Assiagment4Saving&Investing

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Assignment 4 1. Describe a real or made up but realistic situation that could cause you or someone you know to have to use money from a financial reserve. (3-6 sentences. 2.0 points) Someone caught Ebola a serious illness that required a long hospital stay with large medical bills and left them unable to work. He then had to use money from a financial reserve like a savings account or a 401k plan to pay the bills. He then got better, got back on his feet and was able to work again and make money. 2. How many months' worth of expenses do you think your financial reserve should include? Describe at least two reasons for this decision. (3-6 sentences. 2.0 points) Three to six months of income in an emergency savings account this is only to be used in the case of an emergency. Or to cover a sudden loss of employment. Could be used in case a temporary situation arises. 3. Would you rather have a savings account that offered simple interest, or an account that offered compound interest? Why? (3-6 sentences. 2.0 points) I would rather have a Compound interest. While simple interest only pays interest on the amount that was originally invested, compound interest pays interest on the amount invested plus any interest earned. More money the better. 4. If you were opening a savings account with compound interest, would you prefer an account that offers annual compounding, quarterly compounding, or daily compounding? Why? (3-6 sentences. 2.0 points) The more often it is compounded the better. So daily is the best. The greater the number of compounding periods, the better it is for your bottom line. Albert Einstein once said “The most powerful force in the universe is compound interest." With that in mind, the more frequently an investment compounds, the more money

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