Math can make you money! If you understand some basic math, you can make good de
ID: 2776751 • Letter: M
Question
Math can make you money! If you understand some basic math, you can make good decisions about how to keep, spend, and use your hard earned dollars. Try an experiment comparing the same balance in different types of bank accounts.
How much better is a savings account than a checking account?
What difference does the interest rate make? Which is better, an account that earns 5 percent compound or simple interest 5.54?
Can you compare the short and long term costs of borrowing money compared to saving the cash for a purchase?
Use mathematical arguments to answer classic questions like, "Which is more: one million dollars, or one penny the first day, double that penny the next day, then double the previous day's pennies and so on for a month?" (Dr. Math, 2006)
Explanation / Answer
Checking accounts are very liquid and allows many transaction they offer very low interest rate whereas savings account give higher interest rate than checking account.
Compound interest are better for long term as the money grows at a compounded rate.It depends on the time i.e for how long you want to keep money in the account for your stategic needs, for long term savings accounts, compound interest are better.
As in these account money will grow at higher rate.
Borrowing is costly than saving the money for purchase as the interest payments on borrowings are very high so you end up paying a lot if you borrow the money.Saving is prefered rather than borrowing.short term borrowing interest rate is higher than long term borrowing.
Value of money today is higher than the same amount at a later period, this is time value of money so generalky people prefer to have cash today rather than higher amount later as receiving cash later involves risk.Longer to period of cash receivale higher therisk.