Section 2.1 part 1 Notes

1

Warm Up

• Algebra Review

• Page 54

• # 1-10

1)3, 7.5, 21

2)4, 8.5, 22

3)-3, -7.5, -21

4)2, 6.5, 20

5)-4, -8.5, -22

6) -10.5, -2.5, 5.5

7) -2, 0 2

8) -1.95, 1.05, 4.05

9) 6.7, 2.7, -1.3

10) 1.9, -4.1, -10.1

Section 2.1

Choosing a Bank

Goals

• Explore different types of checking accounts

• Calculate the interest and bank charges

• Compare the costs of banking services

Checks & Demand Deposits

• Checks

• Orders written by a depositor directing a bank to pay out

money

• Demand Deposits

• Checks

• This is a demand on the customer’s deposits

Checking Accounts

• Cost per check

•Minimum balance

• Free checking

• Now

Section 2.1 part 1 Notes

2

Cost-per-Check Account

AKA thrift accounts or minimum use accounts

•Maintain a minimum balance & pay fee per check

• Fee ranges from $0.02 to $0.25 per check

Minimum Balance Account

• Customer is required to maintain a certain balance

• Low-Balance Account

• Service Fee charged if account ever goes below minimum balance

• Average-Balance Account

• Service Fee charged if account monthly average goes below minimum balance

Free Checking Account

• No minimum balance or service charge

• The idea behind it is the checking account customers

will also use the bank’s other services (i.e. savings

account, consumer loans, safe-deposit boxes, etc.)

NOW Account

• Negotiable Order of Withdrawal

• Earns interest

•Minimum balance is required

• Service fee charged if gets below minimum balance

Interest

• Is an amount of money paid for the use of your

money

Amount Earned or Charged

A = br - cn•b = average balance

• r = monthly interest rate

•c = cost per check

•n = number of checks

Section 2.1 part 1 Notes

3

Example 1

• Godfather’s checking account pays 0.125% interest

per month and charges 25¢ per check. Find the

amount earned if 10 checks are written and the

average monthly balance is $2100.

A = br - cn Example 1 Solution

• A = br - cn

• A = 2100(0.00125) – 10(0.25)

• A = $0.125

Amount Earned or Charged with Service Fee

A = br – cn – s • b = average balance• r = monthly interest rate• c = cost per check• n = number of checks• s = service fee

Example 2

• At the Soprano’s bank of Italy there is a service

charge as well as a charge per each check. If the

interest is .15% and 20¢ per check with a $25

monthly service fee, how much will the amount

earned or charged be in a month when 15 checks are

written? The average balance is $2700.

A = br – cn – s

Example 2 Solution

• A = br - cn - s

• A = $2700(.0015) – 15(.20) – 25

• A = - $23.95

Assignment

TYS page 59 # 1-8