5.

1 Deposits
Savings Account: Specific kind of bank account that earns interest, you must make a deposit.
Deposit: Money you put in the bank, savings, and loan, credit union, or brokerage firm.
Formula: Total Deposit = (Currency + Coins + Checks) –Cash Received

5.2 Withdrawals
Withdrawal: Taking money out of your bank account.
EX: $45.00= forty-five and 00/100 dollars

5.3 Account Statements

Account Statements: Shows status of your account.
Formula: New Balance = Preview Balance + Interest + Deposits – Withdrawals

5.4 Simple Interest

Interest: Amount of money paid for the use of lender’s money.
Simple Interest: Common method for calculating interest.
Principal: Amount of money originally there.
Annual Interest Rate: Percent of the principal earned as interest in one year.
Formula: Interest = Principal x Rate x Time or I =prt
Formula: Amount = Principal + Interest, or A = P + I

5.5 Compound Interest

Compound Interest: Earns interest not only on the original principal, but also on the interest
earned during previous interest periods.
Formula: Amount = Principal + Interest
Formula: Compound Interest = Amount – Original Principal

5.6 Compound Interest Tables

Compound Interest Table: Shows the amount of $1.00 for many interest rates and interest
periods. Tool to calculate compound interest quickly.
Formula: Amount = Original Principal x Amount of $1.00
Formula: Compound Interest = Amount – Original Principal

5.7 Daily Compounding

Daily Compounding: Computed each day and added to the account balance.
Formula: Amount = Original Principal x Amount of $1.00
Formula: Compound Interest = Amount – Original Principal

5.8 Annuities
Annuity: An account into which someone deposits an equal amount of money at equal periods or
equal intervals of time.
Ordinary Annuity: Occurs when equal deposits are made at the end of each interest period.
Annuity Due: Occurs when you make regular deposits at the beginning of the interest
period.
Formula: Future Value = Amount of Deposit x Future Value of $1.00
Formula: Total Interest = Future Value – Total of all Deposits