Chapter 5 Vocab

Question 1

Savings account

Answer 1

a special bank account that earns interest

Question 2

Deposit

Answer 2

the money you give the bank to hold in your savings account

Question 3

Withdrawal

Answer 3

taking money out of your account

Question 4

Account statement

Answer 4

shows all deposits, withdrawals, and interest credited to your account

Question 5

Interest

Answer 5

rental fee for letting them use your money

Question 6

Principal

Answer 6

the amount of money earning interest

Question 7

Annual interest rate

Answer 7

the percent of the principal that you earn as interest based on one year

Question 8

Simple interest

Answer 8

interest paid only on the principal in a bank account

Question 9

Compound interest

Answer 9

interest earned not only on the original principal, but also on the interest earned during previous interest problems

Question 10

Daily compunding

Answer 10

interest is computed daily and added to the account balance

Question 11

Annuity

Answer 11

an equal amount of money is deposited into an account at equal periods of time

Question 12

Ordinary annuity

Answer 12

equal deposits are made at the end of each interest period

Question 13

Annuity due

Answer 13

regular deposits at the beginning of the period

Question 14

What is the formula for finding simple interest?

Answer 14

Interest = Principal x Rate x Time