stocks and brokers
Elena is thinking about putting $200 in a savings account that earns 4% interest compounded semiannually. She wants to keep that money in the account for 4 years. Which of the formulas below can help her calculate how much money she will have at the end of the 4 years? $200(1+0.08)^2 $200(1+0.04)^4 $200(1+0.02)^4 $200(1+0.02)^8
$200(1+0.02)^8
Alex invested $400 in a CD that pays 3% simple interest, calculated semiannually. How much money will Alex earn in 2 years? $24 $74 $54 $14
$24
What is the most money FDIC will insure in a single account?
$250,000
Lorraine invested $5500 in a savings account with a yearly interest rate of 6% for 9 years. How much simple interest did she earn? $2970 $330 $297 $3300
$2970
Earl's savings account has an APR of 7.3% calculates interest daily, and pays interest at the end of the month. If during the month of Jun, his balance was $400 for the first 10 days of the month, %1500 first 10 days of the month, and $600 for the last 10 days of the month, how much total interest did Earl earn in June? $3.00 $2.80 $2.30 $5.00
$5.00
The APR of Rose's savings account is 4.2% and interest is compounded monthly. If rose makes no additional deposits or withdrawals for an entire year, what will be the balance of her account after all the interest is paid for the year on principal balance of $9100? $9482.20 $9489.64 $9138.19 $9138.29
$9489.64
How many times will interest be added to the principal in 1 year if the interest is compounded annually? 12 2 6 1
1
According to the rule of 72, in about how many years will $80 be worth $40 if the rate of inflation is 5.4%? 12.8 years 13.3 years 14.8 years 7.4 years
13.3 years
Denise put $95 into an account that pay6s 5.2% interest, compounded monthly.According to the rule of 72, approximately how long will it take for her money to double? 138.5 years 13.8 years 18.3 years 182.7 years
13.8 years
Jeff deposited $400 into a bank that offers 3.9% interest rate, compounded daily in how many years will his balance be %800? 24.1 years 12.1 years 17.7 years 18.5 years
17.7 years
Approximately how long will it take you to double your savings of $500 if you open a CD that earns 4% interest, according to the rule of 72?
18 years
Lars deposited $50 into a savings account for which interest is compounded quarterly. According to the rule of 72, what interest rate will cause his money to double in approximately 29 years? 1.7% 0.4% 0.6% 2.5%
2.5%
On January 1, 1990, Emilio deposited $1650 into a savings account paying 6.2% interest, compounded monthly. If he hasn't made any additional deposits or withdrawals since then, and if the interest rate has stayed the same, in what year did his balance hit $3300, according to the rule of 72? 2000 2002 2003 2001
2001
Buffy just put some money into a CD that pays 10% interest, compounded monthly. According to the rule of 72, in approximately how many years will she have 4 times the amount of money she has now? 28.5 years 7.1 years 14.3 years 21.4years
28.5 years
The annual interest rate of Marcella's savings account is 7.2% and simple interest is calculated semiannually. What is the periodic interest rate of Marcella's account ? 3.6% 0.8% 0.4% 1.2%
3.6%
Suppose you were to have $125,000 in savings and you put it in a bank account that earned 2% interest. How long would it take you to double this amount?
36 years
After 4 years, Aspen earned $510 in simple interest from a CD into which she initially deposited $3000. What was the annual interest rate of the CD? 4.25% 11.75% 8.5% 13%
4.25%
How long will it take %75 to halve in value if there is an inflation rate of 1.5%
48 years
According to the rule of 72, if the GDP of the Apex Federation is growing at 1.3% per year,its economy will double in approximately how many years? 17 years 55 years 42 years 41 years
55 years
State the rule of 69 and when it works best
69/r*100 = where, r, is the annual interest rate. This rule of 69 works best when the compounding period is 1 day or less.
State the rule of 72 for the umber of years to halve.
72 divided by % of inflation times 100 = # of years to halve.
What is a savings bank?
A bank that is devoted exclusively to opening savings accounts for its customers
What is a commercial bank?
A bank that makes loans and investments, and buys government bonds
What is a savings and loan?
A financial institutions that accept savings from depositors and uses those funds primarily to make loans to home buyers.
Is a higher interest rate better when you'r borrower or lender? Why
A high interest rate is better when you're a lender because you earn more on the money you led.
CD
A special type of savings account where money must stay deposited for a specific amount of time
What are the fees you pay for purchasing stock through a broker or online?
A stockbroker will buy stocks in your name and then charge you a fee/commission of about 8% of the value of the transaction. So if you up $100 in stocks through a stockbroker, you pay your broker about $8 for making the deal. If you buy stocks online yourself, you pay a transaction fee. This fee can be as low as $10 per transactions.
Savings bond
A type of bond that usually requires you to keep your money invested for 10 years
Basic savings account
A type of savings account that does not limit the number of deposits and withdrawals
Money market savings account
A type of savings account that feature an interest rate that varies according to the changes in the market but is generally higher than a regular savings interest rate. Withdrawals from money market accounts are limited
Colette opened a CD 10 years ago at an interest rate of 8.8% compounded quarterly. According to the rule of 72, when did she have half the amount of money that she has now? About 4.4 years ago About 8.8 years ago About 4.1 years ago About 8.2 years ago
About 8.2 years ago
What is a credit union?
An institution that is owned and operated by the same people who have accounts in it
APR
Annual percentage rate The periodic rate times the number of periods in a year
APY
Annual percentage yield Annual interest rate that factors in compounding effects APY= (1 + APR/n)^n-1
How long is your money "locked up" in a CD?
