 S k i l l
i n
A R I T H M E T I C

Lesson 31  Section 2

# BANKING PROBLEMS

Back to Section 1

 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 %

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

 The rate of interest was 5 14 %.

Please "turn" the page and do some Problems.

or

Continue on to the next Lesson.

Section 1

1st Lesson on Percent