Video: Solving Word Problems Involving Calculating the Profit given the Principal and the Interest Rate

Determine the profit Jacob made in a year from depositing $490000 in a savings account with an annual interest rate of 4.25%.

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Video Transcript

Determine the profit Jacob made in a year from depositing 490000 dollars in a savings account with an annual interest rate of 4.25 percent.

Interest is money that a bank pays to you in return for investing your money with them. An annual interest rate of 4.25 percent means that Jacob will receive this percentage of the amount that he invests in the account each year. The profit that Jacob made is equal to the amount of interest that he received. This is equal to 4.25 percent of his investment, which is 490000 dollars. So we need to look at how to calculate this percentage. And we’ll consider one method with a calculator and one method without.

For the non-calculator method, first of all, we’ll split this 4.25 percent up into percentages that are easier to calculate. 4.25 percent is equal to four lots of one percent plus 0.25 percent. To find one percent of a number, we need to divide that number by 100. So one percent of 490000 is equal to 490000 over 100. This is equal to 4900. To find what four percent is equal to, we need to multiply one percent by four. 4900 multiplied by four is equal to 19600. To find what 0.25, or a quarter of a percent, is equal to, we can divide one percent by four. 4900 divided by four is equal to 1225. To find what 4.25 percent is equal to, we add together the values for four percent and 0.25 percent. 19600 plus 1225 is equal to 20825. So our answer using the non-calculator method is 20825.

Now, let’s consider a calculator method. When we see the word “of” in a question involving percentages, it means that we can multiply. 4.25 percent of 490000 is equal to 4.25 percent multiplied by 490000. As percent means out of 100, we can express 4.25 percent as a fraction, 4.25 over 100. Now, we could perform this calculation as it is using our calculators. Or, we could first cancel a factor of 100 from both the denominator and the numerator. Whether you cancel that factor of 100 first or not, it gives the same result, 20825.

The profit that Jacob made from investing 490000 pounds in this savings account was 20825 dollars.

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