The main concept to investing is diversify your investments. The old saying of “don’t put all of your eggs in one basket” exemplifies this concept. Kerry Stutsman has saved $2,400 and is wondering how to invest it. She was researching different investment options and found a June 2009 article called “What You Need to Know About CD’s” in Kiplinger’s Personal Finance magazine. She currently is investing in real estate through her home as well as contributing to the 401k she has at work and is thinking about investing in CD’s as well. She has the $2,400 in a savings account earning 2.35% interest. She is considering buying a 1-year certificate of deposit (CD) that pays 3.44% interest.

Question

The main concept to investing is diversify your investments. The old saying of “don’t put all of your eggs in one basket” exemplifies this concept. Kerry Stutsman has saved $2,400 and is wondering how to invest it. She was researching different investment options and found a June 2009 article called “What You Need to Know About CD’s” in Kiplinger’s Personal Finance magazine. She currently is investing in real estate through her home as well as contributing to the 401k she has at work and is thinking about investing in CD’s as well. She has the $2,400 in a savings account earning 2.35% interest. She is considering buying a 1-year certificate of deposit (CD) that pays 3.44% interest.
 
What will be the annual difference in her interest earnings between the savings account and the CD? (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Ekanki · Answer

Savings account interest earned $ 56.40
CD interest earned $ 82.56
Difference in interest earnings $ 26.16
Explanation:
Savings account interest earned: $2,400 × 0.0235 = $56.40
CD interest earned: $2,400 × 0.0344 = $82.56
Difference in interest earnings: $82.56 – $56.40 = $26.16