Transcript 3.1 Checking Accounts
3.1 Checking Accounts
Prepare a deposit slip Record entries in a check register
Checking Account
Many people deposit their cash receipts in a checking account at a bank and make their payments by check.
A checking account is safe and easy to use.
The canceled checks returned to you by the bank provide you with a record of your payments.
Deposit Slip
A deposit slip is used to deposit paychecks and other monies.
Prepare a Deposit Slip
1153 2053
List cash deposits of bills and coins on the line labeled CASH.
List each check on a separate line.
List additional checks on the back.
Enter total of additional checks on the Total from Other Side line.
Add all the amounts and write the sum on the Subtotal line.
To receive cash back from the bank, write the amount wanted on the Less Cash Received line.
Subtract the cash received from the subtotal to find the Total Deposit.
Sign on the signature line for cash back
Deposit Slip Example
Sherry has check number 825 for $800, she wants to deposit $700 of it and keep $100 in cash.
Add signature if getting cash back 825
Sherry Taylor
8 0 0 . 0 0 1 0 0 . 0 0 7 0 0 . 0 0
June 30 2008 Sheryl Smock
280 00 5 85 322 94 1 45 ---- -- 610 24 100 00 <-Gross Deposit 510 24 <-Net Deposit Textbook Pg. 85 Example A Deposit-> 14 twenties, 21 quarters, 6 dimes, checks: $322.94 & $1.45.
Cash Received -> $100
June 30 2008
602 00 13 45 39 86 3 83 ---- -- 659 14 ---- -- <-Gross Deposit 659 14 <-Net Deposit Textbook Pg. 85 Example B Deposit-> 17 twenties, 18 tens, 9 fives, 37 ones, 49 quarters, 12 dimes,checks: $39.86 & $3.83.
Cash Received -> $0
Checks
When you write a check you direct the bank to make a payment from your checking account.
Checks are numbered to make it easy to keep track of checks.
Check Register
The check register is part of the checkbook in which deposits and checks are recorded.
A new balance, called a running balance, is calculated after each entry.
–
Each deposit is added to the previous balance.
–
Each check is subtracted from the previous balance.
The balance the account.
is the amount of money in
Sample Check Register
Payment/Debit Money going out Deposit/Credit Money coming in
SEC 3-1 CHECK REGISTER
08/11 Deposit #### 08/13 Check Desc. 825 00 #### 08/13 Check Desc. 96 40 #### 08/13 Check Desc. 12 78 1220 00 2583 45 3803 45 2978 45 2882 05 2869 27 Final Balance Pg. 87 C – Prev Bal $2,583.45, deposit $1,220, checks: $825, 96.40, $12.78
What’s the final balance?
SEC 3-1 CHECK REGISTER
08/11 Deposit 08/11 Deposit #### 08/13 Check Desc. 196 00 #### 08/13 Check Desc. 950 00 #### 08/13 Check Desc. 87 83 500 00 1236 00 129 74 629 74 1865 74 1669 74 719 74 631 91 New Balance Pg. 87 D – Prev Bal $129.74, deposits: $500 & $1,236, checks: $196, $950, $87.83
What’s the new balance?
SECTION 3-1 Rev. Questions
TEXTBOOK PAGE 88 #7-13, 16, 17-19, 27-32
–
(17 pts.)
SECTION 3-1 QUIZ
WORKBOOK PAGE 29-30
–
I have copies of this to give you
•
( 92 pts.)
Internet Extra Credit Quizzes
3.2 Electronic Banking
Record electronic banking transactions Find account balance when banking electronically
Electronic Banking
All banks use computers to process transactions electronically.
Electronic banking allows bank customers to use telephones, computers, and other technologies in place of paper transactions such as writing checks and making loan payments.
Electronic Funds Transfer
Banks use computers to transfer deposits and checks, or “funds,” from person to person and bank to bank.
This process is called Electronic Funds Transfer, or EFT.
ROUTING NUMBER
Customer Account Numbers & Bank Identification Number
Banks print the account numbers of customers and the bank identification number in
Magnetic Ink Character Recognition
, or
MICR
, form at the bottom of deposit slips and checks.
