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Lesson 31  Section 2

BANKING PROBLEMS

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 2.   In a banking problem, what is the Amount and what is the Base?
 
 2.   The Amount is the amount of interest the bank pays you when you make a deposit into an interest-bearing account.
 
  The deposit is the Base.
 
The Interest is a Percent of the Deposit

Example 1.    Eric deposited $1200 into a savings account where the rate of interest was 2½% annually.  In one year, how much interest will he earn?

Solution.  The question is:

How much is 2½% of $1200?

The deposit, $1200, is the Base.

Now,

1% of $1200 is $12.00.     (Lesson 3, Question 7 )

Therefore, 2½% is

2½ × 12 = 24 + 6 = 30.   (Lesson 26, Question 2)

He will earn $30 interest.

Example 2.    Harriet wants to earn $130 in interest.  The bank is paying 3¼% interest.  How much should she deposit?

Solution.  $130 is 3¼% of what deposit -- of what Base?

With a calculator, press

1 3 0 ÷ 3 . 2 5 %

See the answer:

 4000 

Example 3.    Gerald put $800 into a CD (Certificate of Deposit) and received $42 in interest.  What was the rate of interest?

Solution.  The question is:

$42 (the interest) is what percent of $800 (the deposit)?

Write the fraction

 42 
800
.

To express that as a percent, let us complete this proportion:

 42 
800
=   ?  
100
   (Lesson 29, Question 2.)

To make 800 into 100, divide by 8.  Divide 42 by 8 also:

42/100 = 5-2/8/100 = 5-1/4

"8 goes into 42 five (5) times (40) with 2 left over."

The rate of interest was 5 1
4
%.

Please "turn" the page and do some Problems.

or

Continue on to the next Lesson.

Section 1

1st Lesson on Percent

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