5.1 Deposits Savings Accounts: earn interest on the money in the account for bank’s use of your money. Deposit: Money given to the bank to hold. ◦ Deposit slips are much like those used for checking accounts. Calculations: ◦ Total Deposit = (Currency + Coins + Checks) – Cash Received $100 in an account that gets 2.3% interest gets ______ as a balance after 1 year? 28 one-dollar bills, 8 five-dollar bills, 24 quarters, 35 dimes, 90 pennies, a check for $29.34, a check for $ Cash back: a fifty-dollar bill What is the total deposit? Bills Coins Checks_______ _______ Checks or Total From Other Side Sub Total Less Cash Net Deposit $

5.2 Withdrawals Fill out a slip for the money you are taking out of your bank account. ◦ Similar to writing a check. Write dollar amounts in word form with decimals expressed as a fraction. ◦ Same as writing the dollar amounts on a check. Go through examples on pages

5.3 Account Statements Either monthly or quarterly Shows all deposits, withdrawals and interest credited to account for that period. Calculations: ◦ New Balance = Previous Balance + Interest + Deposit – Withdrawals Account shows a previous balance of $1,258.22, and interest of $2.10. You deposited $210.00, $50.00 and $ You had withdrawals of $50.00 and $ What is your new balance?

5.4 Simple Interest Interest: $ your bank pays you for letting them use your $. Simple Interest: Most common formula. I = P x R x T P = Principal – amount earning interest R = Rate T = Time Annual Interest Rate: Percent of the principal that you earn as interest based on one year. Deposit $900 in savings. The account pays an annual interest rate of 5½%. After 3 months, the interest is calculated. How much simple interest do you have?

5.5 Compound Interest Interest for a given period is added to your account. Your new balance is used to calculate the interest for the next period and so on. Compound Interest: Earned not only on original principal, but also on the interest earned during previous interest periods. Amount: the balance in the account at the end of an interest period. Use simple interest formula to make computations. Compound interest is the difference between the amount in the account and the original principal. Calculations: ◦ Amount = Principal + Interest ◦ Compound Interest = Amount – Original Principal $2,000 is deposited at 8% compounded semiannually. Find the amount in the account after 1 year. How much was earned in compound interest?

5.6 Compound Interest Tables Shows the amount of $1.00 for many interest rates and interest periods. Need to know: ◦ Total number of periods ◦ Interest rate per period Calculations: ◦ Amount = Original Principal x Amount of $1.00 ◦ Compound Interest = Amount – Original Principal You open an account and deposit $4, The account pays 6% annual interest and compounds quarterly. Six months later you deposit $2,000. How much will you have in the account 1½ years later if it continues to pay 6% interest compounded quarterly? Find # of periods for 1 st 6 mo. Find interest rate per period Find amount per $ and amount for 6 mo. Find # of periods for 1½ years Find amount of $ for 6 periods Find amount for 1½ years

5.7 Daily Compounding The more frequently interest is compounded the more is earned. Daily compounding is offered at many banks for specific accounts. ◦ Interest is computed and added on to the account each day. Calculations: ◦ Amount = Original Principal x Amount of $1 ◦ Compound Interest = Amount – Original Principal Use the table on Pg. 796 Deposit $8,000, 5.5% interest compounded daily. How much interest will you earn in 31 Days?

5.8 Annuities Financial Advisors: make regular deposits in a savings plan. (IRA) Annuity: when an equal amount of money is deposited into an account at equal periods of time. 2 Types of Annuities: ◦ Ordinary Annuity: Equal deposits are made at the end of each interest period. (Such as salaries.) ◦ Annuity Due: Regular deposits at the beginning of the period. (Such as rent.)  Money immediately starts earning interest. Calculations: ◦ Future Value = Amount of Deposit x Future Value of $1.00 ◦ Future Value of = Future Value of x ($ Rate per Period) an Annuity Due Ordinary Annuity Deposit $500 in an ordinary annuity. At the end of each quarter… earn 6% interest compounded quarterly. What is the future value of the account in 2 years? Find # of Periods Find interest per period Find future value of $1 (for # of periods Pg. 798) Find value Annuity Due: $500 Beginning of each ¼  6% interest comp. quarterly What is the future value in 2 years? Ordinary annuity is… Rate per period is… Find annuity due.