ACCOUNT NUMBER
Automatic Teller Machine
Individuals can also transfer funds electronically when they use an Automatic Teller Machine, or ATM.
By using an ATM card issued by your bank, you can withdraw or deposit money, see account balances, or make transfers between your accounts.
Personal Identification Number
A
Personal Identification Number
, or
PIN
, that is known only to you is entered into the ATM before your transaction is processed.
The PIN provides protection against unauthorized use of your ATM card.
Paying Bills with EFT
EFTs may also be used to pay your monthly bills, such as utility bills.
You can instruct your bank to transfer funds automatically each month from your bank account to the account of your utility provider.
No checks are written or mailed.
Direct Deposit
Some companies use EFT to pay their employees by transferring funds directly into their employees’ bank accounts without writing any checks to the employees.
This is called direct deposit .
Debit Card
Many people use a special form of EFT called a debit card .
Debit cards allow you to pay for your purchases without using cash.
Using a Debit Card
You insert your debit card into a special computer terminal at stores.
The computer system subtracts the amount of each purchase automatically from your checking account and adds the same amount to the store’s bank account.
You may also use your debit card to withdraw cash from your account.
Fees may be charged for using this card.
Recording Electronic Transactions
When you use a debit card you get a receipt of the transaction.
Save the receipt and immediately record the payment or cash withdrawal in your check register.
–
Record the payment by writing the word “Debit” and adding a short description as well.
– –
Record an ATM withdrawal by writing ATM-WD.
Record an ATM deposit by writing ATM-DEP.
SEC 3-1 CHECK REGISTER
DB 08/13 Car Repairs. 85 00 DB 08/13 Clothing Purch 86 54 Atm 08/13 Withdrawal 50 00 782 88 697 88 611 34 561 34 New Balance Pg. 92 A – Prev Bal $782.88, Debit Card: Car Repairs $85, Clothing Purchase $86.54, ATM Withdrawal $50, What’s the new balance?
SEC 3-1 CHECK REGISTER
08/13 Deposit DB 08/13 XXXXX . 12 87 DB 08/13 XXXXX 118 94 Atm 08/13 Withdrawal 200 00 1248 40 890 50 2138 90 2126 03 2007 09 1807 09 New Balance Pg. 92 B – Prev Bal $1,248.40, Deposit $890.50, Debit Card: $12.87, $118.94, ATM Withdrawal $200, What’s the new balance?
SEC. 3-2 ELECTRONIC BANKING Review
Txtbk PAGE 93 # 5-8, 10-15 (16 pts.)
SEC. 3-2 ELECTRONIC BANKING Quiz
Wkbk PAGE 31 # 1-5 (10 pts.)
3.3 Online Banking
Calculate account balance needed to make online payments
3.3 Online-Account Access
Online banking allows you to do your banking by using your personal computer and the Internet.
Each bank designs its own Internet website.
What you see on your screen and how you use an online banking system differs among banks.
3.3 Examples of Online Banking Services
Access accounts 24 hours day, 7 days a week
Transfer money between accounts
Receive bills electronically
Make payments
Reorder checks
Communicate with bank staff
View account history
3.3 Sample Online Banking Screen
3.3 Making Decisions About Online Accounts
When selecting a bank at which to do online banking, the most convenient choice is the bank you now use.
You should also evaluate the systems at other banks.
Select the system that best meets your needs, is easiest to use, and does so at the least cost.
3.3 Using Online Accounts
You must identify sources of deposits to the account and decide who will be paid online.
You will also have to determine the dates on which bills are due and the usual amount of the bill if it changes from month to month.
Online banking simplifies the banking process, yet is very similar to using a regular checking account.
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+
-
SEC. 3-3 ONLINE BANKING
Textbook pg. 97 Ex B B.) $67.00
728.00
36.90
112.85 270.00 15.00 128.00 89.23
45.50
Balance Deposit Debit Card Purchase Debit Card Purchase Check Check Boat Insurance Charge Card Medical Bill .
