1. Business math Mrs. Ruiz-Emmons Fall 2017
3.6 Savings Accounts
Business math
Mrs. Ruiz-Emmons
Fall 2017

2. GOALS CALCULATE SIMPLE INTEREST ON SAVINGS DEPOSITS
CALCULATE COMPOUND INTEREST ON SAVINGS DESPOSITS
CALCULATE INTEREST USING A COMPOUND INTEREST TABLES

3. Reasons people Save
Save money for an emergency. An emergency fund is arguably the most important reason to save money. ...
Save money for bad times. ...
Save money for College. ...
Save money for a house. ...
Save money for travel. ...
Save money for financial freedom. ...
Save money for retirement

4. SIMPLE INTEREST
Interest is money paid to an individual or institution for the privilege of using their money.
A transaction is something that happens that has to be recorded, such as a deposit or withdrawal.

5. Interest on Savings Accounts
There are different types of savings accounts
In a passbook account, simple interest is often figured quarterly, or four times a year, on the balance of the account at the end of each quarter.
The interest is paid on the first day of the next quarter, or on January 1, April 1, July 1, and October 1.
Sometimes interest is paid twice a year, or in semiannual periods (six months, or one-half year).

6. Calculating Interest
To Find the simple interest for any period, first find the interest on the deposit for a full year. Then multiply the amount by the fraction of a year, such as ¼ or ½ for which you want to find interest.

7. EXAMPLE page 112
Find the interest for six months on $ at 1 ½% annual interest paid semiannually.
Solution x $ = $6.009 Interest for one year
½ x $6.009 = $3.0045, or $ Interest for six months
Interest = Principal x Rate x Time (I =PRT)
In the formula I = PRT, I is the amount of interest. P is the principal amount, R is Interest = Principal x Rate x Time
I = $ x x ½ = $3.0045, or $3.00 Interest for six months

8. CHECK YOUR UNDERSTANDING pg.112
A. What interest is paid for three months on $860 at 2 ¼ % annual interest paid quarterly?

9. Solution
$860 x x ¼ = $4.837 or $4.84

10. Compound Interest
Regardless of how interest is earned, the total money in the savings account at the end of the last interest period is called the compound amount, assuming that no compound interest, is the difference between the original principal and the compound amount.

11. Check your understanding pg.113
C. Your bank pays 3% interest compounded quarterly on October 1 and January 1 You had $700 on deposit on July 1 and made no additional deposits or withdrawals. Find the account balance on Janurary 1.

12. Solution $700 + ($700 x 0.03 x ¼)= $700 + $5.25= $705.25

13. D.
You deposited $400 on July 1 and kept your money on deposit for one year. You made no deposits or withdrawals. If your bank pays 2.5% interest compounded semiannually, what compound interest will you earn in one year?

14. Solution $400 + ($400 x 0.025 x 1/2) = $400 + $5 = $405
$ $400= $10.06

15. Compound Interest Tables pg. 113
Can be used for calculating interest The table shows the value of one dollar ($1) after it is compounded for various interest rates and periods.

16. To calculate annual interest, locate the column and row where the interest

17. Vocabulary for QUIZ 10/11 DEPOSIT SLIPS CANCELLED CHECK CHECK
DEBIT CARD RUNNING BALANCE ONLINE BANKING
RECONCILE SERVICE CHARGE FEE
LESS CASH RECEIVED DEPOSITS TRANSACTION
DIRECT DEPOSIT OUTSTANDING CHECK NET DEPOSIT
ELECTRONIC FUNDS TRANSFER PERSONAL IDENTIFICATION NUMBER
BANK STATEMENT CHECK REGISTER
AUTOMATIC TELLER MACHINE