Maharashtra Board Class 7 Maths part 2 Chapter 10 Banks and Simple Interest PDF Download

Banks And Simple Interest

Let's Recall

A bank is a government recognized institution that carries out transactions of money. Banks make it easier to plan the use of money, that is, to do financial planning. We can either deposit cash money in a bank or withdraw cash from it. For that purpose, we must open an account in a bank. Bank accounts are of various kinds.

Different Types Of Accounts

Current Account

A current account is mainly for traders and those dealing in money on a daily basis. An account holder can deposit or withdraw money any number of times in a day. The bank issues a passbook for this account and also a cheque book on demand. The bank does not pay any interest on the money in this type of account. Money can also be withdrawn or deposited by cheque.

Teacher's Note

Your shopkeeper uncle uses a current account to deposit money from his shop every day. This account helps him manage money without getting interest.

Exam Trick

Remember: Current account = No interest. Just like a fast moving train, money moves in and out quickly without earning anything.

Points To Remember

Current account is for traders and businessmen.
Money can be withdrawn many times in a day.
The bank does not pay any interest.
Cheque book is given on demand.

Savings Account

A person can deposit a minimum amount and open a savings account. In some banks, no minimum amount is required for opening an account. The bank pays some interest on the basis of the daily credit balance in the account. There are some restrictions on how often money can be withdrawn from this account. For this account too, the bank issues a passbook and, on demand, a cheque book.

Teacher's Note

Your parents keep their salary in a savings account. The bank gives them interest on the money they save, like a reward for keeping money with them.

Exam Trick

Remember: Savings account = Gets interest. Like planting a seed that grows into a tree, your money grows with interest.

Points To Remember

Savings account is for common people who want to save money.
The bank pays interest on your balance.
There are limits on how many times you can withdraw money.
Passbook and cheque book are provided.

Recurring Deposit Account

The account holder can decide the amount to be deposited every month in the account. The bank gives an interest on the deposit which is more than that paid for the savings account. Such an account is a means of compulsory savings.

Often it is convenient to have a joint account for say, husband and wife or guardian and ward, etc. Besides, accounts of business partners, housing societies, trusts of voluntary agencies, etc. are required to be operated by more than one person.

Teacher's Note

Your mother may open a recurring deposit to save for your school fees every month. She deposits the same amount every month and gets more interest than in a savings account.

Exam Trick

Remember: Recurring deposit = Monthly savings with higher interest. Like putting a coin in a piggy bank every day, you save regularly and get more reward.

Points To Remember

You deposit a fixed amount every month.
The interest is higher than a savings account.
It helps you save money regularly and compulsory.
Joint accounts can be opened by more than one person.

Fixed Deposit

A depositor deposits a certain amount for a fixed period in the bank. This deposit attracts a greater rate of interest than the savings account. However, these rates are different in different banks. Senior citizens get a slightly greater rate of interest than the usual.

Teacher's Note

Your grandmother deposits money in the bank for 5 years and cannot take it out before that time. In return, the bank gives her more interest because she keeps the money for a long time.

Exam Trick

Remember: Fixed deposit = Lock money for more interest. Like locking your cupboard key, your money is locked for a fixed time to get higher interest.

Points To Remember

You deposit money for a fixed time period.
You cannot take out money before the time ends.
The interest rate is higher than savings account.
Senior citizens get extra interest.

ATM, Credit And Debit Cards: An ATM (Automatic Teller Machine) card is used to withdraw cash without going to a bank. A credit card or debit card is used to carry out transactions without using cash. An account holder can get such a card on request to the bank.

Teacher's Note

Your father uses an ATM card to withdraw money from a machine outside the bank. He does not have to go inside the bank and wait in a line.

Exam Trick

Remember: ATM = Money from machine. Like a vending machine that gives snacks, an ATM machine gives cash anytime.

Points To Remember

ATM cards help you withdraw cash without visiting the bank.
Debit cards help you buy things without using cash.
Credit cards allow you to buy now and pay later.
You can get these cards from your bank on request.

Let's Discuss

Have you seen a bank passbook? Observe the entries made in the page of a passbook shown below:

On 2.2.16 the amount deposited was 1500 rupees and the balance was 7000 rupees.

On 12.2.16, 3000 rupees were withdrawn by cheque no. 243965. The balance was 9000 rupees.

On 26.2.2016 the bank paid an interest of 135 rupees.

