2. Using the information we discussed concerning compound interest, work by yourself to choose an answer to the question below. (Your calculations may not be exact. You may be estimating.)
John Anderson deposited $10,000 in a certificate of deposit (CD) for 3 years at 5%. At maturity, it will be worth:
a. $10,500.
b. $10,725.
c. $11,400.
d. $11,580.
e. $12,400.
$11,576.25

3. $10,000 CD for 3 years compounded yearly at 5% interest.
$10,000 x .05 x 1= $500 Interest for 1st year
$10, = $10,500 New Balance
$10,500 x .05 x 1 =$525 Interest for 2nd year
$10, = $11,025 New Balance
$11,025 x .05 x 1= $ Interest for 3rd year
$11,025 + $551.25= $11, New Balance
**How much interest will you get if you take this 3 year CD out after the 2nd year?
None! You’ll also be charged a fee for early withdrawal!

4. The Rule of 72
-Used to calculate how long it will take your invested
money to double.
-72 divided by the interest rate=number of years to
double.
Ex.
$5,000 deposited in an account with 8% interest.
years to double money 8 =

5. Age Amount
$5,000
$10,000
$20,000
$40,000
$80,000
$160,000
$320,000
$640,000
Age Amount
$10,000
$20,000
$40,000
$80,000
$160,000
$320,000
$640,000
$1,280,000

6. Rule of 72 (continued)
-Also used to calculate the rate of return
needed to make your money double.
-72 divided by the number of years you would
like to see money double will give you the
interest rate needed to achieve that goal.
% interest rate to double
10 yrs. =

7. Investing: Taking Risks with Savings
**To earn a higher rate of return, people must
be willing to take a risk w/ their money.
*Stocks
-Buying into a corporation
-Entitles holder to future profit
-Stock certificate shows ownership.

9. Making Money in Stocks
Dividends--money paid to stockholders on
profits.
(Income gained by owning the stock)
Speculation--selling stock for more than you
paid for it.
(Income gained by selling the stock)

10. Selling price today
Profit per share

11. Capital Gains--profit made on stock
Ex Buy Stock at $10 per share
Sell Stock at $30 per share
Profit-- $20 per share
Capital Loss--money lost on stock
Ex Buy Stock at $30 per share
Sell Stock at $10 per share
Loss--$20 per share

12. Bonds
-like loaning money to a corp.
-pays interest over a certain
amount of time.
-promises to repay loan at
maturity
-not an owner, but a creditor

13. Stocks! Owners are the last to be paid.
**Which investment is a bigger risk to your
money- -stocks or bonds?
Stocks!
**Why are stocks riskier than bonds?
Owners are the last to be paid.
Bond holders are bills that must
be paid for company to stay in
business.

14. Highest and lowest
price the stock has been
in the last year.
Amount of profit
paid per share to
stockholders.
Current
Stock Price
Per Share
Number of
shares bought
and sold today.
Difference in stock
price from yesterday to today.

15. Current price
Highest for the year
Lowest for the year
Number traded so far today
Profits per share