Reference no: EM132460694

The Sampsons have just started saving $800 per month. This money will be placed in CDs every month, which they chose in Chapter 5. These funds, earmarked for a down payment on a car and their children's college education, are not available to the Sampsons until the CDs mature.

Chapter 5: When Shawna arrived on campus for her first year of college, she relied on an automated teller machine (ATM) to obtain cash for the many little necessities of college life (food, movies, and more food). It was only on a weekend trip back home, where she reviewed her latest bank statement, that Shawna became aware of a problem. Her bank statement showed thirty-nine separate charges for ATM fees. She had been charged $1.00 for each trip to an "out-of-network" ATM not owned by her bank. There was another $1.50 fee charged by the bank that owned the ATM, so each ATM visit created two charges. In addition, Shawna discovered that she had made five balance inquiries on "out-of-network" ATMs, and her bank charged $0.50 for each of them. Altogether, for her seventeen visits to the ATM, Shawna had accrued $42.50 in ATM fees and $2.50 in inquiry fees for a total of $45.00. Shocked at this discovery, Shawna found a bank that offered a mobile app with an ATM locator that would enable her to easily find no-fee ATMS. The mobile app also allows her to check her account balance at any time, so she will always be aware if she is being charged fees.

1. The Sampsons are starting to save money but still have not made any decision about investing their money in CDs. They are now concerned about potential repair expenses for Sharon's car. They would like to have sufficient liquidity so that if they need to buy her a new car immediately, they could afford a down payment without being forced to cash in CDs early (because they would be charged a penalty). How might they revise their CD investing strategy to increase their liquidity?

2. Advise the Sampsons on money market investments they should consider to provide them with adequate liquidity.