Consumer Strategies

  1. You have $10,000 to deposit. You want to save it, earning interest by loaning its use in the money market to your bank. You anticipate you will need to replace your washing machine within the year, however, so you don’t want to surrender all your liquidity all at once. What is the best way to save your money that will give you the greatest increase in wealth without too much risk and while still retaining some liquidity? Explain your reasons for your choice of a solution. 
  2. For a car you would like to drive, calculate and compare what it would cost you to buy it and to lease it. Use the Lease versus Buy Calculator athttp://www.leaseguide.com/leasevsbuy.htm. What would be the advantages of owning the car? What would be the advantages of leasing it? For your lifestyle, needs, and uses of a vehicle, should you buy or lease?
  3. You are considering purchasing an existing single family house for $200,000 with a 20 percent down payment and a thirty-year fixed-rate mortgage at 5.5 percent.

    When should you consider an adjustable-rate mortgage?

    Review the explanation of adjustable-rate mortgages on the consumer guide site of the U.S. Federal Reserve (the Fed) athttp://www.federalreserve.gov/pubs/arms/arms_english.htm. According to the Fed, why should you be cautious about adjustable-rate mortgages?

 

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