Other Bank Accounts

Gareth has $2,000 to invest. Putting the money in a savings account at his local bank will earn him 2.2% annual interest and gives him the ability to make ATM withdrawals from that bank's ATMs. Putting the money in an online savings account will earn him 4.85% annual interest, but he will be charged $3 every time he makes an ATM withdrawal. Assuming that Gareth's ATM withdrawals do not affect the amount of interest he earns, roughly how many ATM withdrawals must Gareth make every year for the local savings account to be a better deal than the online savings account?

18

Rachel invested $15,000 in a nine-year CD giving 8.5% interest, but needed to withdraw $4,000 after two years. If the CD's penalty for withdrawal was six months' worth of interest on the amount withdrawn, how much money did Rachel have when the CD reached maturity, not including the amount she withdrew? Round answer to the nearest whole dollar.

19,925

Norm has $15,000 to deposit. His daughter is a junior in high school and plans to go to college. Recommend the best way for Norm to store his money. Note that the interest rates are expressed on an annual basis.

A money market account paying 3.5% interest, renewable for three-month commitments

Why do certificates of deposit tend to offer better interest rates than money market accounts?

Certificates of deposit involve a longer time commitment than money market accounts, so they carry a greater return.

Rate the following bank accounts from most to least liquid: CD, savings account, checking account, money market account.

Checking account, savings account, money market account, CD

How is email a useful component of online banking?

I and II only

Which of the following are advantages of certificates of deposit (CDs) over savings accounts?

II only

Select the correct statement and rationale relating the interest rates of online banks to those of traditional banks.

Online banks offer greater interest rates than traditional banks because they have lower overhead costs.

Ian invests $13,670 in a savings account at his local bank which gives 1.9% simple annual interest. He also invests $6,040 in an online savings account which gives 4.5% simple annual interest. After nine years, which one will have earned more interest, and how much more interest will it have earned, to the nearest dollar?

The online account will have earned $109 more interest.

Some online banks offer "online bill pay." What does this mean?

You can visit your bank account online and electronically transfer funds to pay your bills.