2.1
If you deposit $200 into a CD (Certificate of Deposit) with an interest rate of 1% for 3 years, how much simple interest will you earn after THREE years?
$6
What would be the BALANCE of your savings account after SIX MONTHS if the savings account had a principal (initial deposit) of $500 and an interest rate of 2%?
a. $5.00
b. $10.00
c. $505.00
d. $510.00
c. $505.00
You meet with a bank manager to open a savings account. If you can only ask him/her one question (assuming the answer is true), what is the most important question you need answered?
a. What is the interest I would earn with your regular savings account?
b. What are the fees on your regular savings account?
c. Is it true that I get a toaster oven if I open a new savings account his month?
d. Is your bank FDIC insured?
d. Is your bank FDIC insured?
Sally Sue wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?
30 months
You want to take earnings from your part-time job to pay for a new laptop. Your monthly take-home pay is $500 and the laptop costs $1,200. What percentage of your pay do you need to save in order to buy the laptop in 12 months?
a. 5%
b. 10%
c. 15%
d. 20%
d. 20%
Phred saved $1,000 from his summer job cleaning pools. Which of these savings vehicles would work best for him if he doesn't need access to the money for a number of years AND wanted to earn the highest interest rate?
a. Regular savings account
b. Certificate of Deposit
c. Checking account
d. Money Market account
b. Certificate of Deposit
To successfully open a savings account, which of the following is NOT required?
a. Evidence of a job
b. Minimum deposit (if applicable)
c. Social Security number
d. If under 18, a guardian's signature
a. Evidence of a job
You put $500 in a savings account with an annual interest rate of 5%. If the bank compounds the interest every year, what would be the BALANCE in your account after 2 years?
$551.25
Which of the following is an effective strategy for personal saving?
a. Wait until the end of the month and save whatever is left in your checking account
b. Save a certain percentage of each paycheck and deposit it directly in a savings account
c. Cover all of your wants and needs and save whatever is left over
d. Take out a payday loan so you can save before you receive your paycheck
b. Save a certain percentage of each paycheck and deposit it directly in a savings account
You have $1,000 saved that you won't need for a few years. If you believe that interest rates will rise sharply over the next six months, which savings strategy should you pursue?
a. Keep your money in regular savings account and move into a CD after rates have moved up
b. Put your money into a 5-year Certificate of Deposit (CD)
c. Put your money into a 2-year Certificate of Deposit (CD)
d. Spend the money since it will be worth less if interest rates increase.
a. Keep your money in regular savings account and move into a CD after rates have moved up
You are comparing two savings accounts based on the interest you would earn and the fees they charge. Assuming you have a savings account with an average balance of $500, which combination of interest rates and fees are a better deal?
a. Bank A offers you a savings account with a 10% annual interest rate and $5/month in fees
b. Bank B offers you a savings account with 2% annual interest rate and no fees
c. The two banks deals are equivalent
d. Trick question -- it's a bad idea to open a savings account with just $500
b. Bank B offers you a savings account with 2% annual interest rate and no fees
When a bank says their savings account earns 1% interest, that typically means you will earn 1% interest over what period of time?
a. Daily
b. Monthly
c. Quarterly (three months)
d. Annually (a year)
d. Annually (a year)
Stanley deposits $1,000 into a savings account that pays 1% interest per year. At the end of the first year, he's earned $10 in interest and there is $1,010 in the account. If the account has simple interest, the 1% interest for year two would be based off ____________. If the account has compounding interest, the 1% interest for year two would be based off ________________.(NOTE: The first choice goes in the first blank, the second choice goes in the second blank).
a. The original deposit ($1,000); The year one account balance ($1,010)
b. The original deposit ($1,000); The year one interest ($10)
c. The year one account balance ($1,010); The year one interest ($10)
d. The year one account balance ($1,010); The original deposit ($1,000)
a. The original deposit ($1,000); The year one account balance ($1,010)
Which of the following are valid reasons to save for an Emergency Fund?
