FINANCE 6 GROUP 6

 Reporters:

 1st Reporter - Arangis, Candy

 2nd Reporter - Cabonita, Donna Fe
 3rd Reporter - Alisasis, Gladys
 4th Reporter - Inson, Myraflor
 5th Reporter - Narciso, Angelu
 6th Reporter - Fabian, Pinkel
 7th Reporter - Lacaba, Reyca Fe
 8th Reporter - Gumatos, Argie
 9th Reporter - Villareal, Brenda
 10th Reporter - Aventurado, Margie N.
BANK ACCOUNTS AND CREDIT
SECURITIES
PRESENTATION BY: GROUP 6

It is always advisable for an entity or an individual to adopt defensive investing. That is, have part of his
funds invested safely and for fixed income. This may be realized by maintaining bank accounts and
acquiring credit securities such as bonds and treasury bills.
A bank account is a financial account maintained by a bank for a customer. A bank account can be a deposit
account, a credit card account, a current account, or any other type of account offered by a financial institution,
and represents the funds that a customer has entrusted to the financial institution and from which the customer
can make withdrawals. Alternatively, accounts may be loan accounts in which case the customer owes money to
the financial institution.
Bank accounts may be in the form of savings accounts, time deposits and special savings deposits or premium
savings accounts. A checking account may also be maintained to control expenditures. Upon opening a bank
account, or becomes a lender to the bank. The latter treats the account as a liability and includes it as such in its
balance she
When opening a bank account, the following factors are to be considered:
 Minimum balance required. Some banks charge penalties when the balance goes below the minimum amount.
 Interest rate or rates. In some cases, interest rates are tiered. This means that the interest rate changes
depending on the balance in the bank account. The bigger is the balance, the higher is the interest rate.
 Limitations as to withdrawals. Is the account withdrawable anytime? What penalty is imposed in case it is not?
 The bank’s reputation. This refers to the track record of a bank in the handling of its finances and the integrity
of the people comprising its management.
 Insurance. This refers to insurance coverage for deposits received by a bank in the Philippines, bank accounts
are insured with the Philippine Deposit Insurance Corporation (PDIC) to the extent of P500,000 per account.
It is therefore advisable that before one opens a bank account, he calls up the different banks and makes inquiries
 A current account is a type of bank account from which withdrawals are made by issuing
checks. Deposits are made with the use of deposit slips. It is often called a checking
account. It is maintained to separate each intended for normal operations and to control
disbursements. It may be used as a clearing account to which all checks received are
deposited. After they are cleared, the depositor transfers the different amounts of to
other banks (such as savings and time deposits) for the portions therefore that are so
intended
 In general, a account does not earn interest.The required minimum balance for current
or checking accounts ranges from 5,000php to 10,000php Current accounts are further
taken up in Chapter VIII, Personal Finance in relation to control of expenditures. Most of
the banks require a depositor to open a savings account before he/she is allowed to open
a current account.
A savings account is type of bank account where in deposits there to and
withdrawals there from can be made any time. Thus, it is preferably
maintained to take care of minor emergency requirements, deposits that are
small in amount and those that are intended to be withdrawn anytime
during the month.
Deposits and withdrawals are made with the use of deposit and withdrawal
slips, respectively. All transactions are reflected on the passbook provided
by the bank.
SAVINGS ACCOUNT AS FIRST STEP IN MAKING
INVESTMENTS

 For investment purposes, a savings account is used to accumulate cash with the intention of
transferring part there of to other types of bank accounts with higher interest rates.
 Example: A family’s monthly net earnings and normal monthly expenses amount to 25,000php and
20,000php, respectively so that it can save 5,000php every month. The family has adopted the policy
of maintaining normal cash requirements for one (1) month in a savings account and transferring to
a time deposit, whatever is the excess. After 8 months, the family’s savings including interst amount
of P16,300.00 is transferred to a time deposit account to earn a higher rate of interest.
 COMPOUNDING
 This refers to non-withdrawal of income earned on an investment so that it becomes part of the principal is
succeeding periods. In effect, additional income is realized on previous income. In the case of bank accounts,
additional interest is earned on interest earned in the past. Income is making an income.
 TIME AS AN ADVANTAGE

