Skip to content
SmartStudy

Money

Measurements · Money

Syllabus tag: Kenya CBC | Grade 9 Mathematics | Strand 3.0 Measurements | Sub-Strand 3.5 Money (7 Lessons)

Lesson objectives

By the end of this sub-strand, you should be able to:

  • Identify currencies used in different countries and convert between them using exchange rates.
  • Calculate profit, loss and percentage profit or loss on transactions.
  • Work out simple interest and compound interest.
  • Interpret bills, invoices and hire purchase terms in real situations.

Money

Every trade across a border involves two questions. How much is this worth in our currency, and what tax is due on it?

This topic answers both. The arithmetic is percentages and multiplication, which you already know. The work is in reading the question correctly.

a) Currencies

Each country has its own currency. Kenya uses the shilling, written KES. Uganda and Tanzania also use shillings, but theirs are worth different amounts.

Other currencies you will meet include the US dollar (USD) and the euro (EUR). Also the British pound (GBP) and the Japanese yen (JPY).

b) Converting currency

An exchange rate tells you what one currency is worth in another.

Shillings into dollars Shillings into dollars rate → 1 USD = KES 130 the rate you are given dollars = 26 000 / 130 divide to get the smaller unit count dollars = USD 200 the answer
Dollars into shillings Dollars into shillings rate → 1 USD = KES 130 the same rate shillings = 45 × 130 multiply this time shillings = KES 5 850 the answer

Notice that one conversion divides and the other multiplies. There is a simple way to decide which.

Ask whether the unit you are moving to is worth more or less. One dollar is worth many shillings, so converting shillings into dollars must give a smaller number. That means dividing.

If your answer looks far too big or far too small, you have used the wrong operation.

Exchange rates change every day, so the rates in this note are examples only. In a real question, always use the rate you are given.

c) Import and export duty

Import duty is charged on goods brought into the country. Export duty is charged on some goods sent out.

Duty is worked out on the customs value. That is the value of the goods at the point of entry.

Import duty Import duty customs value = KES 80 000 value at the border duty rate = 25% set by the government duty = 0.25 × 80 000 find the percentage duty = KES 20 000 paid before release

The method is just percentage of an amount. The difficulty is knowing which amount, so read the question for the word "customs value".

d) Excise duty

Excise duty is charged on particular goods made or sold inside the country. In Kenya it applies to items such as fuel, airtime, soft drinks and cigarettes.

It is calculated the same way, as a percentage of the value. A good can attract both import duty and excise duty.

e) Value added tax

VAT is added to the price of most goods and services. The standard rate in Kenya is 16 per cent.

Value added tax Value added tax price before VAT = KES 4 000 the shop price VAT = 0.16 × 4 000 16 per cent in Kenya VAT = KES 640 the tax total to pay = 4 000 + 640 add it on total to pay = KES 4 640 what you hand over

Sometimes the price already includes VAT and you must find the price before tax. Do not subtract 16 per cent. That 16 per cent was worked out on the smaller number, not the larger one.

VAT already included VAT already included total = 116% price plus its VAT price before VAT = 4 640 / 1.16 divide, do not take 16% price before VAT = KES 4 000 the answer

Treat the VAT-inclusive price as 116 per cent, then divide.

f) Where this is used

An importer at Mombasa port calculates duty before clearing goods. A shopkeeper issuing an ETR receipt separates the price from the VAT. Anyone sending money home from abroad watches the exchange rate.

Words to know

  • Exchange rate -- the value of one currency expressed in terms of another.
  • Principal -- the original sum of money invested or borrowed.
  • Simple interest -- interest calculated only on the principal.
  • Compound interest -- interest calculated on the principal together with interest already earned.
  • Hire purchase -- buying by deposit plus instalments, with the total exceeding the cash price.

:::checkpoint Check yourself

  1. Convert KES 39 000 into dollars at 1 USD = KES 130.
  2. Goods have a customs value of KES 50 000 and duty is 20%. Find the duty.
  3. An item costs KES 2 500 before VAT. What is the total price at 16% VAT?
  4. A price including VAT is KES 5 800. What was the price before VAT? :::

Bridge to practice

The exercises begin with direct currency conversion and profit calculation, move through working backwards from percentages, and finish with the comparison between simple and compound interest and a hire purchase evaluation. For every percentage question, write down explicitly which amount is serving as the 100 percent before you calculate anything.

Check yourselfPractise Money — 10 questions →Next in MathematicsApproximations and Errors →