Vocab
Rank the savings tools in order from most liquid to least liquid
Checking, savings, money market, CD, savings bond
Used to hold money not spent on current consumption
Savings account
Carly started her first job as a nurse. She wants to place $200 of every paycheck into a savings tool to use for emergencies. Which savings tool should she choose and why?
Savings account - she can keep depositing money every paycheck and withdraw it when she needs to
Carter puts $600 in a savings account with a 2% interest rate for 6 years. How much interest did he earn?
$72
How many years would it take you to double $450 with an investment earning 8% interest?
9 years
Rank the savings tools in order from highest interest rate to lowest interest rate.
Savings bond, CD, money market, savings, checking
A tool used to transfer funds deposited into the account to make a cash purchase
checking account
Brandon has $400 he'd like to deposit into a savings tool. He wants to be able to continue to deposit money to create a college savings fund. Which tool should he use and why?
Savings account - he doesn't have enough to start a money market and he wants to keep depositing money into the account
Dawn invested $957 and received $1,416.36 after eight years. What was the interest rate?
6%
How many years would it take you to double $2,100 with an investment earning 12% interest?
6 years
Secure and liquid accounts offered by depository institutions that assist in the management of a savings fund
Savings tools
A government insured account offered at most depository institutions with tiered interest rates and a limited amount of withdrawals each month
Andrew received $2,000 from his family for his 16th birthday. He plans to save this money for four years to help pay for his first year of college. He doesn't anticipate depositing any more than the $2,000. Which savings tool should he choose and why?
CD - he can earn a large amount of interest because he doesn’t plan on touching the account after the original deposit
Bailey puts $1300 in a savings account with a 4% interest rate for 5 years. What is the final amount Bailey will have at the end of those 5 years?
$1,560
What interest rate would you need on an investment of $4,200 to double your money in 4 years?
18%
What does tiered interest rate mean?
The more money in your account, the higher interest rate you’ll earn
Interest earning savings tool allowing restricted access to funds
Certificate of Deposit
Penelope currently has $10,000 in her savings account. She wants to transfer $5,000 into a higher interest-earning account. However, she still wants to access her money in case of an emergency. Which tool should she use and why?
Money market - she wants a higher interest rate, she has a large deposit, but she still wants access to her money
Richard invests $900 at 5.5% compounded annually for 12 years. What is the final balance of his investment?
$1,711.08
What interest rate would you need on an investment of $20,000 to double your money in 18 years?
4%
Federal government agency that insures certain depository institutions against loss up to $250,000
Federal Deposit Insurance Corporation
A discount bond purchased at 50% the face value from the government.
savings bond
Drew has saved $5,000 that he wants to grow with a high interest rate. He does not need the $5,000 at any specific time or in the near future. What savings tool should he use and why?
Savings bond - he will earn the highest amount of interest and he doesn't need access to the money
Gary puts $550 into an investment at 8% compounded quarterly for three years. What will the balance be at the end of three years?
$1385.01
Describe the Rule of 72
Can be used to find how many years it will take your investment to double with a given interest rate or to find what interest rate you’ll need to double your investment with a given number of years