$97.52
SEC. 3-3 ONLINE BANKING Review
•
Textbook PAGE 98 # 6-8, 11-13 Quiz at 10:30
SEC. 3-3 ONLINE BANKING Quiz
WKBK PAGE 32 # 1-4 PRACTICE
3.4 Check Register Reconciliation
Reconcile a bank statement Reconcile and correct a check register
3.4 Reconcile the Bank Statement
Banks keep track of checking account transactions and send a monthly report, called a bank statement , to depositors.
3.4 Sample Bank Statement
3.4 Bank Statement
Typical items on a bank statement
– – – –
Checks paid by the bank Deposits, including interest earned ATM withdrawals Service charges
Interest earned
is money paid to customers for the use of their money.
A service charge is a deduction made by the bank for handling the checking account.
3.4 Canceled Check
A
canceled check
is a check that the bank has paid and then marked so it can’t be used again.
3.4 Transactions Outstanding
Checks that are not returned by the bank are called outstanding checks .
–
This means that the checks have not yet been received or paid by the bank.
An outstanding deposit occurs when a deposit is made after the closing date of the bank statement and the deposit is recorded in the check register.
3.4 Reconciliation
The difference (their balances do not match) in the checkbook balance and the bank statement balance is the result of the outstanding transactions, interest earned, and the service charge.
To bring both balances into agreement (or match) and to make sure the bank’s records are correct, both records must be reconciled.
Ms. Smock will hand out the reconciliation forms
3.4 Reconcile the Bank Statement
Follow the steps on the reconciliation form on the back of the bank statement.
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Enter Closing Balance from Statement
–
Add any deposits outstanding
–
Add lines 1 and 2
–
Enter total of Checks Outstanding
–
Subtract line 4 from line 3. This amount should equal your check register balance.
•
If not then you need to do more steps
3.4 Sample Bank Reconciliation Form
3.4 BUSINESS TIP
Outstanding items (checks and deposits) are items that you have recorded in your check register but the bank has not yet received.
–
That means they have not subtracted outstanding checks from the bank balance nor added outstanding deposits to the bank balance.
These are two reasons most likely reasons why your balance doesn’t match the bank’s balance.
3.4 Reconcile the Check Register
Add interest register.
to the balance in the check
Deduct service charges register.
from the check
The Balance from the check register should now equal the balance on the reconciliation sheet
SEC. 3-4 CHECK REGISTER RECONCILIATION
PG 101 A
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
1,383.53
------------ 1,383.53
216.84
1,166.69
OUTSTANDING CHECKS 129.45
87.39
Continue on the next slide - TOTAL 216.84
6.) ADD ANY SERVICE CHARGES OR INTEREST EARNED TO THE CHECK REGISTER & UPDATE BALANCE NO 7.) DOES THE BALANCE EQUAL THE AMOUNT IN NUMBER 5 ON THE WORKSHEET? YES 1166 69
SEC. 3-4 CHECK REGISTER RECONCILIATION
PG 101 B
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
793.57
312.09
1,105.66
207.63
898.03
OUTSTANDING CHECKS 278 174.85
280 32.78
Continue on the next slide - TOTAL 207.63
6.) ADD ANY SERVICE CHARGES OR INTEREST EARNED TO THE CHECK REGISTER & UPDATE BALANCE NO 7.) DOES THE BALANCE EQUAL THE AMOUNT IN NUMBER 5 ON THE WORKSHEET?
YES 898 03
SEC. 3-4 CHECK REGISTER RECONCILIATION
PG 102 C
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
727.92
OUTSTANDING CHECKS Continue on the next slide - TOTAL
6.) ADD ANY SERVICE CHARGES OR INTEREST EARNED TO THE CHECK REGISTER & UPDATE BALANCE 7.) DOES THE BALANCE EQUAL THE AMOUNT IN NUMBER 5 ON THE WORKSHEET?
YES PG 102 C xx/xx Service Charge 18 90 xx/xx Interest Earned 1 60 727 92 709 02 710 62
6.) ADD ANY SERVICE CHARGES OR INTEREST EARNED TO THE CHECK REGISTER & UPDATE BALANCE 7.) DOES THE BALANCE EQUAL THE AMOUNT IN NUMBER 5 ON THE WORKSHEET?
