Which of the following financial instruments can earn a return for its owner by promising a share of a company’s profits?
- corporate bond
- Treasury bond
- certificate of deposit
- savings account
Which of the following assets is generally considered the LEAST liquid?
- savings accounts
- mutual funds
- real estate
- certificates of deposit
Suppose you have $1,000 that you can invest in a certificate of deposit at a local bank. Answer the following questions based on this information.
- If the interest rate were 3 percent, how much would your investment be worth in 10 years? Explain and show your work.
- If the interest rate were 6 percent, how much would your investment be worth in 10 years? Explain and show your work.
- If your goal was to double your initial investment and if the interest rate were 5 percent, approximately how many years would it take you to reach your goal? Round your answer to one decimal place.
- Certificates of deposit are low-risk investments. Provide an example of a financial investment you could choose if you wanted to invest your money in something that was higher risk. Would that investment likely earn a higher or lower rate of return than the certificate of deposit? Explain.