Certificate of Deposit

Archive for September, 2007

Question: best way to invest before college?

I got all of my savings bonds and some are earning good interest(4%), but others are making less than 1%. I put all of them in a bond calculator, and they came out to $1100.

I was wandering if i should leave them all in bond form or try to find a Money Market account, but I don’t think $1100 is enough for that.

What should I do with it?

Answer: You can buy a Money Market account with $1,100, but the problem will be finding one that will yield more than 4%.

Ally bank was the highest yield I found on an account. 2% APY on bank CDs.

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Question: When opening a Certificate Of Deposit, which rate is more important, the interest rate or APY?

Also, how is interest calculated? Can u provide an example? Thanks

Answer: If it is for less than a year then APY does not apply. Because APY is annual percentage yield. So, if you open a CD for 12 months or 14 months or 2-3 years than I would say APY rate could help you out. Some times, banks do offer higher APY for 4- 5 years certificate of deposits.
Therefore, I would say interest rate is important for less than 12 months CD.
Interest calculation: for e.g. if you open a CD of $1000.00 for 6 months @ 6.00% rate. 1000.00 x 6%= 60
then 60 divide by 12 months = $5.00 per month. So, interest for 6 months = $30.00.
I hope this example will help you out.

Certificate Of Deposit Rates

Question: Would someone please answer these questions for me. Thanks it will be greatly appreciated?

(1) An inventory pricing procedure in which the oldest costs incurred
rarely have an effect on the ending inventory valuation is
a. FIFO.
b. LIFO.
c. base stock.
d. weighted-average
(2)Which of the following is considered cash?
a. Certificates of deposit (CDs)
b. Money Market checking accounts
c. Money Market savings certificates
d. Postdated checks
(3)Information is neutral if it
a. provides benefits which are at least equal to the costs of its
preparation.
b. can be compared with similar information about an enterprise at
other points in time.
c. would have no impact on a decision maker.
d. is free from bias toward a predetermined result.

Answer: (1) a. FIFO

FIFO (first in, first out) means that the oldest costs would be applied to sales first, and therefore would not be part of the ending inventory after these sales.

(2) b. Money Market checking accounts

these can be used as payment for current transactions, the others on the list cannot.

(3) I’m not sure what the term “neutral information” refers to. I don’t remember it being part of my studies, I’ve never used it in my career, and I checked an old textbook that I have lying around, it’s not mentioned. It must mean one of two things: either it means that the information was obtained from a neutral source (which would make d. the correct answer) or it means that the results have a neutral effect (which would make c. the correct answer). I can’t see any possibility for either a or b to be correct.

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