Yes | No | Statement |
Provides peace of mind | ||
Keeps you out of debt by giving you money to cover unexpected expenses | ||
Helps pay for your wants | ||
Covers your expenses if you should lose your job |
Yes | No | Statement |
x | Provides peace of mind | |
x | Keeps you out of debt by giving you money to cover unexpected expenses | |
x | Helps pay for your wants | |
x | Covers your expenses if you should lose your job |
Assume Phred is earning 0.5% interest on his savings account while inflation is running 2% per year. Which statement below is TRUE?
a. Phred's purchasing power is increasing by 0.5% per year
b. Phred's purchasing power is increasing by 2.0% per year
c. Phred's purchasing power is decreasing by 1.5% per year
d. Phred's purchasing power is decreasing by 2.0% per year
c. Phred's purchasing power is decreasing by 1.5% per year
How can you earn interest on your savings?
a. Borrowing money from a bank
b. Putting money in your mattress at home
c. Allowing your account to drop below the minimum
d. Depositing your money in a bank account
d. Depositing your money in a bank account
You are opening a savings account and are considering two options: BANK A is NOT FDIC insured, has an interest rate of 5%, and a minimum deposit of $25. BANK B is FDIC insured, has an interest rate of 0.01%, and a minimum deposit of $50. Both have fees competitive with other banks. If you had to choose, which bank would you pick?
a. Bank A
b. Bank B
c. Bank A and Bank B are the same
b. Bank B
Which of the following are important factors to consider when opening a savings account?
Yes | No | Statement |
Minimum deposit required to open account | ||
Interest rate | ||
Brand recognition | ||
Fees |
Yes | No | Statement |
x | Minimum deposit required to open account | |
x | Interest rate | |
x | Brand recognition | |
x | Fees |
Which of the following statements about banks is FALSE?
a. If it is FDIC-insured, your money is safe even if the bank fails
b. Many banks pay interest for the money you deposit with them
c. Historically, savings accounts earn higher returns than investments in the stock market
d. Money in a bank is usually easy to access via ATM, debit card or check
c. Historically, savings accounts earn higher returns than investments in the stock market
TRUE or FALSE: The interest rate on your savings account will remain the same as long as you keep the account open.
FALSE
The highest yielding savings accounts are paying historically low interest rates, so Sally Sue is only able to get a 1% annual interest rate for her savings account. Assuming interest rates do not change, use the Rule of 72 to approximate how many years it will take for her to DOUBLE her money in this account?
a. 1 year
b. 5 years
c. 72 years
d. 12 years
c. 72 years
Which of the following is NOT a reason savings can be difficult?
a. People often believe they are saving when they buy products at a listed discount
b. A majority of Americans, across all income lines, have no place in their budget they can save
c. Without a vehicle to save (like a savings account), it's much easier to spend and harder to keep track of finances
d. Billions of dollars is spent on marketing to persuade consumers to spend
b. A majority of Americans, across all income lines, have no place in their budget they can save
You open a new bank account at Eastside Savings. You see FDIC stickers around the bank, and the teller specifically mentions that Eastside Savings is "FDIC insured". A few months later, you hear on the radio that Eastside Savings is struggling to stay in business. Your savings balance is $500. What would happen to that money if Eastside Savings failed?
a. You would receive $250,000 since FDIC insurance provides each account at the bank with $250,000 regardless of how much they have deposited.
b. You would receive all the money you have deposited at Eastside Savings since FDIC insurance covers accounts up to $250,000.
c. You could lose $250 since FDIC insurance only covers 50% of the money you have deposited.
d. You would lose all of your money.
b. You would receive all the money you have deposited at Eastside Savings since FDIC insurance covers accounts up to $250,000.
You are developing a savings plan and using short-, medium- and long-term goals to motivate you. Arrange the following goals from short-term (1) to long-term (3):
Saving for retirement | |
Saving for a down payment on a home | |
Saving to buy a used car |
3 | Saving for retirement |
2 | Saving for a down payment on a home |
1 | Saving to buy a used car |
All of the following are good strategies to develop savings habits EXCEPT...
a. Start with a small goal and gradually get more ambitious
b. Take a percentage of your paycheck and deposit it directly into a savings account
c. Avoid spending money that you don't have and running up credit card debt
d. Getting paid in cash so you can store a certain percentage of your money in a shoebox in your room every month
a. Start with a small goal and gradually get more ambitious