Final answer:
This Business question at the College level deals with calculating interest from the principal amount, rate, and time. It also considers the classification of various financial assets into M1 and M2 categories of the money supply. The examples involve rates such as 1% and discussing how various sums, such as $1,200 in a checking account or $2,000 in a money market account, fit into these categories.
Step-by-step explanation:
The student's question appears to concern the determination of financial terms given certain criteria, which falls under the Business subject, specifically in the realm of finance. Furthermore, since the question involves analysis of interest rates and principal amounts which is typically taught in college-level business courses, this signifies that the question is at the college educational level.
Based on provided information, we can deduce the following:
- Interest calculation: The interest can be calculated using the formula Interest = Principal × rate × time.
- Given the example, $500 = $10,000 × rate × 5 years, solving for the rate we get Rate = 1%.
- To compare the sensitivity of the accumulation to different interest rates, one can evaluate how the final amount changes using the formula Principal(1 + interest rate)time.
When considering the money supply categories:
- M1 includes currency in circulation and other liquid deposits like checking accounts.
- M2 includes M1 plus savings deposits, money market accounts, and other near-monies.
- The $5,000 line of credit is considered neither M1 nor M2 since it represents potential borrowing capacity.
- The $50 in traveler's checks would be a part of M1 as it is ready to spend.
- The $1 in quarters in your pocket is part of M1 as it is currency in circulation.
- The $1200 in your checking account falls within M1.
- The $2000 in a money market account would be included in M2 as it's less liquid than the components of M1.