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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 1 3-3 SAVINGS ACCOUNTS Learn the basic vocabulary of savings accounts. Compute simple interest using the simple interest formula. OBJECTIVES

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 2 savings account interest interest rate principal simple interest simple interest formula I=prt statement savings minimum balance money market account certificate of deposit (CD) maturity Key Terms

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 3 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: 4 % E-Save Bank: 4 % Johnson City Trust: 4.22% Land Savings Bank: 4.3% Example 1

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 4 Example 2 Raoul ’ s savings account must have at least $500, or he is charged a $4 fee. His balance was $716.23, when he withdrew $225. What was his balance?

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 5 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. CHECK YOUR UNDERSTANDING

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 6 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 three years?

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 7 EXAMPLE 4 How much simple interest does $2,000 earn in 7 months at an interest rate of 5%?

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 8 EXAMPLE 5 How much principal must be deposited to earn $1,000 simple interest in 2 years at a rate of 5%?

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 9 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?

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Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 10 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?

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