Unit 2 Test - Saving

The highest yielding savings accounts are paying historically low interest rates, so Maria 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?

• 1 year
• 5 years
• 10 years
• 72 years

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?

• $1
• $5
• $6
• $25

Juan 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?

• Regular savings account
• Money Market account
• Checking account
• Certificate of Deposit

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? (Hint: Using a one year period, determine the balance that you would have at Bank A and Bank B).

• Bank A offers you a savings account with a 10% annual interest rate and $5/month in fees
• Bank B offers you a savings account with 2% annual interest rate and no fees
• The two banks deals are equivalent
• Trick question -- it's a bad idea to open a savings account with just $500

Which of these statements about savings is incorrect?

• People often believe they are saving when they buy products at a listed discount, even if they didn't need the product in the first place
• It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit
• Without a vehicle to save (like a savings account), it's much easier to spend and harder to keep track of finances
• Billions of dollars is spent on marketing to persuade consumers to spend money instead of saving it

Jeremy is a 17-year-old junior in high school and just started his first job. He wants to open a savings account. Which of these will he need to bring to the local bank branch in order to start an account?

• A letter from his school
• A letter from his parents
• An adult cosigner because he is under 18
• An adult cosigner because he is still a student

All three have fees competitive with other banks. Which bank is the best option?

• Bank A
• Bank B
• Bank C
• All 3 banks are equally good options

When a bank says their savings account earns 1% interest, that typically means you will earn 1% interest over what period of time?

• Daily
• Monthly
• Quarterly (three months)
• Annually (a year)

9Stanley 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).

• The original deposit ($1,000); The year one account balance ($1,010)
• The original deposit ($1,000); The year one interest ($10)
• The year one account balance ($1,010); The year one interest ($10)
• The year one account balance ($1,010); The original deposit ($1,000)

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?

• You would receive all the money you have deposited at Eastside Savings since FDIC insurance covers accounts up to $250,000.
• You could lose $250 since FDIC insurance only covers 50% of the money you have deposited.
• You would lose all of your money.
• You would receive $250,000 since FDIC insurance provides each account at the bank with $250,000 regardless of how much they have deposited.