YES PG 102 D xx/xx Service Charge 7 68 457 38 449 70
SEC. 3-4 CHECK REGISTER RECONCILIATION
Closing Balance on Bank statement is 300.00. Your balance in your checkbook is 100.00. There are outstanding checks of $45 and $200. There is an outstanding deposit of $50. The bank charges $5 service charge. Interest earned is $10. Reconcile the bank statement with your checkbook.
SEC. 3-4 CHECK REGISTER RECONCILIATION
x
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
300.00
50.00
350.00
245.00
105.00
OUTSTANDING CHECKS --- --- 45.00
200.00
Continue on the next slide - TOTAL 245.00
6.) ADD ANY SERVICE CHARGES OR INTEREST EARNED TO THE CHECK REGISTER & UPDATE BALANCE 7.) DOES THE BALANCE EQUAL THE AMOUNT IN NUMBER 5 ON THE WORKSHEET?
YES xx/xx Service Charge 5 00 xx/xx Interest Earned 10 00 100 00 95 00 105 00
SEC. 3-4 CHECK REGISTER RECONCILIATION
Closing Balance on Bank statement is 20.00. Your balance in your checkbook is 25.00. There are outstanding checks of $5 and $10. The bank charges $10 service charge. The bank made a $10 error not in your favor. Reconcile the bank statement with your checkbook.
SEC. 3-4 CHECK REGISTER RECONCILIATION
x
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
20.00
-------- 20.00
15.00
5.00
OUTSTANDING CHECKS --- --- 5.00
10.00
Continue on the next slide - TOTAL 15.00
6.) ADD ANY SERVICE CHARGES OR INTEREST EARNED TO THE CHECK REGISTER & UPDATE BALANCE 7.) DOES THE BALANCE EQUAL THE AMOUNT IN NUMBER 5 ON THE WORKSHEET?
YES xx/xx Service Charge 10 00 xx/xx Bank Error 10 00 25 00 15 00 5 00
SEC. 3-4 CHECK REGISTER RECONCILIATION
Review Textbook
(16 pts.) Page 103
5-7 do on paper
,
8 & 10 use reconciliation forms
I will have the reconciliation forms for you
#19-23 do on paper
SEC. 3-4 CHECK REGISTER RECONCILIATION
Quiz - Workbook page 34 # 1-4 (61 pts.)
•
Use the worksheet Mrs. Smock gives you.
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
OUTSTANDING CHECKS TOTAL
3.5
Other Reconciliation Problems
Reconcile a checking account with outstanding transactions and other errors
Reconcile the Checking Account
Sometimes you must reconcile a bank statement and check register balances when deposits, checks, and EFT transactions are not recorded and when other errors are made.
SEC. 3-5 OTHER RECONCILIATION PROBLEMS
STEPS TO FIND PROBLEMS 1.) Check to see if balance of check register and bank statement are the same.
If they don’t agree you have to reconcile the account.
SEC. 3-5 OTHER RECONCILIATION PROBLEMS
STEPS TO FIND PROBLEMS 2.) Compare to see if each item of on the register is also on the bank statement.
If an item is on both put a checkmark on the item in the bank statement.
Place an “X” on the items that need to be looked into.
SEC. 3-5 OTHER RECONCILIATION PROBLEMS
STEPS TO FIND PROBLEMS 3.) Prepare a reconciliation form to reconcile the bank statement.
4.) Reconcile the check register.
