Commercial Banks

services provided by banks for businesses: deposit a/c current a/c loans night safe foriegn exchange

Deposit a/c

money in deposit a/c earns interest larger sums of money earn higher interest tax paid on interest earned(DIRT- deposit interest retention tax) for customers who want to save interest is paid each year money can be withdrawn using ATM or withdrawal form your money is safe

Current a/c

a/c for people who need to pay bills and expences on a reg. basis no interest is given given a cheque book and can recieve an overdraft essential service for businesses as it helps them with their cash flow

Loans

banks supply a lot of the capital needed for the business take form from overdraft to long term loans ensures the business has access to money at the best possible rates

Night Safe

used by shopkeepers and traders who want to lodge money outside of normal banking hours they put money in a special marked bag and place it in safe next day they go to the bank and get the bag to make the lodgement

Foriegn exchange

banks buy and sell foreign currency firms may need the service when trading with countries outside the EU(usa,britian,china,japan)

Money transfer Facilities

Paypath:safe and convenient way of paying employees-goes straight to their bank a/c's-they can then withdraw money Standing Order(SO):agreement between bank and customer to pay specific amount of money on a specific date to a 3rd party(eg.loans,rent) Direct Debit(DD):the bank automatically pay whatever the amount is(amount varies each period)(eg.electricity bills) Bank draft:cheque written by bank official using one of the banks cheque-small fee for customer-customers use this if they dont have a current a/c or a customer of a firm insists on a bank draft as they are not known to bank,money must be sent through post or a guarenteed payment is required

bank giro:credit transfer system that means bills can be paid without writing cheques

Question

Enda Mooney,2 seaview,dundalk has a current a/c no.1247908 in AIB,dundalk branch. he recieved a 4 year loan of $16,000terms of the loan were:-capital repayments of $4000 a year-interest 12% APRcalculate the total interest payable over 4 years

Solution:

year 1-16,000x12% APR =               1,920year 2-12,000x12% APR =              1,440year 3- 8000x12% APR  =               960year 4-4,000x12% APR  =              480Total interest payable over 4 years =4800

chp.17

Capital repayments and interest question