Money in my savings account earns interest at 10%annual rate. Each time I go to the bank, I waste 15 minutesin line. My time is worth $10 per hour. During each year, Ineed to withdraw $10,000 to pay my bills. a How often should I go to the bank?b Each time I go to the bank, how much money shouldI withdraw?c If my need for cash increases, will I go to the bankmore often or less often? d If interest rates rise, will I go to the bank more of-ten or less often? e If the bank adds more tellers, will I go to the bankmore often or less often?
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
Money in my savings account earns interest at 10%
annual rate. Each time I go to the bank, I waste 15 minutes
in line. My time is worth $10 per hour. During each year, I
need to withdraw $10,000 to pay my bills.
a How often should I go to the bank?
b Each time I go to the bank, how much money should
I withdraw?
c If my need for cash increases, will I go to the bank
more often or less often?
d If interest rates rise, will I go to the bank more of-
ten or less often?
e If the bank adds more tellers, will I go to the bank
more often or less often?
To answer your questions, let's analyze each scenario:
a) How often should I go to the bank?
To determine how often you should go to the bank, you need to consider the trade-off between the interest earned on your savings and the value of your time.
Each time you go to the bank, you waste 15 minutes in line. In terms of your time value, this is equivalent to $2.50 ($10 per hour divided by 4, as there are 60 minutes in an hour and 15 minutes is a quarter of an hour).
Assuming you withdraw $10,000 each time, you would earn 10% interest annually on your savings. Therefore, if you withdraw the entire amount at the beginning of the year, you would earn $1,000 in interest over the year.
Comparing the value of your time ($2.50) to the interest earned ($1,000), it would be more beneficial for you to withdraw the full $10,000 at once and go to the bank once a year.
b) Each time I go to the bank, how much money should I withdraw?
Based on the analysis in part (a), you should withdraw the full $10,000 each time you go to the bank.
c) If my need for cash increases, will I go to the bank more often or less often?
If your need for cash increases, you would likely go to the bank more often. This is because you would require additional withdrawals to meet your increased cash needs.
d) If interest rates rise, will I go to the bank more often or less often?
If interest rates rise, you may be incentivized to go to the bank less often. Higher interest rates would mean that your savings would earn more interest over time. Therefore, it would be more beneficial to keep your money in the savings account for a longer duration and make fewer withdrawals.
e) If the bank adds more tellers, will I go to the bank more often or less often?
If the bank adds more tellers, it would likely reduce the time you spend in line during each visit. Consequently, you would be more inclined to go to the bank more often as the time cost of waiting in line would decrease.
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