Certificates of Deposit pp SECTION

Click to edit Master text styles Second level Third level Fourth level Fifth level 2 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Section Objective Use tables to compute: interest on certificates of deposit

Click to edit Master text styles Second level Third level Fourth level Fifth level 3 SECTION Copyright © Glencoe/McGraw-Hill 12-1 certificate of deposit (p. 394) A kind of savings account that requires a specific deposit for a specified period of time, and which earns a higher rate of interest than a regular savings account. Key Words to Know

Click to edit Master text styles Second level Third level Fourth level Fifth level 4 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Amount = Original Principal × Amount per $1.00 Formula 1

Click to edit Master text styles Second level Third level Fourth level Fifth level 5 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Interest Earned = Amount – Original Principal Formula 2

Click to edit Master text styles Second level Third level Fourth level Fifth level 6 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Life after Working Shifts p. 394 If you want to find the best rate for a CD, is it best to consult only your neighborhood bank?

Click to edit Master text styles Second level Third level Fourth level Fifth level 7 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Paul Crates invests $4,000 in a 1-year certificate of deposit that earns interest at an annual rate of 5 percent compounded monthly. How much interest will he earn at the end of 1 year? (Refer to the Amount of $1.00 Invested—Daily, Monthly, and Quarterly Compounding table on page 800 of your textbook.) Example 1

Click to edit Master text styles Second level Third level Fourth level Fifth level 8 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Find the amount. Original Principal × Amount per $1.00 $4,000 × = $4, or $4, Example 1 Answer: Step 1

Click to edit Master text styles Second level Third level Fourth level Fifth level 9 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Find the interest earned. Amount – Original Principal $4, – $4, = $ Example 1 Answer: Step 2

Click to edit Master text styles Second level Third level Fourth level Fifth level 10 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Ching-Hsia Chan can invest $5,000 in a 1- year CD at 4 percent compounded monthly or a 1-year CD compounded daily. What is the difference earned in each investment? Example 2

Click to edit Master text styles Second level Third level Fourth level Fifth level 11 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Find the interest earned in each investment. Monthly: $5,000 × = $5, $5, – $5,000 = $ Daily: $5,000 × = $5, $5, – $5,000 = $ Example 2 Answer: Step 1

Click to edit Master text styles Second level Third level Fourth level Fifth level 12 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Find the difference earned in each investment. Difference: $ – $ = $0.33 Example 2 Answer: Step 2

Click to edit Master text styles Second level Third level Fourth level Fifth level 13 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Refer to the Amount of $1.00 Invested—Daily, Monthly, and Quarterly Compounding table on page 800 of your textbook. $25,000 at 7.75 percent for 1 year compounded daily or 1 year compounded monthly. Find the difference in the amount of interest for each investment. Practice 1

Click to edit Master text styles Second level Third level Fourth level Fifth level 14 SECTION Copyright © Glencoe/McGraw-Hill 12-1 $6.50 Practice 1 Answer

Click to edit Master text styles Second level Third level Fourth level Fifth level 15 SECTION Copyright © Glencoe/McGraw-Hill 12-1 Refer to the Amount of $1.00 Invested—Daily, Monthly, and Quarterly Compounding table on page 800 of your textbook. $4,500 invested at 8.75 percent for 4 years compounded daily or 9 percent for 4 years compounded quarterly. What is the amount of each CD at maturity? Which CD earns the most interest? By how much? Practice 2

Click to edit Master text styles Second level Third level Fourth level Fifth level 16 SECTION Copyright © Glencoe/McGraw-Hill % compounded daily is worth $6, % compounded quarterly is worth $6, % compounded quarterly earns $38.75 more than 8.75% compounded daily Practice 2 Answer

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