Consumer arithmetic

ZIMSEC O Level · Mathematics · Form 2, Form 3, Form 4

Consumer arithmetic is the maths of everyday money: buying, selling, saving and borrowing.

Profit = selling price − cost price. Percentage profit = profit ÷ cost price × 100.
Discount is a reduction on the marked price.

Simple interest: I = PRT ÷ 100, where P is the principal, R the rate % per year and T the time in years.
Compound interest: A = P(1 + R/100)ⁿ, where interest is added to the principal each year.

Worked example: Find the simple interest on US$600 at 8% per year for 3 years.

I = 600 × 8 × 3 ÷ 100 = US$144

Worked example: US$2 000 is invested at 5% per year compound interest. Find the amount after 2 years.

A = 2000 × 1.05² = 2000 × 1.1025 = US$2 205

Hire purchase: a deposit plus equal instalments. Total HP price − cash price = extra cost of buying on credit.
Commission is a percentage of sales paid to an agent.
To change currency, multiply or divide by the exchange rate. Check which way the rate is given.

Worked example: A fridge costs US$450 cash, or a 20% deposit and 10 monthly payments of US$40. How much more is paid on hire purchase?

Deposit = 0.2 × 450 = 90. Instalments = 10 × 40 = 400. Total = 490.

Extra = 490 − 450 = US$40.

Exam tip: In compound interest questions, the interest for the year is A − P, not A.

A trader buys a radio for US$40 and sells it for US$52. Find the percentage profit.
Find the compound interest on US$5 000 at 10% per year for 3 years.
An agent earns 3% commission. She sells a house for US$45 000. Find her commission.

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