Please, help me to understand investment?

Question

5.41% APY guaranteed earnings for term of CD
FDIC insured

What is APY? And what is FDIC insured?

Answer 1

Most American banks use a government insurance program by the Federal Deposit Insurance Corporation. If your bank participates (and the website will affirm what the bank says), then if the bank failed, your money in the bank (principle, not unpaid interest) is guaranteed up to a $100,000 limit. Now, that is not to say that if you make deposits of $100k at ten different branches that the government is guaranteeing you will stay a millionaire, you have to go to ten different FDIC insured banks for that kind of thing.

As for the other, APY would mean Annual Percentage Yield. It is talking about an annualized yield that may be higher because of compounding, interest earning interest. You will have to leave the money alone to do its work, including leaving the interest alone to let it compound. So if you sign up for a CD and have them send you a check each month for the interest, that money is not making still more money, therefore your APY will most likely come close to matching the basic rate.

Do the math. $1,000 at 5 percent is $50 a year, or $4.16 a month. For 12 months, $4.16 (and rounded-off fraction) is $50. $1,000 at 5 percent for one month is $1,004.16, which earns $4.18 (and fraction) the second month. That $1,008.35 earns $4.20 the third month, etc.

Answer 2

5.41% APY (annual percentage yield) means that your effective return on principal is 5.41% due to compounding, even though the stated interest rate is lower than 5.41%. The federal government requires that the banks provide this number so that people will know how much they can actually expect to earn on their money, so that they can compare apples to apples.

Coverage by the FDIC (Federal Deposit Insurance Corporation) was started by the federal government after a lot of banks went out of business during the Depression in the 1930's. The idea is that to keep people from going into a panic and demanding the withdrawal of all their deposits, the government will guarantee the safety of all their principal up to $100,000 per account. Note that should the bank actually go out of business, only principal is guaranteed, but not interest.

Answer 3

APY means "annual percentage yield", and an APY of 5.41% means that if you invest $100 today, a year from now it will be worth $105.41.... (This is a lousy return, by the way, unless you are 80 years old and can't tolerate any risk with your savings!)

"FDIC insured" means that (up to $100,000) the US Government will "back" your money, so if the bank that has it goes out of business, the government will make sure you don't lose the first $100,000 of your savings. FDIC stands for "Federal Deposit Insurance Corporation", a corporation created by the government to insure bank deposits after the Depression.

Answer 4

APY = Annual Percentage Yield, tis how much interest you will make on you money.

If you invest $100, in one year the $100 will have grown to $105.41.

FDIC insured means that the money is insured. So if the bank closes or something happens, the money is backed up.

Answer 5

APY = Annual Percentage Yield

FDIC means your investment is insured by the government, up to $100,000 should your bank go belly up. It stands for Federal Deposit Insurance Corporation.

Answer 6

Here's a book that takes your through the fundamentals: "Investing For Dummies." Informative and fun to read.