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