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    Markups and Markdowns

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    Part I: Markups and Markdowns

    A manufacturer produces ceiling fans at a cost of $38.25 per fan. During the summer months, it sells the fan in one of its retail outlets at a price of $55.00. However, during the fall and winter season, the manufacturer discounts its fans by 20% off the $55.00 list price.

    -If you were to order 15 fans in the summer and 18 in the winter, what would be the total price paid?
    -How much would you save if you knew ahead of time that you needed a total of 33 fans for the year by buying them all in the winter?

    Part II: Open/Closed End Credit

    It's time to go shopping! You grab your Best Purchase credit card, which has an annual interest rate of 18%. Assume that you have a previous charged balance of $285.76 (before interest has been applied) on the card. On your shopping trip, you purchased three items: a Blu-ray player, two 4-GB flash drives, and a 19-inch flat-screen television. You purchase all the items on your credit card for a total of $352.18. When the bill comes at the end of the month you decide to pay all of the charges. Answer the following questions, showing any needed calculations. (Round all your answers to nearest hundredth or cent.)

    -What is the monthly interest rate?
    -What are the interest charges on the card? (Calculate only on last month's unpaid balance)
    -What is the total balance on your card?
    Part III: Simple Interest (Applying Percentages, Decimals, and Fractions)

    Student loans are a hot discussion when it comes to paying back not only the initial borrowed amount but interest on top of the loan. Typical student loans do not start accumulating interest until after the student has been out of school, usually one year. Base the following that the individual has been out of school and is starting to look at the interest on a student loan.

    -Give an example of an amount of a realistic student loan for an individual that attended a university for at least 2 years.
    -Research and find the current average interest rate for student loans. Be sure to reference the site(s) you chose your interest rate.
    -How much interest was charged at the end of the first day of the loan (assuming no payments have been made and interest accumulates at the end of the first day)? Do you find this number surprising?
    -How much interest has been accumulated after one year of the loan (again assuming no payments have been made and interest accumulates at the end of the first year)?
    -The loan agency has allowed you to defer the loan for one year if you pay 8% of the original loan today. What is the amount that you would send the loan agency? What is the new loan amount?
    -Find the interest on the new loan amount, after paying 8% off, for one day and then again for one year. Do you think paying the 8% was worth it when viewing the interest accumulated by day or by year? Discuss when this 8% might be beneficial for paying off part of the original loan.

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    Solution Preview


    Ceiling Fans:
    Price of fan in summer = $55.00
    Price of fan in fall/winter = 20% off the $55.00 price = $55.00 * 0.20 = $44.00

    So, the total price paid for 15 fans in the summer and 18 fans in the winter is:

    (15 * $55.00) + (18 * $44.00) = $1617.00

    How much do you save if you purchase all 33 fans in the winter?

    Price of 33 fans in winter = 33 * $44.00 = $1452.00

    The amount that you save is the difference between the last two calculations: $1617.00 - $1452.00 = $165

    Open/Closed End Credit:
    Annual interest rate = 18% or 0.18
    Previous balance = $285.76
    New purchase amount = $352.18

    Monthly interest rate is calculated by dividing the annual interest rate by 12 (the number of months in a year).

    So, monthly interest rate = ...

    Solution Summary

    Markups and markdowns are determined.