Problem 9
Applying Economic Concepts Suppose that you deposit \(\$ 100\) into your savings account, which earns 3 percent interest per year. Use what you've learned about calculating interest to determine how much money you'll have in your account at the end of one year and at the end of six years.
Problem 9
Inez bought 100 shares of a mutual fund for \(\$ 10\) each and sold them five years later for \(\$ 15\) each. Ethan put \(\$ 1,000\) in a 5 -year \(\mathrm{CD}\) and received a total of \(\$ 235\) in interest. Which investment provided the better return? How does this illustrate the relationship between risk and return?
Problem 9
Julie has accumulated 1,000 dollars in a bank savings account, which pays 2.7 percent interest. She investigates several options and finds that she can invest her money in a 1 -year Treasury note paying 4.4 percent interest, a 1-year CD paying 3.9 percent interest, or a money market mutual fund with an average yield of 3.7 percent. What are the pros and cons of each of these investment options?
Problem 10
Stocks that are sold on the secondary market and savings accounts both provide liquidity. For each of these investments, what kinds of risks does this liquidity entail?
Problem 10
Challenge Why might a decrease in household savings have an adverse effect on small businesses in a local community?
Problem 10
How would a lower bond rating by Moody's or Standard \(\&\) Poor's affect the coupon rate that a corporation has to offer when it issues its bonds? Give reasons for your answer.