Go over together Pg 106-107
SEC. 3-5
Pg. 106-107
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
632.31
85.00
717.31
42.40
674.91
OUTSTANDING CHECKS 850 8.12
852 34.28
TOTAL 42.40
Ch851 7/19 ck853 wrong 37 16 ck853 correct 72 05 atm dep 7/28 Int. earned ATM with 7/12 120 00 ATM fee 7/12 1 50 EFT truck loan 416 18 Debit card fee 6 40 1181 39 1144 23 27 05 1171 28 1099 23 118 20 1217 43 1 56 1218 99 1098 99 1097 49 681 31 674 91
SEC. 3-5
Pg. 108 A
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
161.96
161.96
OUTSTANDING CHECKS TOTAL Int. earned atm dep ck307 wrong ck307 correct 35 29 107 87 43 108 30 56 00 164 30 32 95 197 25 161 96
SEC. 3-5
Pg. 108 B
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
624.77
-------- 624.77
92.49
532.28
OUTSTANDING CHECKS 201 92.49
TOTAL 92.49
ATM with 200 00 Ch202 80 17 812 45 612 45 532 28
SEC. 3-5 REVIEW
•
TEXTBOOK PG 109 #7-10
•
USE THE PAPER I GIVE YOU AND LABEL THE PROBLEM NUMBERS
•
TEXTBOOK PG 110 #18-21
•
DO ON PAPER 30 POINTS
SEC. 3-5 QUIZ
•
WKBK PG 35-36 #1-2
•
I have copies for you 57 Points
SEC. 3-5 Banking Simulation
Banking Is Check set Integra Bank 100 Points
3.6
Savings Accounts
Calculate simple interest on savings deposits Calculate compound interest on savings deposits Calculate interest using a compound interest table
Interest
One reason people open savings accounts is to keep their money safe.
Another reason is that they earn interest on their money.
Interest is money paid to an individual or institution for the privilege of using their money.
Lesson 3.6
78
Transaction
As with a checking account, you may deposit money into or withdraw money from your savings account.
The bank teller may give you a receipt, which is an official record of the transaction.
A transaction is something that happens that has to be recorded, such as a deposit or withdrawal.
Simple Interest
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
one-half year).
periods (six months, or
Calculate Simple Interest
To find the simple interest for any period, first find the interest on the deposit for a full year .
–
Then multiply that amount by the fraction of a year, such as ¼ or ½ for which you want to find interest.
Interest = Principal × Rate × Time
(I=PRT)
SEC. 3-6 SAVINGS ACCOUNTS SIMPLE INTEREST – PD QRTLY OR SEMI-ANNUAL
INTEREST = PRINCIPAL X RATE X TIME PG 112 EX: I = $400.60
X 0.055
X ½ = $11.016 OR $11.02
SEC. 3-6 SAVINGS ACCOUNTS
PG 112 A & B A.) I = $860 X 0.0225 X ¼ = $4.8375 OR $ 4.84
B.) I = $350 X 0.031 X ½ = $5.425 OR $ 5.43
Compounding Interest
At the end of each interest period, the interest due is calculated and added to the previous balance in the savings account.
The new balance then becomes the principal on which interest is calculated for the next period, if no deposits or withdrawals are made.
When you calculate interest and add it to the old principal to make a new principal on which you calculate interest for the next period, you are compounding interest.
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 deposits or withdrawals have been made.
The total interest earned, called compound interest , is the difference between the original principal and the compound amount.
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST – PAID DAILY OR QUARTERLY COMPOUND AMOUNT – TOTAL MONEY IN THE SAVINGS ACCOUNT AT THE END OF THE LAST INTEREST PERIOD COMPOUND INTEREST = = COMPOUND AMOUNT – ORIGINAL PRINCIPAL
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST
–
PG 113 EX: I = $800 X 0.06 X 1/4 = $12 1 ST QTR) (INTEREST FOR FIND NEW ACCOUNT BALANCE
$800 + $12 = $812
(COMPOUND AMOUNT)
$812 X .06 X ¼ = $12.18
QTR) (INTEREST FOR 2ND FIND NEW ACCOUNT BALANCE
$812 + $12.18 = 824.18
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST
–
FIND COMPOUND INTEREST FOR THE TWO INTEREST PERIODS $824.18 - $800 = $24.18 (COMPOUND INTEREST) SIMPLE INTEREST FOR SAME PROBLEM = $800 X .06 X ½ = $24 COMPOUND INTEREST FOR SAME PROBLEM = $24.18
WHICH MAKES YOU MORE INTEREST?
