P.) of the article is different than the Selling Price (S.P.).

  Profit = SP - CP

  Profit Percentage = {(SP -CP)/CP}x 100


  Loss = CP - SP

  Loss Percentage = {(CP -SP)/CP}x 100

                  

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Solved Examples:

Q1. 

CTET 2011-Paper1

Answer Option 3   :

The correct answer should display the upward advancing curve as time elapses. One option 3 is displaying that situation and hence correct answer.

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Q2.

Answer Option:  (3)    


Just multiply the price of one pencil ( 2.5) with the number of pencils ( one and half dozen = 18) to arrive at 45 rupee and since Amit has given Rs. 100, he will get 100 - 45 = 55.

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Q3.

Answer: (1) Role playing

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Q4. 

S.I. on Rs. 4000 for 5 years at 8% rate of interest is :
(1). 1600
(2). 1550
(3). 1500 
(4).  1800

Answer: (1). 1600

Explanation: In the formula for S.I., put the value of P= 4000, R = 8 and t=5.  
then, S.I. = ( 4000 x 5 x 8 )/100 = (160000)/100 = 1600.

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Q5

In how many years,  a sum of money will double itself, if rate of interest is 10% per annum and Interest is simple interest? 

(1).10 years
(1).11 1/2 years
(1). 9 years
(1). 9 1/2 years

Answer: (1). 10 years

Explanation: In the formula for S.I., put R =10 and t=T years. 
then, S.I. = ( P x 10 x  T)/100 

Since S.I. =P ( money is doubled. therefore the S.I. generated should be equal to the principal amount

we have,  P = ( P x 10 X T)/100 ; dividing both sides by P.
=> 1 = ( 1 x 10 x T)/100 ; multiplying both sides by 10
=> 100 = ( T x 10); dividing both sides by 10
=> 10 = T. Hence the answer T = 10 years


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Q6.  One orange costs 5 and half rupees and 1 kg apple costs 80 rupees.Then the cost of one and half dozen of oranges and one and three-fourth kg of apples is :
 (1) 219
 (2) 229
 (3) 239
 (4) 209


Answer: (3) 239
Solution:
Cost of 1 orange = Rs 5.5
Cost of one and half dozen ( 12 + 6=18) oranges = 18  x 5.5 = 99 rupees

Now, Cost of 1 kg of apple = 80 
Cost of one and three-fourth ( 7/4 kg) =  7/4 X 80 = 140 rupees.

Therefore, total cost = 140  + 99 = 239 rupees