Anywhere from 6 months to 5 years
Why do banks advertise APY to their depositors while credit companies advertise APR to their borrowers?
Banks want to make interest rates look higher to their depositors, and credit card companies want to make their fees look lower to their borrowers
According to the rule of 72, if Randall invests $700 and %1900 into two separate accounts with the same interest rate, which amount will double faster? $700 $1900 Both will double at the same rate None of the above
Both will double at the same rate
What is meant by "flipping" real estate?
Buying pieces of property and then selling it in a short time period. Improve the home's appeal or to make repairs
If you buy high and sell lower, do you experience a capital gain or a capital loss?
Capital loss
What is FDIC insurance?
FDIC stands for Federal Deposit Insurance Corporation and is an independence agency of the federal government that insures deposits placed in FDIC insured banks.
What is the formula for calculating interest on a CD?
I=p*r*t (I=interest, p=principal, r=periodic interest rate, t= periods/time)
What is the relationship between liquidity and interest?
If the interest is higher, the liquidity is lower
How accurate is the rule of 72?
It's accurate if your money is compounded less often than everyday
A $1000 deposit is put into a savings account. Which of the following compounding frequencies will ensure highest interest earned in 5 years? Semiannually Annually Monthly Quarterly
Monthly
A savings account that pays interest every month is said to have a _______________ interest period. Quarterly Semiannually Monthly Daily
Monthly
As the compounding period grows shorter, does the rule of 72 become more or less accurate?
More
What is a mutual fund?
Mutual means "all together" Mutual fiends are collections of stock owned by a whole group of people.
What are the two major stock exchanges in the United States?
NYSE (New York Stock Exchange) -largest NASDAQ (National Association of Securities Dealers Automated Quotations) (exists online)
What are dividends?
Payments from a company to its shareholders
What is a broker?
Professional who is licensed to conduct transactions through the stock market. A broker can World as an independent agent/ be employed by a brokerage firm.
What is a bond
Promises to repay the full amount of debt plus periodic interest that are sold to investors by institutions
What is a real estate investment?
Real estate investment can be any type of property, such as houses, buildings, or land
Which of the following is nor needed to calculate simple interest? Yearly interest rate Reinvestment amount Principal Time
Reinvestment amount
If the interest earned by a CD is compounded continuous, which rule is most accurate when calculating how long it will take the money invested in the CD to double? Rule of 69 Rule of 72 Rule of 12 None of the above
Rule of 69
Rank the four types of savings accounts according to liquidity and interest Savings account CD Money market account Savings bond
Savings account Money market account CD Savings bond
Name two ways to increase your savings
Spend less by cutting back on expenses Put savings into an account that pays high compound interest
List four considerations you should keep in mind when investing in a mutual fund?
Spread your $ over several different stocks and other investment options Reduces your risk (potential loss of money) Some types of mutual funds charge a fee if you withdraw your money too early Mutual funds must pay out your dividends, earnings, at least once a year
What are stock market indices used for?
Stock market indices describes the stock market to the world at large and so can affect how trading goes each day
What are three differences between stocks and bonds?
Stocks:generally riskier but have more upside potential (may or may not offer periodic income in the form of dividends) Bonds: provide a guaranteed stream of income in the form of coupons (interest)
What is liquidity?
The ability to access cash quickly
What is a capital loss?
The amount by which a purchasing price exceeds a selling price.
What is a capital gain?
The amount by which a selling price exceeds a purchasing price
Future value
The amount to which a specific sum will row in the future
If a broker is not actually on the floor of a stock exchange, how can the broker buy or sell stock for his or her clients?
The broker can buy stocks remotely
Who issues bonds?
The government issues bonds and corporations
What is the Dow Jones Industrial Average?
The most closely watched stock market index in the country. It's a list of 30 large American Companies. The average daily ups and downs of the companies on the list make up this.
What is the rule of. 72?
The rule of 72 says that all amounts of money will take the same time to double and it approximates how long each doubling will take. More formally stated, if you save your money in an account at percentage rat, r, you can calculate how long it will take to double your money by applying the formula : 72/r*100=doubling rate, where r = percentage rate
What is the SEC?
The securities and exchange commission
Present value
What money is worth today
What are the three options for managing funds from a CD?
Withdrawal Renewal Reinvest
How can you make money with a real estate investment?
You can rent, leas, or sell your property
When would you need to use a broker?
You must go through a broker anytime you want to buy or sell stock shares
If you buy low and sell high, do you experience a capital gain or a capital loss?
You want to buy stock when they are at a low price and sell when the price increases. This profit you earn in this way is called capital gain.
What happens if you withdrawal your money early?
You will probably have to pay a fee
simple interest
interest paid only on the principal balance. simple interest is not added back to the principal
suppose you were to invest 150 dollars in a CD that pays simple interest, calculated quarterly. the annual interest rate is 6%. how much interest will you earn after 2 years.
interest= $150 times (0.06/4) times 8 = 18 dollars
what is the formula for simple interest
interest= principal * annual interest rate * time (in years )
the formula for calculating interest using periodic interest rate
periodic interest rate= annual interest rate/numbers of periods per year
principal
the amount of money invested or borrowed
interest
the fee paid for using other people's money also called finance charge
what is a period
the interval of time during which interest is calculated and applied
interest rate
the percentage paid or charged for borrowed money