NOTE. 1. Unless otherwise stated in the agreement, interest is compounded annually. 2. When interest is compounded semiannually, consider the rate as the annual rate, or if quarterly, 4, etc. 2. Find the compound interest on $1000 for 2 years at 5%, with interest compounded semiannually. 3. Find the compound interest at 6% on $800 for 1 yr. 5 mo., interest payable quarterly. 4. Find the compound interest on $600 for 9 mo. at 6%, interest payable quarterly. SAVINGS ACCOUNTS Its Compound interest is no longer allowed on notes. only practical application for elementary schools is found in computing interest on savings accounts. Many banks to-day have a savings department. The amounts thus deposited are not subject to check, but draw from 2% to 4% interest which is usually compounded semiannually. The interest periods are generally January 1 and July 1 of each year, although sometimes the interest is compounded quarterly. Thirty days are reckoned to a month. Interest on savings accounts is sometimes calculated from the 1st and 15th of each month succeeding the several deposits. Thus, $10 deposited on the 1st of any month would draw interest from date; but $10 deposited on the 2d of any month would draw interest from the 15th; or money deposited on the 16th would draw interest from the 1st of the next month. There is no fixed rule, however, as each bank determines for itself when the interest date begins. No interest is allowed on a fractional part of a dollar, and parts of a cent are omitted on all interest credits. Most banks require notice from a depositor before a savings account may be withdrawn. Amounts withdrawn before the end of an interest period draw no interest for that period. Written Work 1. On July 1, 1905, Raymond Wilkinson makes a savings deposit of $400 at 4% interest, payable semiannually. If the interest at each period is added to the deposit, what is the total amount in bank January 1, 1907? Deposit July 1, 1905 Interest on $400 at 4 %, July 1, 1905 to Jan. 1, 1906 $400.00 8.00 Interest at 4% on $408 from Jan. 1, 1906 to July 1, 1906 8.16 8.32 424.48 Int. at 4% on $416 (why?) from July 1, 1906 to Jan. 1, 1907 2. Find the difference between the simple interest on a note of $200 dated July 1, 1906, due in two years at 43 %, and the interest on $200 deposited in a savings bank at 4 %, compounded semiannually, for the same period. 3. A savings account of $150 deposited April 1, 1906, at 3% interest, payable January 1 and July 1, is withdrawn April 12, 1908. Find the amount withdrawn. 4. A savings bank pays 4% interest, calculated from the 1st and the 15th of each month succeeding the several deposits. The deposits are Sept. 1, $20; Oct. 10, $15; Nov. 15, $20; Dec. 10, $25. Find the amount in bank the following January 1, if the interest periods are January 1 and July 1. 5. The Lincoln School had on deposit in the Holmes Savings Bank Jan. 1, 1907, $495.80. The deposits were as follows: Feb. 1, $76.90; March 1, $105.05; April 1, $114.29; May 1, $129.70; June 1, $98.75. Find the amount in the bank Jan. 1, 1908, at 4% interest, compounded the first of January and July. Find the amount in bank from the following deposits: Compound interest tables are frequently used by insurance companies, building and loan associations, and trust companies, to calculate the income from investments where the interest is added each interest period to the amount invested. The following table shows the amount of $1 at compound interest at the given rates for 10 years. The compound interest on any amount for 4 years at 8% payable semiannually is evidently the same as upon the same amount for 8 years at 4% payable annually. The amount of any given principal for any given number of years is found by multiplying the principal by the amount of $1 at the given rate for the time as given in the table. Written Work 1. Find the amount of $1200 invested for 7 years at 3%, interest compounded annually. 2. Find the compound interest at 4 % on $10000 invested for 9 years. 3. The amount of $12000, invested for 10 years at 31%, interest compounded annually, is divided equally among 3 sons. Find each one's share. 4. Find the amount of $1200 for 2 years and 6 months at 4%, compound interest payable semiannually. PROMISSORY NOTES Mr. James H. Ames, a grocer, Erie St., Buffalo, N.Y., has an account of $52.00 against Robert Patterson for groceries, and Mr. Ames asks Mr. Patterson to give him a note at 6% interest for the amount of the bill. A promissory note is a written promise to pay to a certain person named in the note, or his order, a specified sum of money at a specified time. The Essentials of a Promissory Note: 1. It should state the place where and the time when given. 2. It should promise to pay to a certain person or to his order. 3. It should promise to pay a certain sum of money, expressed both in figures and in writing. 4. It should state when the money is to be paid. 5. It should state by whom the money is to be paid. 6. It should state for value received. (Not absolutely necessary, but usually written in a note.) 7. It should state with interest and the rate, if it is an interest-bearing note. The promissor is called the maker of the note. The person who is to receive the money is called the payee of the note. 1. Who is the maker of the note on page 216? 2. Who is the payee of the note on page 216? 3. Find the amount to be paid when due. 4. The face of the note is the sum written in the note. What is the face of the note on page 216? 5. This note reads "pay to the order of James H. Ames," and means that Mr. Ames has the right to sell this note to any one by simply writing his name across the back of the note and delivering it to the purchaser. What words in the above note give Mr. Ames the right to sell it? When the owner of a promissory note writes his name across the back of it, he is said to indorse the note. If Mr. Ames indorses the note and then sells it to Mr. B., and Mr. B. indorses it and sells it to Mr. C., to whom does the note belong? A promissory note, therefore, like any other property may be bought and sold; hence it is called negotiable paper. When a note is made payable to a definite person, it cannot be transferred, and is therefore not negotiable, |