BUSINESS MATH Compound Amount * Future valve is the final amount of the investment or loan at the end of the term or last period. ‘Compound Interest + |s the difference between the compound amount and the original principal. ‘Annually / Once a year i Semi-annually / Every 6 months 2 Quarterly / Every 3 months 4 Monthly / Once a month 12 Daily / Once a day 365 / 366 (leap year) Weekly 52 Important Terms 1. Conversion Period or Interest Period ~ this is the time between two successive conversions of interest. 2. Frequency of Conversion ~ this is the number of conversion periods of the investment or loan per year. Itis denoted by m. 3. Nominal Rate ~ this is the stated rate of interest per year, denoted by J. 4, Rate per Conversion Period - the rate of interest for each conversion petlod. It s denoted by 5. Number of Conversion Periods - the total numbers of perlods the transaction that compound Interest will be computed. Itis denoted by n. ‘The Fundamental Compound Amount Formula Where: = compound amount/final amount P= principal amount | = rate per period n= total number of periods + Compound interest is simply the difference between the compound amount and the principal amount. D> I=s-F > The number of decimal digits to be used in this accumulation factor must be the same as number of digits including the 2 digits for centavo portion.Effective Interest Rate + The rate compounded annually that will give the same annual Interest as the given nominal rate () converted m times a year. Nominal Rate © Two formulas: Present Value at Compound Interest © The present value (P) of a compound amount (F) in the future is thus described as: Other Formulas: a. Conversion Perlods: =§ —— Time: Time: — Annuity ‘+ Gsetles of periodic payments (usually equal) made at regular intervals of time + R~The sum of money that represents the size of the equal payments. It is also refered to as perlodic payment or perlodic rent or perlodic deposit. Payment Interval ‘+ the perlod of time between consecutive payments © Term - is the time from the start of the annulty w/c is the 0 position up to the annuity which is $ positions in the time diagram. + The interval maybe of any convenient length like monthly, quarterly, semi-annually, and annually Types of Annuities © Annuity Certain is an annuity payable for a definite duration not dependent on some outside contingency. + Annuity Uncertain or Contingent Annuity is an annuity payable for an Indefinite duration in which the beginning or the termination is dependent on some certain event. (e.g. pensions, lite insurances)* Selling Price ~ is the price for which a merchandising business or retailer sells a products to a customer. © Profit - the remains of the selling price otter all costs and expenses had been deducted. Mark-Up * Mark - Up - the difference between the selling price and the cost price, sometimes referred to as margin or gross profit. Generally used terms in business transaction instead on mark-on. Markup cancellation — refers to decrease in the new selling price that does not decrease it below the original selling price. * Mark -up can be expressed as c percent, the percent mark-up is called the markup rate. It can be expressed based on cost or based on selling price The following variables will be in our mathematical treatment on mark-up: a. SP = Selling price b. C= Cost ¢. SP=C+M (markup based on cost or markup based on selling price) Mark-Up/Mark-On based on Cost + SP=C+ © MR = Mark-up Rate * = mark-up rate based on cost © Cost=—— ‘Mark-Up based on Selling Price Mark-Up Percentage * If the percentage of markup on selling price is given, * Ifthe percentage of markup on cost price is given, Markdown + Markdown is c price reduction from the original selling price of merchandise. * Most markdowns should no! be viewed as losses but as sales promotion opportunities used to Increase sales and profit. When sale is over. raising prices to the original price is called as a markdown cancellation. * Reduction on the regular price of a product may been brought by damaged goods, discontinued item, old stocks, clearing inventory and other events.The following are the formulas for the markdown: a. Markdown = Regular price x Markdown Rate b. Sale Price = Regular Price ~ Markclown cc. Markdown Rate = d. Regular Price Salary and Wages Employees’ compensation ~ refers to the remuneration given an employee in exchange of his/her services. Basic Pay ~ in an employee's compensation package reters to the wages or salaries that they get. Wages ~ refers to earnings received by the worker on a plece rate, hourly rate, or dally rate. Gross Pay (or gross earnings) Is the total amount of employee's earnings betore deductions have been made by the employer. Employees who work more than the required number of hours is entitled to overtime pay. Overtime premium could be 25% or 50% or any rate more than 25% as per company policy. Earnings of employees paid on monthly or annual basis is generally referred to as salary.