Packet: Read page 9, 10, 11 and complete questions on pages 12 and 13 for Homework.

Banking

Money

What Gives Something Value?

Definition 3 Characteristics

Medium of Exchange- Stuff used to exchange for other goods and services.

Standard of Value- agreed upon by all.

Store of Wealth- a way to keep wealth and store your work.

Gold Worldwide value Durable Divisible

Origin of Currency & Banks Gold Storage (Goldsmiths) Paper Money= Receipts for Gold Inflation= more receipts than gold

How do Banks Make a Profit? Interest Investments Fees- Service Charges

Where does the bank get the money it lends and invests?

Interest Positive Interest Interest on Loans Interest gained on deposits a “reward” paid to the depositor Interest on Loans

Simple Interest Interest on the principle

$1,400 Principle= $1,000 10% interest Calculated Quarterly 1,000 x .10 100 1,100 1,200 1,300 1,400 Principle= $1,000 10% interest Calculated Quarterly $1,400

Interest on Interest (Balance) Compound Interest Interest on Interest (Balance)

$1464.10 Principle= $1,000 10% interest Compounded Quarterly 1,000 ( 1,331) x .10 x .10 100 133.10 (1,100) (1464.10) x .10 110 (1,210) x .10 121 $1464.10