Question

what is the most suitable option for norm to invest his $15,000, considering his daughter’s upcoming college plans and the associated interest rates?
a. a four-year cd paying 4.8% interest, with a substantial penalty for early withdrawal
b. an online savings account offering 2.3% interest
c. a money market account paying 3.5% interest, renewable for three-month commitments
d. a checking account with no monthly fees
please select the best answer from the choices provided

Explanation:

Step1: Analyze Interest Rates

Compare the interest rates: 4.8% (a), 2.3% (b), 3.5% (c), and checking accounts (d) usually have low rates. So a has the highest rate.

Step2: Consider Time Frame

College plans are likely within a few years (daughter's upcoming college). A 4 - year CD's early withdrawal penalty: if college is in ≤4 years, but the key is highest rate for saving towards college (even with penalty, if he doesn't need to withdraw early, 4.8% is best for growth). Other options have lower rates.

Answer:

A. A four - year CD paying 4.8% interest, with a substantial penalty for early withdrawal