 Due to the effects of compounding, the earlier one saves the bigger would be the future
value of his investment.This is illustrated in the following
Annual Savings to Earn 100,000php at Varying Interest Rates
4% 6% 8% 10% 12% 14% 20% 25%
Future Value 2,500,000 1,666,667 1,250,000 1,000,000 833,333 714,286 500,000 500,000
Years
5 443,815 278,925 197,288 148,907 117,120.34 94,789.19 55,991.54 38,991
10 200,219 119,289 79,895 57,041 42,398.91 32,401.97 16,051.15 9,623.22

( 100,000php/4%);2,500,000php/FV of annuity due of 1php for 5 years at 4% (Table II, Appendix)

Per given schedule, one needs to raise 2,500,000php in order to earn 100,000php if his
portfolio is earning 4% per annum If he has 5 years only to do so, he has to save 443,815php
per annum. If he has 15 years to accumulate the amount, his annual contribution should be
120,051php.
 What Is a Time Deposit?
 A time deposit is an interest-bearing bank deposit account that has a specified date of
maturity, such as a certificate of deposit (CD).The deposited funds must remain in the
account for the fixed term to receive the stated interest rate.Time deposits are an
alternative to the standard savings account, and will usually pay a higher rate of interest.
 Certificates of deposit are types of savings accounts or negotiable instruments whereby
the customer is paid interest in exchange for depositing funds into the account for a set
period of time. CDs are issued by banks, credit unions, and other financial institutions.
There are many different types of CDs with varying terms of maturity and minimum
investment requirements.Those requiring a larger initial deposit usually offer a higher
return than lower minimum CDs.
TIME DEPOSIT AS SECOND STEPS IN INVESTING

 This is so because the required minimum balanceis much bigger than that required for savings account.as stated
earlier , savings maybe accumulated in a savings accont and when the investor can afford to do so, a transfer to a
time deposit maybe effective to enable him to earn a higher rate of interest.Asssuming that an individual can save
P2000 every month,it would take five (5) months to accumulate P10,000.However he must leave an amount with
the savings account from which he can withdraw anytime.
SPECIAL TIME DEPOSIT

Lipa Bank, Inc. (A Rural Bank), in its effort to extend more financial assistance to its beneficiaries.
Introducing the new savings product “Special Time Deposit”. This product aims to help the depositor to save their
money with the highest interest rate the bank can offer.
With initial deposit of P50,000,the depositor can get the 4% interest with tax-exempt for 5 years.
What are you waiting for?
Open your Special Time Deposit in Lipa Bank and let your savings grow with time
 CREDIT SECURITIES
 Credit Securities means fixed-income securities, debt securities and loans and investments with economic
characteristics similar to fixed-income securities, debt securities and loans issued by entities other than the U.S.
Government, including corporate bonds, loans and loan participations, asset-backed securities (all or a portion of
which may consist of collateralized loan obligations), mortgage-backed securities (both residential mortgage-
backed securities and commercial mortgage-backed securities), mezzanine and preferred securities, convertible
securities, commercial paper, municipal securities and sovereign government and supranational debt securities.
FACTORS IN INVESTING IN CREDIT SECURITIES

Before buying credit securities, an investor should look into the following aspects thereof;
 Interest rates - the proportion of a loan that is charged as interest to the borrower, typically expressed as an
annual percentage of the loan outstanding.
 Date of maturity or call - is the day your last payment is due and your debt is repaid.
 Value of security - The monetary value placed on security by a lender in determining the extent to which
it can make loans against such security.
 Yield on security- is the amount of cash (in percentage terms) that returns to the owners of the security,
in the form of interest or dividends received from it. Normally, it does not include the price variations,
distinguishing it from the total return.
 Credit rating- rates of a company’s ability to pay back debt by making timely principal and interest payments
and the likelihood of default.
 Credit rating of the issuing party
 Credit rating of the trustee
 Credit rating of the underwriter