Banking

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Commercial mathematics

Banking

Banking can be defined literarily as the business activity of accepting and safeguarding Money owned by individuals and entities and release of the money whenever the needs arise by the owner. It is the business of managing money and where money is involved everything must be carefully assessed, valued and measured.

Mathematics and Banking are closely connected. Extensive Maths is involved in keeping track of the money in a bank. Banking is a world of numbers and Mathematics is used in the way accounts are handled for calculating interest rates and for determining credit scores. Needless to say, mathematical precision is essential. Banks handle substantial sums of money and inaccuracies in the calculation can create huge negative ramifications.

Mathematics and Banking are tightly linked. Banking requires constant use of mathematics. e.g Complex formulas are necessary to compute interest and loans. Not only does banking require extensive math skills, it also requires intense precision and accuracy .Banking and mathematics are inexorably intertwined.

Correlation between Banking and Mathematics

  • Cash Transactions
  •  Fund Transfer
  •  Bank Reconciliation
  • Loans and Interest Rates
  •  Income and Expenditure
  • Portfolio Management
  •  Risk Assessment

Cash Transactions

 When someone deposits or withdraws money from a bank, Mathematics is involved to calculate the total in their accounts. Precision and accuracy is key.If a bank employee (teller) accidentally puts too much money into someone’s account, it will cost the bank money and if too little money is put into someone’s account, it can greatly damage the bank’s image.The same goes for withdrawals. Accurate Mathematics is essential to all cash transactions to ensure that correct amount/money is coming and going to the correct places (accounts).

Fund transfer

 This can be an internal transfer i.e.transfer within a bank or a transfer from one bank to another bank. In Fund Transfer, Mathematics is also involved because the commission and other charges has to do with calculation. For example, a transfer of N3,000 to another bank will attract a COT charge of N3 (i.e =N=1 per mille). Other forms of transfer like fx transfer, payment of salary, remittance to government agencies all involve figure.

Bank reconciliation

 Reconciling of account means the process of verifying the accuracy of the register (list of entries) by an individual or company entries in the register with the entries in the bank statement. Simple addition and subtraction mathematical skills are all that are required.

Loans and intrest rates

Loans

This involves complex Mathematics. First, the bank needs to calculate how high of a loan it should give (obligor limit) and how much you will be paying each month for the loan (rental). Calculating this requires consideration of a wide variety of factors ranging from how long the loan is for to how strong your credit history is.

Interest rates

The concept of interest rates is perhaps the most frequently used mathematical concept in banking. Interest rate is simply the cost of money over a specific period of time e.g. if a bank is willing to lend money to a borrower for a year at a rate of 10 %,the cost of borrowing over a year’s time is 10% of the original sum borrowed. So the cost of taking out a N1,000 loan for a year equals 10 % of N1,000 = N10.

Income and expenditure

Income increases the bottom line of an organisation or an individual and this is done through additional method while expense has to do with the subtraction from the bottom line.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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Banking is the business of providing financial Services to individuals and businesses. These services include accepting deposits, making loans, and providing other financial products and services.

Banks play an important role in the economy by providing a safe place to store money, making it easier for people to make and receive payments, and providing credit to businesses and individuals.

There are many different Types of Banks, including Commercial Banks, Savings banks, and credit unions. Commercial banks are the largest type of bank and offer a wide range of financial services. Savings banks are similar to commercial banks, but they focus on providing savings and Investment products. Credit unions are non-profit financial institutions that are owned by their members.

To open a bank account, you will need to provide some basic information, such as your name, address, and Social Security number. You may also be asked to provide proof of income or EMPLOYMENT. Once you have opened an account, you can deposit money, withdraw money, and make payments.

You can manage your bank account online, by phone, or in person at a branch. Online banking allows you to view your account balance, transfer money, pay bills, and more. Phone banking allows you to speak to a customer service representative to make transactions or get help with your account. Branch banking allows you to visit a physical location to make transactions or get help with your account.

ATMs allow you to withdraw cash, deposit money, and check your account balance. You can use an ATM at any bank that is part of the same Network as your bank.

Bank cards are plastic cards that allow you to make purchases. There are two main types of bank cards: credit cards and debit cards. Credit cards allow you to borrow money from the bank to make purchases. Debit cards allow you to use the money that is already in your checking account to make purchases.

Bank loans are a type of debt that you can use to finance a large purchase, such as a car or a house. There are many different types of bank loans, including personal loans, car loans, and mortgage loans.

Bank transfers allow you to move money from one account to another. You can make a bank transfer online, by phone, or in person at a branch.

Bill payments allow you to pay your bills electronically. You can set up automatic bill payments so that your bills are paid on time each month.

Cash deposits allow you to add money to your checking or savings account. You can make a cash deposit at an ATM, at a branch, or by mail.

Cash withdrawals allow you to take money out of your checking or savings account. You can make a cash withdrawal at an ATM, at a branch, or by writing a check.

Checking accounts are a type of bank account that allows you to write checks and make withdrawals. Checking accounts typically have a monthly fee.

Credit cards are a type of bank card that allows you to borrow money from the bank to make purchases. Credit cards typically have a credit limit, which is the maximum amount of money that you can borrow.

Debit cards are a type of bank card that allows you to use the money that is already in your checking account to make purchases. Debit cards are linked to your checking account, so when you use your debit card to make a purchase, the money is automatically deducted from your checking account.

Direct deposit is a way to have your paycheck or other payments deposited directly into your bank account. Direct deposit is a convenient way to get paid and can help you avoid late fees or overdraft charges.

Financial planning is the process of creating a plan for your financial future. Financial planning can help you reach your financial goals, such as saving for retirement or buying a house.

Foreign Exchange is the process of exchanging one currency for another. Foreign exchange is often used when traveling or doing business internationally.

Online banking is a way to manage your bank account online. Online banking allows you to view your account balance, transfer money, pay bills, and more.

Personal loans are a type of loan that you can use for any purpose. Personal loans typically have a higher interest rate than other types of loans, such as mortgages or car loans.

Savings accounts are a type of bank account that allows you to save money. Savings accounts typically have a higher interest rate than checking accounts.

Security deposits are a type of deposit that you may be required to pay when you rent an apartment or house. Security deposits are typically used to cover any damages that occur to the property during your tenancy.

Stop payments are a way to stop a payment from being made. You can stop a payment if you have made a mistake or if you no longer want to make the payment.

Wire transfers are a way to send money electronically. Wire transfers are typically used to send large amounts of money or to send money internationally.

Here are some frequently asked questions and short answers about the following topics:

Sure, here are some MCQs without mentioning the topic Banking:

  1. What is the name of the financial institution that is responsible for issuing currency and regulating the Money Supply?
  2. What is the name of the financial instrument that is used to borrow money from a bank?
  3. What is the name of the financial institution that provides loans to businesses?
  4. What is the name of the financial instrument that is used to invest in stocks and Bonds?
  5. What is the name of the financial institution that provides insurance to individuals and businesses?

Answers:
1. The central bank.
2. The loan.
3. The commercial bank.
4. The security.
5. The insurance company.

Here are some more MCQs:

  1. What is the name of the financial instrument that is used to save money?
  2. What is the name of the financial institution that provides checking and savings accounts?
  3. What is the name of the financial instrument that is used to transfer money electronically?
  4. What is the name of the financial institution that provides investment advice?
  5. What is the name of the financial institution that provides financial planning services?

Answers:
1. The deposit.
2. The commercial bank.
3. The electronic funds transfer (EFT).
4. The investment advisor.
5. The financial planner.

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