Week 1

Objective:

• Banking: To learn the concepts of deposit and credit
• To learn how to calculate income from deposited money
• Learn to know the types of credit payments 
• Learn to calculate the types of credit payments

Expected results:

After learning the project, students will:

– be able to communicate well with the teacher 

– analyze and summarize information

– Form a responsible attitude to learning

– accustomed to working independently

– independent logical reasoning and conclusion

– ability to work in Microsoft Excel

– understand the concept of deposit and credit

– be able to calculate deposit income and credit payments

Interdisciplinary Connections: 

• Algebra 
• Informatics

Teacher’s guide:

1. For the evaluation of the project, in the first week, provide this material (PBL rubrics)  to students so that

– students understand in advance what criteria they need to prepare for,

– Students are able to independently assess their peers.

2. At the beginning of the lesson it is recommended:

• To stimulate interest in the project, ask a few “leading questions”, such as:

– what services does the bank offer people?

– what is a deposit?

– what is a credit?

– Do you and your family members use the bank’s deposit and credit services?

Deposit

A deposit in a bank is the depositing of money in a bank account for a specified rate of interest. The obligatory conditions of the existence of the deposit are the repayment of money to the client, the urgency (the validity of the agreement within a specified period), the payment (the payment of fees to the client for the money provided).

Types of deposits

• term;
• demand.

Demand deposits  are demand deposits. The main goal of such deposits is not to make profit but to manage the funds in the account comfortably. You can withdraw your money at any time, transfer it or top up your account without any limits.

The interest rate is minimal, at 0.01% per annum. The low rate is due to the fact that banks do not benefit from indefinite deposit terms: it is so difficult to use depositors’ money.

Term deposits are those that are limited to a specific period prescribed in the contract. They are divided into three groups:

• savings deposits – to raise a certain amount, top-ups are allowed;
• savings – for saving and accrual of capital; no replenishments or partial withdrawals are allowed;
• target – oriented (e.g. children’s).

Сonditions of deposits with banks

All conditions are detailed in the contract. You can familiarize yourself with them in advance on official portals of banks or specialized websites which collect information from all Russian credit and financial institutions.

The conditions directly depend on the type of deposit and the bank itself. The main parameters:

• interest rate. The higher the rate, the less “bonuses” for the client: there is no possibility of replenishment and partial withdrawal, a long term of placement;
• Minimum and maximum amount of the deposit. More often the starting amount for opening is 1000 tenge;
• Opportunity to replenish the account. In some deposits additional contributions can be made only within a certain period after opening;
• An opportunity of partial withdrawal. The money can be withdrawn only from the “non-combustible” balance;
• Capitalization, i.e. regular additions of interest income to the principal deposit. The more often capitalization takes place (weekly, monthly), the higher will be the income from investments.

To find out how much income a deposit will bring, it is not enough to know the annual rate. On profitability also the methodology of accrual of interest by the bank. In the financial system, there are the concepts of simple and compound interest, which allows you to get, under almost equal conditions, different income on deposits.

This is the interest, which is accrued on the initial amount of the deposit for a certain period. Simple interest is not added to the body of the deposit and is paid either at the end of the contract term or once a month or a year at the choice of the depositor. 

Compound interest or capitalization. 

In this case, the income for the agreed period is added to the deposit amount. In the following period the interest is accrued already on the increased amount of the deposit. The amount of deposit gradually grows at the expense of accrued interest, the final income becomes higher.

Capitalization period is the periodicity with which interest is added to the deposited amount. Banks add interest once a month, a quarter or a day.

Currently, most RK banks calculate deposit income using compound interest.

Resources:

• Банк: что это простыми словами, виды банков и их функции в экономике (tinkoff.ru)
• Депозит в банке: что это такое, виды, зачем нужен и чем отличается от вклада (mainfin.ru)
• Как рассчитать проценты по вкладу: формула и примеры | Райффайзен Банк (raiffeisen.ru)

Practical part

In the practical part, each student will work individually. In the first week, you will learn how to calculate the deposit. You will perform calculations on your computer in Microsoft Excel.

Assignment №1.

The bank needs to calculate by how much the amount of money deposited for 1 year will increase at the end of the year. 

Step 1.  

Create and open a file named “deposit” in Microsoft Excel. Create a table for it as shown in the picture. 

