When Linda checks her mail, she sees that the bank statement for her savings account has arrived. Linda has a keen interest in this account because she’s using it to save for a new car.
This month, she sees she has saved $6,800. She is pleased, but then she looks at how much interest she earned last month: just $2.83! That doesn’t seem like much.
Linda decides she can do better. She picks three other options to compare:
|Type of investment||How much money will Linda invest?||What return will she get?||How much will Linda have in one year (before fees)?|
|Treasury bill (1 year)||$6,800||1.3%||$6,888|
|Money market fund||$6,800||0.2%||$6,814|
|Government of Canada bond that matures in 1 year||$6,800||1.4%||$6,895|
Source: Bank of Canada
Linda’s decision: She puts her $6,800 into a Government of Canada bond. She doesn’t feel there’s a lot of added risk and she wants to make more on her money than she can with the other choices. In a year, she may choose to do something different. She may even be ready to buy her new car.
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