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST
–
Pg 113 C & D C) I = $700 X 0.03 X 1/4 = $5.25
1 ST QTR) (INTEREST FOR FIND NEW ACCOUNT BALANCE $700 + $5.25 = $705.25
(COMPOUND AMOUNT) $705.25 X .03 X ¼ = $5.29
QTR) (INTEREST FOR 2ND FIND NEW ACCOUNT BALANCE $705.25 + $5.29 = 710.54
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST
–
Pg 113 C & D D) I = $400 X 0.05 X ½ = $10 (INTEREST FOR 1 ST QTR) FIND NEW ACCOUNT BALANCE $400 + $10 = $410 (COMPOUND AMOUNT) $410 X .05 X ½ = $10.25
(INTEREST FOR 2ND QTR) FIND NEW ACCOUNT BALANCE $410 + $10.25 = $ 420.25
Interest Earned in one year $420.25 - $400 = $20.25
Compound Interest Tables
When you calculate compound interest for several interest periods, you can use a compound interest table.
The table shows the value of one dollar ($1) after it is compounded for various interest rates and periods.
Sample Compound Interest Table
Using a Compound Interest Table
1.
2.
3.
4.
To calculate annual interest, locate the column and row where the interest rate and the number of interest periods meet.
The number you find is called the
multiplier
.
Multiply the deposit amount by the multiplier to find the compound amount.
Subtract the original principal from the compound amount to find compound interest.
SEC. 3-6 SAVINGS ACCOUNTS COMPOUND INTEREST TABLES –
EX 3 PG 114 2 ½ % @ 12 yrs $400 X 1.344888 = $537.9552 -> $537.96
COMPOUND AMOUNT $537.96 - $400 = $137.96
COMPOUND INTEREST
SEC. 3-6 SAVINGS ACCOUNTS COMPOUND INTEREST TABLES –
PG 114 E 5% @ 3 yrs $1,100 X 1.157625 = $1273.3875 $1,273.39
COMPOUND AMOUNT $1,273.39 - $1,100 = $173.39
INTEREST COMPOUND
SEC. 3-6 SAVINGS ACCOUNTS COMPOUND INTEREST TABLES –
PG 114 F 6% @ 7 yrs $720 X 1.503630 = $1082.6136 $1,082.61
COMPOUND AMOUNT $1,082.61 - $720 = $362.61
INTEREST COMPOUND
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST TABLES – EX 4 PG 114 1/4 4 X 8% = 2% X 3 = 12 QUARTERLY RATE INTEREST PERIODS 2% @ 12 yrs $1,200 * 1.268242
= $1,521.89
COMPOUND AMOUNT $1,521.89 – $1,200 = $321.89
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST TABLES – PG 115 G 1/4 4 X 5% = 1.25% X 2 = 8 QUARTERLY RATE INTEREST PERIODS 1.25% @ 8 yrs $850 * 1.104486
= $938.81
COMPOUND AMOUNT $938.81 – $850 = $88.81 INTEREST EARNED
SEC. 3-6 SAVINGS ACCOUNTS
COMPOUND INTEREST TABLES – PG 115 G 1/2 2 X 4% = 2% X 2 = 4 QUARTERLY RATE INTEREST PERIODS 2% @ 4 yrs $1,600 * 1.082432
= $1,731.89
COMPOUND AMOUNT $1,731.89 – $1,600 = $131.89 INTEREST EARNED
SEC. 3-6 SAVINGS ACCOUNTS COMPOUND INTEREST TABLES – Review 3-6
-> WKBK PG 37-38 ALL #1-5 #6-9 #10-18 Simple Interest Calculate Compound Interest Manually Use Compound Table I will make copies of this for you.
SEC. 3-6 SAVINGS ACCOUNTS
QUIZ TEXTBK PG 116 #7-18, 31-35
•
For problem number 17 the money is in the bank for only 3 compounding periods.
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For problem number 34 use the table on page 41 Extra Credit Pg. 116 #19 & 20
3.7
Money Market and CD Accounts
Calculate interest earned on special savings accounts Calculate the penalty for early withdrawals from CD accounts Compare the interest earned on savings accounts Calculate the effective rate of interest
3.7 Special Savings Accounts
In addition to regular passbook savings accounts, many banks also offer special savings accounts for long-term savers.
The interest rates paid on these special savings accounts are higher than the rates paid on regular savings accounts.
3.7 CERTIFICATE OF DEPOSIT
The certificate of deposit is widely referred to as a CD.
