1. 3 BANKING SERVICES 3-1 Checking Accounts
10/1/2017 3
BANKING SERVICES
3-1 Checking Accounts
3-2 Reconcile a Bank Statement
3-3 Savings Accounts
Chapter 1

2. 3 BANKING SERVICES 3-4 Explore Compound Interest
10/1/2017 3
BANKING SERVICES
3-4 Explore Compound Interest
3-5 Compound Interest Formula
3-6 Continuous Compounding
3-7 Future Value of Investments
3-8 Present Value of Investments
Chapter 1

3. OBJECTIVES 3-3 SAVINGS ACCOUNTS
Banking
10/1/2017
3-3 SAVINGS ACCOUNTS
OBJECTIVES
Learn the basic vocabulary of savings accounts.
Compute simple interest using the simple interest formula.
Chapter 1

4. Key Terms savings account interest interest rate principal
simple interest
simple interest formula
statement savings
minimum balance
money market account
certificate of deposit (CD)
maturity

5. What types of savings accounts do banks offer customers?
Banking
10/1/2017
What types of savings accounts do banks offer customers?
What are the advantages of direct deposit?
Where does the money that banks lend out for loans come from?
Homework:
What banking services does your family use?
What is the value of compound interest?
Chapter 1

6. Example 1
Grace wants to deposit $5,000 in a certificate of deposit for a period of two years. She is comparing interest rates quoted by three local banks and one online bank. Write the interest rates in ascending order. Which bank pays the highest interest for this two-year CD?
__ First State Bank: four and a quarter per cent
__ E-Save Bank: 4 3/8%
__ Johnson City Trust: 4.22%
__ Land Savings Bank: 0.043
HINT: write each as a decimal per cent number

7. CHECK YOUR UNDERSTANDING
Write the following five interest rates in descending order (greatest to least):
5.51%
5 %
5.099%
5.6%
Do Question #2 & #5, page 135

8. Example 2
Raoul’s savings account must have at least $500, or he is charged a $4 fee.
His starting balance is $716.23, then he withdrew $225.
What was his ending balance?
– 225 =
– 4 =

9. CHECK YOUR UNDERSTANDING
Mae has $891 in her account.
A $7 fee is charged each month the balance is below $750.
She withdraws $315.
If she makes no deposits or withdrawals for the next x months, express her balance algebraically.
– = – 7x
Do Question #3 & #4, page 135

10. I = principle * rate * time = prt Principle = 1200 Rate = 4.5% = 0.045
EXAMPLE 3
Mitchell deposits $1,200 in an account that pays 4.5% simple interest. He keeps the money in the account for three years without any deposits or withdrawals. How much is in the account after 3 years?
I = principle * rate * time = prt
Principle = 1200
Rate = 4.5% = 0.045
Time = 3
I = 1200 * * 3 = 162
I = $162.00

11. Balance = principal + interest = p + prt B = 1200 + 162 = 1362
EXAMPLE 3
Mitchell deposits $1,200 in an account that pays 4.5% simple interest. He keeps the money in the account for three years without any deposits or withdrawals. How much is in the account after 3 years?
I = prt = 1200 * * 3 = $162.0
Balance = principal + interest = p + prt
B = = 1362
B = $

12. CHECK YOUR UNDERSTANDING
How much simple interest is earned on $4,000 in 3½ years at an interest rate of 5.2%?
I = principle * rate * time = prt
p =
r =
t =
I = 4000 * * 3.5
I = $728
Do Question #7 p.135 & #16 p. 136

13. EXAMPLE 4
How much simple interest does $2,000 earn in 7 months at an interest rate of 5%?
I = prt
p =
r =
t =
I = 2000 * 0.05 * (7/12)
I = 2000 * 0.05 *
I = $58.33
t = years or x / 12 months
3 years  t = 3 or
t = 36 / 12

14. CHECK YOUR UNDERSTANDING
How much simple interest would $800 earn in 300 days in a non-leap year at an interest rate of 5.71%? Round to the nearest cent.
I = prt
I = 800 * * (300 / )
I = 800 * *
I = $37.52
Do Question #10, page 136
t = years or x / 365 days
1 year  t = 1 or
t = 365 / 365

15. SIMPLE COMPOUND INTEREST
Interest = principle * rate * time
I = prt
Determine the formulas for these variations:
Principle 
Rate 
Time 

16. EXAMPLE 5
How much principal must be deposited to earn $1,000 simple interest in 2 years at a rate of 5%?
What are you solving for?
I =
p =
r =
t =
What formula do I need?

17. EXAMPLE 5
How much principal must be deposited to earn $1,000 simple interest in 2 years at a rate of 5%?
What are you solving for?
I = 1000
p = ?
r = 0.05
t = 2
What formula do I need?
p = I / rt = 1000 / 2*0.05 =

18. CHECK YOUR UNDERSTANDING
How much principal must be deposited in a two-year simple interest account that pays 3¼% interest to earn $300 in interest?
What are you solving for?
What formula do I need?

19. EXAMPLE 6
Derek has a bank account that pays 4.1% simple interest. The balance is $910. When will the account grow to $1,000?
What are you solving for?
I =
p =
r =
t =
What formula do I need?

20. CHECK YOUR UNDERSTANDING
How long will it take $10,000 to double at 11% simple interest?
What are you solving for?
What formula do I need?
Do Question #11 & #12, page 136

21. EXAMPLE 7
Kerry invests $5,000 in a simple interest account for 5 years. What interest rate must the account pay so there is $6,000 at the end of 5 years?
What are you solving for?
I =
p =
r =
t =
What formula do I need?

22. CHECK YOUR UNDERSTANDING
Marcos deposited $500 into a 2.5-year simple interest account. He wants to earn $200 interest. What interest rate must the account pay?
What are you solving for?
What formula do I need?
Do Question #13 & #17, page 136
Do Question #9, page 136

23. Practice Sets P = I / RT R = I /PT T = I /PR
Banking
10/1/2017
Practice Sets
P = I / RT
R = I /PT
T = I /PR
Interest = Principal * Rate * Time
I = PRT
Example 3
Do Question #7 p.135 & #16 p. 136
Example 4
Do Question #10, page 136
Example 6
Do Question #11 & #12, page 136
Example 7
Do Question #13 & #17, page 136
All
Do Question #9
Chapter 1