The Following Are Interest Rates at the State Employees Credit Union (SECU). Answer The

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Saving Lab

Part 1

The following are interest rates at the State Employees’ Credit Union (SECU). Answer the following questions based on the above interest rates:

(Look at next page)

1 – You have $700.00 to invest into a CD (Share term certificate). Look into opening a 12 month, 18 month, 24 month, 30 month, 36 month, and 48 month CD compounded monthly. What is the ending value of each investment and in each case how much is made off interest? (Remember t is always the number of years)

2 – Look at the current Money Market Rate.
a. Are you able to open a Money Market account with $176.00? Why or why not?
b. Say you deposit $650.00 into a Money Market account. Assume the rate stays constant what is the value of the account after 10 months?

3- For the “Summer Cash Variable Rate” and “Money Market Variable Rate” check the APY. Show your work:

4- In class we discussed the difference between APR and APY and how they are different. Look at the APR (rate) and APY for 12 month, 18 month, 24 month, 30 month, 36 month, 48 month,and 60 month CD. Work through and provide a written justification (In a complete sentence) for why the APR and APY are printed the same.

Hint: you will not have to do this 7 times

5- Say you were hired to do marketing for a bank. You are expected to market the great interest rates for loans and savings account.
a. when marketing a loan would it be more appealing to advertise the APR or APY?

b. when marketing a saving account would it be more appealing to advertise the APT or APY?

Answer both questions in complete sentences with explanation.

Part 2:

For questions 1 – 5 answer all of the following questions. How much money will the student have at the end of 5 years? How much interest will the student have earned in 5 years? What is the effective yield (APY)?

1.A student puts $10,000 in a savings account that pays 4% annual interest, compounded annually.

Set-upEnding ValueInterest Earned

Set-up APY

2.A student puts $10,000 in a savings account that pays 4% annual interest, compounded semi-annually.

Set-upEnding ValueInterest Earned

Set-up APY

3. A student puts $10,000 in a savings account that pays 4% annual interest, compounded quarterly.

Set-upEnding ValueInterest Earned

Set-up APY

4. A student puts $10,000 in a savings account that pays 4% annual interest, compounded monthly.

Set-upEnding ValueInterest Earned

Set-up APY

5. A student puts $10,000 in a savings account that pays 4% annual interest, compounded daily.

Set-upEnding ValueInterest Earned

Set-up APY

6. A student puts $10,000 in a savings account that pays 4% annual interest, compounded hourly.

Set-upEnding ValueInterest Earned

Set-up APY

7. Use the results of problems 1 to 6 to make a graph of the number of compounding periods in a year and the APY. The number of compounding periods should go on the x-axis, the APY goes on the y-axis. Pick an appropriate scale.
(Your graphing calculator can help here)

8. A student puts $5000 in a savings account that pays 3.4% annual interest, compounded quarterly. How much money will the student have at the end of 54 months? How much interest will the student have earned in 54 months?