Sandra Chan, 22, has just moved to Winnipeg to begin her first professional job. She is concerned about her finances and, specifically, wants to save for a rainy day and a new car purchase in 2 years. In order to finance her move, Sandra had put aside some money. Now that her move is finished, Sandra has $1000 remaining in her chequing account at the bank. Sandra is unsure if she should put this money aside in a rainy day fund, or if she should put this money aside for a new car purchase. Sandra has reduced her savings options to four choices:

Leave the $1000 in her chequing account where it will earn 0.25% per year.

Deposit her $1000 in an online investment savings account where she will earn 1.35% per year.

Invest her $1000 in a Canada Premium Bond that pays interest of 1.00% per year.

Invest her $1000 in a Guaranteed Investment Certificate (GIC) that pays interest of 1.50% per year.

1. Which short-term investment is most appropriate for Sandras situation?

2. Assuming Sandra remains unsure as to what she will do with the $1000, does it really matter if Sandra

puts her $1000 in a rainy day fund or a car purchase fund?