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Money - Calculating Discounts

It can be helpful to know how to calculate discounts. For example, what does "30% off" translate to in terms of money? In order to figure out discounts on sale items, you will follow several key steps.

First, find the original price of the item. In our example, let’s say the original price is $19.99. The sale is 25% off. In order to figure out how much the item will cost, you have two options. You can either subtract first and then multiply, or you can multiply first and then subtract. You will be using different numbers depending on which method you choose. We’ll work through both of them and you can decide which one makes more sense to you.

The first method is to figure out how much money will be discounted, and then subtract that amount from the original price. In order to do this, you first need to turn the percent into a fraction by putting the number over 100 (using 100 as the denominator). In our example, 25% would become 25/100. Now, you need to multiply this fraction times the original price. The problem would be set up like this:

Once you’ve multiplied 19.99 x 25 and then divided by 100, you get 4.9975 as your answer. Obviously, you cannot have four decimal places when working with money, so you need to round it to the hundredths place value. (For additional help with rounding, please see Rounding Numbers.) Once you’ve rounded the number, you should end up with $5.00.

Now, please realize that $5.00 is the amount that will be discounted; it is not the amount you will pay for the item. In order to figure out the amount you will pay, you would now have to subtract $5.00 from the original price of $19.99. Once you’ve done your subtraction, you’ll get $14.99 as your answer. This would be the price you would pay for the sale item.

There is another way to solve this problem. Because the sale is 25% off, that means you are still paying 75% of the original price. You can figure out how much of the original price you’re paying by taking 100% minus the % discount (for example 100% — 25% = 75%). After you’ve figured out what percent of the original price you’re paying, you can perform the multiplication to figure out how much you’ll be paying for the item. You will set up the multiplication similarly to the first example, like this:

Once you multiply $19.99 x 75 and divide by 100, you get $14.9925. Here again, you cannot have four decimal places when working with money, so you must round to the nearest hundredths. Once you’ve rounded to the nearest hundredth, you will end with an answer of $14.99.

Notice that with either method, you are calculating the price you would pay for the sale item. If you are asked to figure out your savings or the amount discounted, you would use the first method, and your answer would be $5.00. However, if you want the sale price of the item, you can use either method to find the answer: $14.99.