The CD is also known as a
time deposit
or a
savings certificate
.
Some government rules apply to certificate of deposit accounts.
(continued on the next slide)
3.7 CERTIFICATE OF DEPOSIT
Most banks require depositors to meet certain requirements.
–
Deposit a minimum amount.
–
Leave the money on deposit for a minimum time. The time may be specified in number of days, months, or years. The minimum time is called the term . The date that marks the end of the term is the maturity date .
–
Pay a penalty if money is withdrawn before the end of the term.
3.7 MONEY MARKET ACCOUNTS
Money market accounts offer higher interest rates than regular accounts.
Special rules apply:
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A minimum balance must be kept in the account for the term specified. More money may be added to the account at any time.
–
The interest rate paid is fixed for short periods of time.
–
A small number of checks may be written against the account.
3-7 MONEY MARKETS & CD ACCOUNTS
1/12 PG. 119 A & B A.) 10,000 x .054 x 3 = $1,620 B.) 2,000 x .044 x .08333= $7.33
2,000 x .0432 x .08333 = $7.20
7.33 + 7.20 = $14.53
3.7 Penalties on CDs
By law, banks must charge depositors a penalty for withdrawing money early from a certificate of deposit.
Each bank sets its own penalty for early withdrawals.
The penalty usually varies with the term of the certificate.
3-7 MONEY MARKETS & CD ACCOUNTS
PG 120 C & D 3/12 C.) 500 x .049 x .25 = $6.13
D.) 1,000 x .067 x 1 = $67 1,000 – 67 = $933
3.7 Compare Savings Accounts
Savings accounts are often compared by the interest earned in each account.
To compare, calculate the interest that would be earned by each type of account for the same time period.
3-7 MONEY MARKETS & CD ACCOUNTS
PAGE 121 E & F E.) .0535 x .5 x 1,400 = $37.45
37.45 – 15.13 = $22.32
F.) .0426 x .75 x 1,500 = $47.93
47.93 – 31.37 = $16.56
3.7 Effective Rate of Interest
The effective rate of interest is the rate you actually earn by keeping your money on deposit for one year.
The annual rate and the effective rate you earn can be different.
The effective rate is sometimes referred to as the
annual percentage yield
.
Amount of Interest Earned for One Year Amount of Money on Deposit = Effective Rate of Interest
3-7
PG 122 G & H – Use Table on Pg. 113 G.) 6% / 4 = 1.5% 1 x 4 = 4 yrs Pg. 113 1.5% at 4 yrs.
1.061364
x 2,000 = $2,122.728
2,122.728 - 2,000 = $122.728
122.73 / 2,000 = .061364 = 6.14%
3-7
PG 122 G & H – Use Table on Pg. 113 H.) 5% / 2 = 2.5% 1 x 2 = 2 yrs Pg. 113 2.5% at 2 yrs.
1.050625
x 6,000 = $6,303.75
6,303.75 - 6,000 = $303.75
303.75 / 6,000 = .050625 = 5.10%
SEC. 3-7 MONEY MARKETS & CD ACCOUNTS
Review 3-7 -> WKBK PG 39 - 40 ALL 40 pts 10:30 Quiz Begins
SEC. 3-7 MONEY MARKETS & CD ACCOUNTS
Quiz 3.7 -> TXTBK PG 123 #9-11, 13, 18-20 #9 – all simple interest no compound 30 pts
CHAPTER 3 REVIEW
PAGE 124 – 125 ALL 40 pts.
CHAPTER 3 TEST
PAGE 129 # 11-18 100 Pts.
CHAPTER 3 INTEGRATED PROJECT
Integrated Project 100 Pts.
CHAPTER 3 GOOGLE DOCS
FIND AND RATE TYPES OF SAVINGS ACCOUNTS GOOGLE DOCS PROJECT 100 Pts.
1.) ENTER CLOSING BAL 2.) ADD ANY DEPOSITS + 3.)ADD LINES 1 & 2 = 4.) TTL OF CHKS OUT 5.) LINE 3 – LINE 4 =
OUTSTANDING CHECKS TOTAL