Investments Lesson 12 1 CERTIFICATES OF DEPOSIT CDS

Vocabulary Invest- To commit money in order to earn a financial return. Earn interest

To invest in CD’s, you start with one relatively large deposit. What are some

A. J. deposits $50, 000 in a 4 -year CD that earns interest at

Clayton and Madison can purchase a 4 -year CD for $10, 000 at 4.

Cody Deposits $5, 000 in Beacon Credit Union’s 5 -year CD, which pays 5.

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Investments Lesson 12. 1 CERTIFICATES OF DEPOSIT CD’S

Vocabulary Invest- To commit money in order to earn a financial return. Earn interest Certificate of Deposit (CD)- A kind of savings account that requires a specific amount deposited for a specific period of time. It usually earns a higher interest rate that a regular savings account. Interest is usually compounded daily, monthly or quarterly You can be penalized for early withdrawal Maturity- The specific amount of time when you can “cash-in” to get the full value of the CD. Principal + Interest

To invest in CD’s, you start with one relatively large deposit. What are some situations that you might have a large sum of money that you do not currently need to use? � Tax return � Bonus from work � Graduation � Inherence � Sell of property � Gift (marriage, holiday, . . ) � Legal settlement � Lottery/winnings � Overtime earnings � Vacation pay � Profit from other investments

Formulas �

A. J. deposits $50, 000 in a 4 -year CD that earns interest at an annual rate of 5. 25% compounded daily. a) Find the amount of the CD in 4 -years Amount = Original Principal X Amount of $1. 00 Amount = (50, 000) (1. 233659) Amount = $61682. 95 b) Find the interest earned in 4 -years Compound Interest = Amount – Original Principal Compound Interest = 61682. 95– 50, 000 Compound Interest =$11682. 95

Clayton and Madison can purchase a 4 -year CD for $10, 000 at 4. 5% compounded daily or monthly. a) What is the amount of each CD at maturity? Amt Daily=(10, 000)(1. 197204) Amt Daily= $11972. 04 Amt Month=(10, 000)(1. 196814) Amt Month= $11968. 14 b) What is the difference in the interest earned? 11972. 04 – 11968. 14=$3. 90

Cody Deposits $5, 000 in Beacon Credit Union’s 5 -year CD, which pays 5. 22% compounded monthly. Find the value of the CD at maturity and interest he earned. �

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