A passbook is issued for a savings account and a recurring deposit account. Amounts deposited, withdrawn and the balance are recorded in it with their dates.

Activity: Ask an adult in your house to show you a passbook and explain the entries made in it.

Teacher's Note

Show your parents' passbook to your child and explain how deposits and withdrawals are recorded. This helps them understand real banking.

Exam Trick

Remember: Passbook = Bank diary. Just like your school diary records what you did each day, the passbook records what happened with your money each day.

Points To Remember

Passbook shows all deposits and withdrawals with dates.
Balance is calculated after each transaction.
Interest is also recorded in the passbook.
It is issued only for savings and recurring deposit accounts.

Let's Recall

Suvidya borrowed a sum of 30000 rupees at 8 p.c.p.a. interest for a year from her bank to buy a computer. At the end of the period, she had to pay back an amount of 2400 rupees over and above what she had borrowed.

Based on this information fill in the boxes below.

Principal = \(₹\) _______, Rate of interest = _______%, Interest = \(₹\) _______, Time = _______ years.

The total amount returned to the bank = _______ + _______ = _______

Let's Learn

We added the capital and the interest accrued on it to find out the amount that Suvidya returned to the bank. Thus,

Principal + Interest = Amount

Teacher's Note

When your mother borrows money from a bank for a scooter, she must return both the money she borrowed and the extra money the bank charges, which is called interest.

Exam Trick

Remember: Principal + Interest = Amount. Like buying a toy for 100 rupees and paying 10 rupees extra to the shopkeeper, you pay the cost plus the extra charge.

Points To Remember

Principal is the money you borrow or deposit.
Interest is the extra money charged by the bank.
Amount is the total money you must return or receive.
Amount = Principal + Interest always.

Example 1

Neha took a loan of 50000 rupees at 12 p.c.p.a. to buy a two wheeler. What amount will she return to the bank at the end of one year?

Solution

The amount, that is, the total money owed to the bank at the end of the time, is to be calculated here. The principal is 50000 rupees. At 12 p.c.p.a., the interest on 100 rupees for one year is 12 rupees. We shall write the ratio of interest to capital in two ways to obtain an equation.

On 50000 rupees let the interest be \(x\) rupees.

On 100 rupees the interest is 12 rupees.

\[\frac{x}{50000} = \frac{12}{100}\]

\[\frac{x}{50000} \times 50,000 = \frac{12}{100} \times 50,000\] (Multiplying both sides by 50000)

\[x = 6000\]

Amount (to be returned to the bank) = principal + interest

\[= 50,000 + 6,000\]

Therefore, Amount to be returned to the bank = \(₹\) 56,000

Teacher's Note

When Neha borrows 50000 rupees, she must pay back 6000 rupees more as interest. So she pays a total of 56000 rupees.

Exam Trick

Remember: Find what 12% of 50000 is, then add it to 50000. Simple as that!

Points To Remember

First find the interest using the ratio method.
Then add interest to principal to get the amount.
Use cross multiplication to solve the ratio problem.
Always write the final answer with the rupee symbol.

Example 2

Aakash deposited 25000 rupees in a bank at a rate of 8 p.c.p.a. for 3 years. How much interest does he get every year? How much altogether?

Solution

Here, the principal is 25000 rupees, time is 3 years and rate of interest is 8 on 100 rupees. The interest on 100 rupees is 8 rupees. Let us suppose the interest on 25000 rupees for 1 year is \(x\). Let us find the ratio of interest to principal.

Then,

\[\frac{x}{25000} = \frac{8}{100}\]

\[\frac{x}{25000} \times 25000 = \frac{8}{100} \times 25000\] (Multiplying both sides by 25000)

\[x = 2000\]

Aakash got 2000 rupees interest for one year.

For three years he got = 2000 \(\times\) 3 = 6000 rupees interest.

Teacher's Note

When Aakash deposits 25000 rupees in the bank, he gets 2000 rupees as interest every year. After 3 years, he gets 6000 rupees total interest.

Exam Trick

Remember: Interest for 1 year, then multiply by number of years. First find interest for one year, then multiply that by the total years.

Points To Remember

Find interest for one year first using the ratio method.
Then multiply that interest by the total number of years.
Use the formula: Interest for total time = Interest for 1 year \(\times\) Number of years.
Always check your answer by checking if it makes sense.

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