Where: S – amount of money accumulated in the future, P – deposited funds, i – bank interest rate, T – number of payment periods, K – number of payments for the year, AC – accrued income for the period, B – available balance.

Step 2. 

Identify the bank in which you are investing your deposit. Visit that bank’s website online, go to the deposit section and study the interest rate, number of payments per year. 

Note how much you deposit and the number of periods – how long you deposit. 

In this project, Kaspi Bank’s deposit service was used as an example. The bank has an interest rate of 14.1%, the number of pay periods is 12, and the deposit amount is 100,000₸. The number of periods per year is 12 months (paid monthly). 

Step 3. 

In the first table S you need to calculate the amount of finances that will be accumulated in the future. To do this, enter the data collected in step 2 into the table. In the cell in which money is entered, symbol “₸”, and in the cell in which interest is entered, symbol “%” to place: under Home→Numerical format select for money – “Monetary”, for interest – “Percentage”.

As an example, the above data is included in the table in the figure.

Step 4.

You use Excel’s FV function to calculate the amount of finances that will accumulate in the future. The FV function is one of the financial functions. It calculates the future value of the investment based on a given interest rate and constant payment frequency.

Click cell B1 and choose Formula → Insert Function → FV Function. You will open a new table. Fill in the data in the table as shown and click OK. Where:

“Rate” is the interest rate/number of periods;

“Nper” – number of payment periods;

“Pmt” – constant payment for each period equals 0;

“Pv” – current amount of payments. In the example, 100,000₸. Enter it with the symbol ( – ), because this amount comes out of your own pocket;

“type” – payment period.

Step 5.

The next second table must be filled out. 

P is the amount you have contributed. Enter it in cell E2. AC1 must be calculated. This is the accrued income for the period.To calculate the income for the first month, enter the formula E2*(B3/12) in cell F2.

Step 6.

B – calculate the available balance. To do this, add P and AC1. Fix the sum of P with the F4 button.

Step 7. 

To calculate AC2 (estimated income for the second month), multiply B1 by the bank’s interest rate and divide by 12: you calculate using the formula G2*($B$3/12), which means you fix B3 with F4.

Step 8. 

To calculate the available balance for the second month, you add P and AC1 and AC2. Go to “format” and select “Autosummary”. Mark the interval from E2 to F3 and fix E2 with the F4 button. You output the total sum by pressing Enter.

Step 9.

To calculate the estimated income and available balance for each month, mark AC2 and B2, and then left-click the autofill marker (the square in the lower right corner), pull down. Compare the last available balance with the amount S, the value in both should be the same.

Assignment №2.

A bank needs to calculate the amount of money deposited for 9 months. In addition to the first deposit, each month puts money on deposit by the same amount. 

Step 1.

Add a new sheet to the Excel  file and create a table as shown below.

Where: S – amount of funds accumulated in the future, P – deposited funds, i – bank interest rate, T – number of payment periods, N – amount of each payment, K – number of payments per year, AC – accrued income per period, B – available balance.

Step 2.

Fill in the table. Enter the bank information that you used in the first task. Denote the amounts of P and N by yourself.

Step 3.

You will use the FV function to calculate the amount of funds that will accumulate in the future – S.

Click on cell B1 and select Formula → Insert Function → FV Function. You will have a new table open. Fill in the data in the table as shown and click OK. 

“Pmt”-the amount of the individual payment is equal to the money you pay each month, in the example 10,000₸.

Step 4.

To calculate the calculated income (AC) for the period, multiply the first deposit by the interest rate and divide by 12.

Step 5.

To calculate the available balance, connect P and AC using the “Auto Sum” function and fix P with the F4 button. 

Step 6.

To calculate the estimated income for the second month, add the deposit for the second month to the available amount for the first month, multiply it by the interest rate and divide by 12. Fix the interest rate with the F4 button.

Step 7.

To calculate the available balance for the second month, you add P, N, AC1 and AC2. Go to “format” and select “Auto Sum”. Mark the distance from F2 to G3, and you fix it with the P F4 button. You output the total by pressing Enter. 

Step 8.

To calculate the estimated income and available balance for each month, mark AC2 and B2, and then left-click the autofill marker (the square in the lower right corner), pull down. Compare the last available balance with the amount S, the value in both should be the same.

This amount is considered to be the amount you have accumulated over 9 months. 

You can choose the bank that suits you best by analyzing the banks in this way before depositing your money.