Question

Jan wants to save a $2000 gift from her grandparents, and add $50 per month as emergency funds. She has narrowed her search for a savings account to 2 banks, Bank A and Bank B. Bank A pays a fixed rate of interest, and Bank B pays a variable rate, but both rates are currently the same. What advice would you give Jan about how to choose an account based upon her own needs?
I. The fees and services will make a much bigger difference than the type of interest while your balances are small.
II. The more that you expect to save, the more you should think about what effect the interest rates might have on your finances.
III. Choose the variable rate, because no matter what the fees are, if it goes way up, you could become richer.
a.
I
b.
I and II
c.
I, II, and III
d.
I and III


Please select the best answer from the choices provided

A
B
C
D

Answer 1

B

I and II are correct: with small balances fees and services matter more than small interest differences, and if you plan to save much more then interest rates become more important. III is not good advice because fees and the risk of rates falling also matter.