Economics: Banks, Loans, and Credit Worksheet

Question 1

List three services that banks commonly provide for individuals or families. Explain why one of those services is useful.

Accepted Answer

Banks commonly provide services such as savings accounts, checking accounts, loans, debit cards, and direct deposit. A savings account is useful because it helps people keep money safe and may earn interest over time.

Question 2

Maya has $145 in her checking account. She deposits $60 from babysitting, then spends $28 using her debit card. What is her new account balance?

Accepted Answer

Maya's new account balance is $177. She starts with $145, adds $60 to get $205, and subtracts $28 to get $177.

Question 3

A savings account pays 3% simple interest per year. If Carlos deposits $200 and leaves it in the account for one year, how much interest will he earn?

Accepted Answer

Carlos will earn $6 in interest. Three percent of $200 is $6 because 0.03 times 200 equals 6.

Question 4

A bank lends Jordan $500 for one year at 8% simple interest. How much interest will Jordan owe, and what total amount will he repay?

Accepted Answer

Jordan will owe $40 in interest because 0.08 times $500 equals $40. He will repay a total of $540, which is the $500 principal plus $40 interest.

Question 5

Two loan offers are shown: Offer A is $1,000 at 6% simple interest for 2 years. Offer B is $1,000 at 8% simple interest for 1 year. Which loan has the lower total interest cost?

Accepted Answer

Offer B has the lower total interest cost. Offer A costs $120 in interest because 1,000 times 0.06 times 2 equals 120, while Offer B costs $80 in interest because 1,000 times 0.08 times 1 equals 80.

Question 6

Explain the difference between using a debit card and using a credit card to buy a $35 backpack.

Accepted Answer

Using a debit card takes the $35 from money already in the buyer's bank account. Using a credit card means the credit card company pays first, and the buyer must repay the $35 later, possibly with interest if the bill is not paid on time.

Question 7

Read the situation: Nia pays her credit card bill on time every month, keeps her balance low, and does not apply for many new cards. How would these habits likely affect her credit history?

Accepted Answer

These habits would likely help Nia build a positive credit history. Paying on time, using only a small part of available credit, and avoiding too many new applications show lenders that she is responsible with borrowing.

Question 8

Banks often connect savers and borrowers. Describe how money can move from a person with savings to a person or business that needs a loan.

Accepted Answer

A person can deposit money in a bank, and the bank can use some deposited funds to make loans to borrowers. The borrower repays the loan with interest, and the bank may pay some interest to savers while also earning income from lending.

Question 9

A car loan requires collateral. What is collateral, and why might a lender require it?

Accepted Answer

Collateral is something valuable that a borrower promises as security for a loan. A lender may require collateral because it reduces the lender's risk if the borrower does not repay the loan.

Question 10

Sam buys a $300 game system with a credit card. He pays only the minimum payment each month and interest is added to the unpaid balance. Explain one possible disadvantage of this choice.

Accepted Answer

One disadvantage is that Sam may pay much more than $300 over time because interest is added to the unpaid balance. Paying only the minimum can also make the debt last longer.

Question 11

A bank advertises a checking account with no monthly fee, but it charges $3 each time a customer uses another bank's ATM. If Alex uses another bank's ATM 4 times in one month, how much will he pay in ATM fees?

Accepted Answer

Alex will pay $12 in ATM fees. The fee is $3 each time, and 3 times 4 equals 12.

Question 12

Use the bank statement information: Starting balance $220, paycheck deposit $150, grocery debit $46, phone bill payment $30, and gift deposit $25. What is the ending balance?

Accepted Answer

The ending balance is $319. The account starts at $220, increases by $150 to $370, decreases by $46 to $324, decreases by $30 to $294, and increases by $25 to $319.

Question 13

A savings account earns 2% interest in one year, but prices in the economy rise by 4% during the same year. What happens to the purchasing power of the money in the account?

Accepted Answer

The purchasing power of the money decreases because prices rose faster than the savings account earned interest. Even though the account balance grew slightly, the money can buy less than before.

Question 14

A local bakery gets a loan to buy a new oven. Explain one way the loan could help the bakery and one risk the bakery takes by borrowing.

Accepted Answer

The loan could help the bakery buy equipment that allows it to make more bread and earn more revenue. The risk is that the bakery must repay the loan with interest, even if business is slower than expected.

Question 15

Match each term to its meaning in a sentence: principal, interest, lender, borrower, and credit.

Accepted Answer

Principal is the original amount of money borrowed. Interest is the extra cost paid for borrowing money or the money earned on savings. A lender gives money to be repaid. A borrower receives money and agrees to repay it. Credit is the ability to borrow money now and pay it back later.

Economics: Banks, Loans, and Credit

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