Assignment 4: Saving and Investing
1. Describe a real or made up but realistic situation that could cause you or someone you know to have to use money from a financial reserve. (3-6 sentences. 2.0 points)
If someone were to have a sudden, serious illness that required a long hospital stay with large medical bills and left them unable to work, they would have to use money from a financial reserve like a savings account or a 401k plan to pay the bills.
2. How many months' worth of expenses do you think your financial reserve should include? Describe at least two reasons for this decision. (3-6 sentences. 2.0 points)
7 months because I could lose my job and have no source of income.
3. Would you rather have a savings account that offered simple interest, or an account that offered compound interest? Why? (3-6 sentences. 2.0 points)
compound interest. Over time the compound interest will build up on interest on your interest
4. If you were opening a savings account with compound interest, would you prefer an account that offers annual compounding, quarterly compounding, or daily compounding? Why? (3-6 sentences. 2.0 points)
Daily compounding would give the best annual return
5. Which strategy for saving do you think would work best for you? Why? (3-6 sentences. 2.0 points)
Monthly or biweekly budget because if you save like 10 dollars here and there it will eventually build up to alot
6. Describe two financial goals that you would want to meet before you begin investing. Explain why you would want to reach those goals first. (2-4 sentences. 2.0 points)
I will need to pay and get my car, and I will need to buy insurance for it.
7. Describe at least two factors of an investment that you would want to consider before putting money into that specific investment. (2-4 sentences. 2.0 points)
How risky the investment is and how much you can get out in return for what you put in