3. If you thought that interest rates were going to rise in the next few months, how might this affect the advice that you give the Sampsons about investing in CDs with short-term versus long-term maturities?

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Recall that the Sampsons would like to save a total of $1,000 per month. They notice that their local bank offers the certificate of deposit (CD) rates listed in the following table; they now need to determine if they should invest in CDs, and if so, which CDs will best suit their savings goals. The Sampsons are saving for a down payment on a new car that they will purchase for Sharon within a year. They hope to save money each month for their children's college education, which begins twelve years from now. Maturity Annualized Interest Rate (%) 1 month 1.0 3 months 1.2 6 months 1.6 1 year 2.0 3 years 2.5 5 years 2.8 7 years 3.0 10 years 3.2 1. Advise the Sampsons on the maturity to select if they decide to invest their savings in a CD for a down payment on a car. Discuss the advantages and disadvantages of the maturity that you recommend the Sampsons use to save for the down payment on a car. 2. Advise the Sampsons on the maturity to select if they decide to invest their savings in CDs for their children's education. Discuss the advantages and disadvantages of the maturity that you recommend the Sampsons use to save for their children's education needs. Recall that the Sampsons would like to save a total of $1,000 per month. They notice that their local bank offers the certificate of deposit (CD) rates listed in the following table; they now need to determine if they should invest in CDs, and if so, which CDs will best suit their savings goals. The Sampsons are saving for a down payment on a new car that they will purchase for Sharon within a year. They hope to save money each month for their children's college education, which begins twelve years from now. Maturity Annualized Interest Rate (%) 1 month 1.0 3 months 1.2 6 months 1.6 1 year 2.0 3 years 2.5 5 years 2.8 7 years 3.0 10 years 3.2 1. Advise the Sampsons on the maturity to select if they decide to invest their savings in a CD for a down payment on a car. Discuss the advantages and disadvantages of the maturity that you recommend the Sampsons use to save for the down payment on a car. 2. Advise the Sampsons on the maturity to select if they decide to invest their savings in CDs for their children's education. Discuss the advantages and disadvantages of the maturity that you recommend the Sampsons use to save for their children's education needs.

Answer rating: 100% (QA)

Solution 1 As Sampsons want to invest their money for the down payment of the car they cannot invest ... View the full answer