Unit 2 Test - Saving

John has found a savings account with a 2% annual interest rate. Given that the interest rates remain the same, how many years will it take for John to DOUBLE his money in this account using the Rule of 72?

• 36 years

• 72 years

• 144 years

• 2 years

If you invest $500 in a savings account with an annual interest rate of 2% for 5 years, how much simple interest will you accumulate after FIVE years?

• $10

• $20

• $50

• $100

Maria earned $2,000 from her part-time job at a cafe. If she doesn't need to use the money for several years and wants to maximize her interest earnings, which savings option would be the most suitable for her?

• Savings account

• Certificate of Deposit

• Current account

• Money Market account

You are evaluating two investment options based on the returns you would get and the charges they impose. Assuming you have an investment amount of $1000, which combination of returns and charges would be more profitable? (Hint: Calculate the net gain from both Investment A and Investment B over a year).

• Investment A offers you a 15% annual return rate and $10/month in charges

• Investment B offers you a 5% annual return rate and no charges

• Both investment options yield the same net gain

• Trick question -- it's not wise to invest only $1000

Which of these is not a common misconception about savings?

• Saving money is not possible for people with low income

• Having a savings account is not necessary for financial stability

• Spending money on discounted items is not considered saving

• Marketing strategies do not influence people to spend more than they save

Samantha is a 16-year-old sophomore in high school and just got her first part-time job. She wants to open a checking account. What will she need to do to open an account at her local bank?

• A letter from her school

• A letter from her parents

• An adult cosigner because she is under 18

• An adult cosigner because she is still a student

Considering the competitive fees among all, which bank would you choose as the best option?

• Bank X

• Bank Y

• Bank Z

• All 3 banks are equally good options

If a bank offers a 2% interest rate on their savings account, over what period of time is this interest typically calculated?

• Weekly

• Bi-monthly

• Semi-annually (six months)

• Yearly (one year)

John invests $2,000 into a savings account that offers 2% interest per year. After the first year, he has earned $40 in interest and his account balance is $2,040. If the account uses simple interest, the 2% interest for the second year would be calculated based on ____________. If the account uses compounding interest, the 2% interest for the second year would be calculated based on ________________. (NOTE: The first option fills the first blank, the second option fills the second blank).

• The initial investment ($2,000); The balance after year one ($2,040)

• The initial investment ($2,000); The interest earned in year one ($40)

• The balance after year one ($2,040); The interest earned in year one ($40)

• The balance after year one ($2,040); The initial investment ($2,000)

You have a savings account at Westside Bank, which is FDIC insured. You have a balance of $1000 in your account. One day, you read in the newspaper that Westside Bank is facing financial difficulties. If Westside Bank goes out of business, what will happen to your savings?

• You would get back all your money as FDIC insurance covers up to $250,000 per depositor, per insured bank.

• You would lose half of your money as FDIC insurance only covers 50% of your deposits.

• You would lose all your money as FDIC insurance does not cover bank failures.

• You would receive $250,000 from FDIC insurance, regardless of your actual account balance.