Personal Finance

Deposit $1,950 in a savings bond account. The bank is paying you .02% interest, but it is compounded semi-annually. How much interest will you earn for the year

$.39 or $1950.39

Deposit $15,000 in a saving account. The bank is paying you .035% interest, but it is compounded quarterly. How much interest will you earn for the year?

$1,5052.57 or $52.57

Deposit $1650 in a money market account. The bank is paying you 1.15% annually, which is compounded monthly. How much interest will you earn for two years?

$1,688.37 or $38.37

Al Czervik recently won a substantial award from a lawsuit that he filed against Bushwood Country Club. He deposits $1,000,000 in a savings account that pays interest at an annual rate of 2%. However, the bank compounds the interest on a quarterly basis. What is the total value of Al's savings account at the end of one year?

$1020150.50

Deposit $800 in a CD account. The bank is paying you .15% annually, which is compounded monthly. How much interest will you earn for one year?

$801.20 or $1.20

withdraw

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Deposit $1,250 in a money market account. The bank is paying you 1.1% interest, but it is compounded quarterly. How much interest will you earn for the year? What is the rate of return (also known as APY)? (so you need 2 answers)

1. $1,263.81 or $13.81 2. 1.1048%

Tony D'Annunzio deposits $3,000 in a savings plan at the beginning of the year. At the end of the year, Tony has earned $105 in interest. What was the rate of return earned by Tony during the year?

3.5%

Ty Webb wants to deposit $15,000 into a savings plan. He intends to use the money in five years to build a new swimming pool. He desires a low risk plan that earns a higher interest rate than a normal savings account. He has no intention of needing the money prior to the end of the five-year period and, hence, does not need the ability to withdraw any of the money in the meantime. Upon visiting his bank and discussing his options with a financial representative, Ty decides on a plan. However, the representative warns him to make sure he removes his money at the end of the five years. Otherwise, he may risk having to keep the money in the plan another five years or face a financial penalty. What type of savings plan has Ty decided to use?

CD

Certificates of Deposit (CDs) typically offer lower interest rates than regular savings accounts.

False

Which of the following is NOT a criteria by which consumers evaluate savings plans?

Foreign Exchange Rate

A loss of buying power will occur if the rate of ___________ exceeds the rate of return for a particular savings plan.

Inflation

Which of the following is NOT a possible restriction or fee applicable to savings plans?

Tax-exempt status

5 months

cd

liquid account

checking account

The Annual Percentage Rate (APR) informs a consumer of the interest rate based on both the annual rate and the frequency of compounding.

false

Carl Spackler plans to retire in three years from his job working as a Head Greenskeeper at a local Country Club. Therefore, he intends to start depositing a portion of his salary into a savings plan. However, he wants to be able to withdraw some of the money without a penalty for the down payment on the purchase of a new boat next year. The financial representative at his bank recommends a type of savings plan that allows for three withdrawals each month without a penalty. The interest rate for the plan varies from month to month and requires a minimum initial deposit of $1,000. What type of savings plan is the financial representative recommending to Carl?

money market

5 yeas

savings

What term best describes money earned from a saving plan that is free from taxation until a person withdraws or takes possession of it?

tax-deferred

A higher frequency of compounding leads to a higher rate of return.

true

Interest rates for Money Market accounts fluctuate over time and oftentimes vary based on the size of the account balance.

true