CDAE 158 Lecture Notes - Lecture 8: Financial Institution
27 Sep 2018
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Usually involve a low or no minimum balance. A cd is a savings plan that requires you to leave your money on your deposit for a set time period, otherwise you incur early withdrawal penalties. Consider all the earnings and all the costs before saving with a cd or rolling over a cd. Consider creating a cd portfolio with cds maturing at different times. Benefits: rate varies with interest rates, low minimum deposit, government guaranteed, exempt from state, local income taxes. Drawback: lower rate when redeemed within first five years. Percentage or yield is the increase in value of your savings from earned interest. Compounding refers to interest that is earned on previously earned interest . Defines annual percentage yield (apy) as the percentage rate a saver should expect to earn. Purpose is to provide consistency when comparing different savings options at different institutions. Requires disclosure of: fees on deposit accounts, the intrest rate, other terms and conditions.
