Exam 5: Cash or Liquid Asset Management

The National Credit Union Association is a federal agency that insures deposits at credit unions.

What is a risk associated with keeping liquid assets?

A money order is typically less liquid than a personal check.

Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day-to-day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. -After balancing his checking account,what will his current balance be today?

Why is it important to convert interest rates into the APY on different accounts and with different banks?

Overdraft protection is an automatic loan made to your checking account whenever your account does not contain enough cash to cover the checks that you have written against it.

A tax free investment will always have a higher after-tax return than a taxable investment.

The Johnson family is very conservative financially. They have a retirement plan where John works and share a joint checking account at their bank. They keep a lot of money in their checking account to cover short-term needs and emergencies. Both of them want to step up to a higher interest rate than a checking or savings account pays, and at the same time stay with their bank. -What would be your suggestion for the next account John and Maile should open?

Virginia Tech's Hokie Passport is an example of a smart card.

T-bills are extremely safe investments,having been issued by the federal government.

Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day-to-day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. -What recommendations would you give Christopher concerning his cash management?

With online banking,you are able to access your accounts and conduct business transactions through the Internet,your mobile phone,and devices.

List one advantage to paying bills automatically.

Please choose the method to use when calculating the after-tax return.

Your bank may offer a line of credit,a credit card,or a link to your savings account to cover transactions when you overdraw your account.

For a consumer who does not have a checking account a prepaid debit card is a means of paying for goods and services.

Credit unions and Internet-only banks typically offer more attractive interest rates to both borrowers and savers.

The APY can never be the same as the APR.

A savings alternative that pays a fixed rate of interest while keeping your funds on deposit for a contracted period of time that can range from 30 days to several years is called a

NOW accounts offer an option to traditional demand deposits.All of the following are characteristics of NOW accounts except one.Which is it?