The Most Common Applications of Percentages and How to Calculate Them
Percentages are a vital part of our daily lives. We use them to analyze statistics, calculate taxes, compound interest, and so much more. In this article, we will take a look at the most common applications of percentages and how to calculate them.

Percentage Basics

Before we delve into the applications of percentages, it’s essential to understand what percentages are. Percentages are a ratio or a fraction, typically expressed as a part of the whole expressed as a hundred. In simpler terms, a percentage is a way to express a number as a portion of a hundred. For example, 50% converts to the fraction ½, and 75% equates to ¾.

Applications of percentages

1. Taxes

When calculating taxes, percentages come in handy. Depending on where you live, your income tax could be calculated as a percentage of your income. For example, in the United States, the federal income tax ranges from 10% to 37% of your taxable income.

2. Tip and gratuities

When people go out to eat, it’s customary to leave a tip or gratuity for their server. In the United States, 15-20% of the total bill is a standard tip. To calculate this, multiply the bill by the desired percent, then add that number to the initial price. For example, if your bill is $75, and you want to leave a 20% tip, you would multiply 75 by 0.20, which gives you 15. You then add 15 to 75, giving you a new total of $90.

3. Sales tax

Most states impose a sales tax on goods and services purchased within their borders. Typically, sales tax rates vary depending on the state and the product, but they are always expressed as a percentage. To calculate the sales tax on a purchase, multiply the price of the item by the sales tax rate as a decimal. For example, if the sales tax on a pair of shoes was 7%, and the price was $50, you would multiply 50 by 0.07, giving you a sales tax of $3.50.

4. Discounts

Discounts are a common theme in the business world. We see them during sales promotions, special offers, and loyalty programs. To calculate discounts as a percentage, subtract the discount amount from the original price and divide by the original price and then multiply that by 100%. For example, a jacket originally costing $100 is currently on sale for $80. To calculate the percentage discount, you would subtract $80 from $100, giving you $20. You then divide 20 by 100, which equates to 0.2. To convert the decimal to a percentage, you multiply 0.2 by 100, giving you a 20% discount.

5. Credit card interest

Credit card interest rates are expressed as annual percentages. These interest rates determine how much people pay on their outstanding balance each month. To calculate the monthly interest rate, divide the annual percentage rate by 12. For example, if the credit card interest rate is 18%, dividing 18 by 12 gives you a monthly interest rate of 1.5%.

6. Mortgage rates

Mortgage rates determine how much people pay each month on their home loans. These rates usually fluctuate depending on economic factors, and are expressed as percentages. To calculate your mortgage payments based on interest rates, multiply the loan amount by the interest rate and then divide that number by the number of payments you will make.

7. Investments

Investment returns are usually expressed as percentages. The percentage rate of return calculates the profit or loss a person gains from their investment. To calculate investment returns, subtract the amount invested from the final value of the investment, then divide that number by the amount invested and multiply the result by 100%.

FAQs

1. What is percentage change, and how do you calculate it?

Percentage change is the difference between two numbers expressed as a percentage of the original numbers. To calculate percentage change, you subtract the original number from the new number, then divide by the original number, then multiply that by 100%. For example, if a stock started at $50 and is now worth $75, the percentage change is (75 – 50) / 50 x 100% = 50%.

2. How do I convert decimals to percentages?

To convert a decimal to a percentage, multiply the decimal by 100. For example, if the decimal is 0.25, multiplying it by 100 gives you a percentage of 25%.

3. How do I find a percentage of a number?

To find a percentage of a number, multiply the number by the percentage as a decimal. For example, to find 25% of 100, you would multiply 100 by 0.25, giving you 25.

4. How do I calculate the percentage of change in price when given the original price and sale price?

To calculate the percentage of change between the original price and the sale price, subtract the sale price from the original price, then divide that number by the original price, and then multiply that by 100%. For example, if a shirt originally cost $50 and is now on sale for $35, the percentage of change is (50 – 35) / 50 x 100% = 30%.

Conclusion

In conclusion, percentages are an essential part of our daily lives and are used in numerous applications. Knowing how to calculate percentages allows us to make informed decisions about our finances and analyze information efficiently. With this knowledge, we can handle everything from taxes to discounts with ease.