Savings Accounts and Rates

Reading the rate that is actually offered.

12 problems · about 21 minutes · TEKS M.M.3.B

NameDate

Figure — use these to answer the problems

Three accounts. Compare the yields, then subtract inflation to see what each really returns.

Account A20

Account B41

Account C50

Account A yield, tenths of a percent20

Account B yield, tenths of a percent41

Account C yield, tenths of a percent50

Figure 1

Straightforward practice. Get the method working first.

5 problems

An account pays 4% while inflation is 1%. Real return in percent?
Answer
2
What does APY let you do?
- Compare accounts on one number, with compounding included.
- See the return after inflation.
Pays 6%, inflation 2%. Real return in percent?
Answer
Pays 3%, inflation 3%. Real return in percent?
Answer
$1000 at 2% APY for one year. Balance in dollars?
Answer

The same ideas with more to keep track of.

3 problems

$5000 at 4% APY for one year. Balance in dollars?
Answer
Which is better, all else equal? 1 for 5% APY, 2 for 4.1% APY.
Answer
Where should emergency money sit? 1 accessible account, 2 locked higher-rate account.
Answer

Mixed problems. Work out what kind of question it is before you start.

4 problems

9
Which statements about APY are true?
- It already includes the effect of compounding
- It lets two accounts be compared directly
- It accounts for inflation
- It guarantees the rate will not change
- Tick every box that applies.
Pays 2%, inflation 5%. Real return in percent?
Answer
The Real Rate
An account pays 5% while inflation is 2%. What is the approximate real return, in percent?
Answer%
The Loss
An account pays 1% while inflation is 4%. Approximate real return, in percent?
Answer%