Slide 1

2-3 SAVINGS

ACCOUNTS

Understand the advantages & disadvantages of an

interest bearing account. (Interest bearing means it pays

interest.)

Compute simple interest.

Compute doubling time.

OBJECTIVES

You will need:

• Papers on the student

table

• Textbook

• Calculator

• Pen or Pencil

• Notebook PaperRed Items are needed during

the lecture

To do now:

1. Write down the objective

2. Take out earbuds

Slide 2

Banking

• What are disadvantages of a bank

account?

➢Not as easy to get your money

➢There may be fees

Slide 3

Banking

• What is an advantage of a savings

account?

➢Interest is a source of income

Slide 4

Example 2

▪ 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.

First State Bank: 1 % E-Save Bank: 1 %

Johnson City Trust: .0122 Land Savings Bank: 1.3%

3

8

1

4

Let’s convert each rate into a decimal %

Which bank will pay the most interest income?

Slide 5

Example 2

First State Bank: 1 % E-Save Bank: 1 %

Johnson City Trust: .0122 Land Savings Bank: 1.3%

3

8

1

4

Let’s convert each rate into a decimal %

First State: 1 ¼ % ¼ = .25 1.25%

E-Save Bank: 1 % 3/8 = .375 1.375%

Johnson: .0122 multiply by 100% 1.22%

Land: no change needed 1.3%

3

8

Slide 6

Example 2

First State Bank: 1 % E-Save Bank: 1 %

Johnson City Trust: .0122 Land Savings Bank: 1.3%

3

8

1

4

Let’s convert each rate into a decimal %

First State: 1 % ¼ = .25 1.250%

E-Save Bank: 1 % 3/8 = .375 1.375%

Johnson: .0122 multiply by 100% 1.220%

Land: no change needed 1.300%

1

43

8

Which bank will pay the most interest income?E-Save Bank

Slide 7

Example 3

▪ Raoul’s savings account has a minimum balance requirement of $500.

▪ If it falls below $500, he is charged a $4 fee.

▪ His balance is $716.23.

▪ He withdraws $225.

What was his new balance?

New Balance = Prior Balance - Reduction

= 716.23 – 225

= 491.23

Will he be charged a fee?

New Balance = Prior Balance - Reduction

= 491.23 – 4

= $487.23

Yes

Critical

Information!

Important difference:

If we just say “interest” that refers to dollars.

If we say “interest rate” we mean a percent.

“Interest” means $

“Interest Rate” means %

Slide 9

New Formula

Simple Interest formulas:

I = PRT or B = P + PRT

I = Amount of Interest Earned

B = Ending Balance

P = Principal (beginning amount)

R = Interest Rate (converted)

T = Time in years

Look at your Formula Cheat Sheet.

Where are these formulas?

What are their numbers?

1a 1b

Example 4▪ Mitchell deposits $1,200 in an account

that pays 1.5% simple interest.

▪ He keeps the money in the account for three years without any more deposits or withdrawals.

How much is in the account after three years?

One: TopSimple: 1

1b

Q1) One or multiple?Q2) Which key word?Q3) What are you looking for? Ending Balance: b

Which formula on the formula cheat sheet?

Slide 11

Example 4

▪ Mitchell deposits $1,200 in an account that pays 1.5% 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?

B = P + P x R x T

= + x x

= $1,254.00

1,200 .015 31,200

Formula:Variables:

B =

p =

r =

t =

B

3

.0151,200

Slide 12

Example 4 - Now You Try It!

How much simple interest is earned on $4,000 in 3½ years at an interest rate of 1.2%?

Slide 13

Example 4 - Now You Try It!

How much simple interest is earned on $4,000 in 3½ years at an interest rate of 1.2%?

One: TopSimple: 1

1a

Q1) One or multiple?Q2) Which key word?Q3) What are you looking for? Interest: a

Which formula on the formula cheat sheet?

Slide 14

Example 4 - Now You Try It!

How much simple interest is earned on $4,000 in 3½ years at an interest rate of 1.2%?

I = PRT

I = 4,000 x .012 x 3.5

Interest = $168.00

Formula:Variables:

I =

p =

r =

t =

I

3.5

.0124,000

Slide 15

Example 6How much principal must be deposited to earn $1,000 simple interest in 2 years at a rate of 1.3%? Round to the nearest cent.

One: TopSimple: 1

1a

Q1) One or multiple?Q2) Which key word?Q3) What are you looking for? Principal BUT I know

the amount of interest: a

Which formula on the formula cheat sheet?

Slide 16

Example 6

How much principal must be deposited to earn $1,000 simple interest in 2 years at a rate of 1.3%? Round to the nearest cent.

I = PRT

1,000 = P x .013 x 2

(Nsolve, manually solve, or Mathway)

P = $38,461.54

Formula:Variables:

I =

p =

r =

t =

1,000

2

.013P

Example 7

▪ Derek has a bank savings account that pays 2.1% simple interest.

▪ The balance is $750.

When will the account balance double?

One: TopSimple: 1

1b

Q1) One or multiple?Q2) Which key word?Q3) What are you looking for? Time: b

Which formula on the formula cheat sheet?

Slide 18

Example 7

▪ Derek has a bank savings account that pays 2.1% simple interest.

▪ The balance is $750.

When will the account balance double?

B = P + PRT

1,500 = 750 + 750 x .021 x T

(Nsolve, manually solve, or Mathway)

T = 47.62 years

Formula:Variables:

B =

p =

r =

t =

1,500

T

.021750

Slide 19

Example 7 - Now You Try It!How long will it take a $1,000 investment to double with 10% interest?

Slide 20

Example 7 - Now You Try It!How long will it take a $1,000 investment to double with 10% interest?

One: TopSimple: 1

1b

Q1) One or multiple?Q2) Which key word?Q3) What are you looking for? Time: b

Which formula on the formula cheat sheet?

Slide 21

Example 7 - Now You Try It!How long will it take a $1,000 investment to double with 10% interest?

B = P + PRT

20,000 = 10,000 + 10,000 x .1 x T(Nsolve, manually solve, or Mathway)

T = 10 years

Formula:Variables:

B =

p =

r =

t =

20,000

T

.1

10,000

It took almost 50 years to double the money

when it was in a bank savings account.

0Years 10 20 30 40 50

Bank

Account

Investment:

1,000 2,000

1,000 32,00016,0008,0004,0002,000

The investment doubled every 10 years!

What do I do now?

The 2-3 Assignment

When is it due?

Next Class