Question 1

All of the following are true of money market deposit accounts (MMDAs)except

Accepted Answer

A)  a minimum balance is required. 
B)  they pay higher interest than a NOW account 
C)  a limited number of checks may be written monthly. 
D)  they are the same regardless of the depository institution offering them. 
A)  a minimum balance is required. 
B)  they pay higher interest than a NOW account 
C)  a limited number of checks may be written monthly. 
D)  they are the same regardless of the depository institution offering them. D

Question 2

Generally,short-term debt securities issued by large corporations,also known as commercial paper,offer a slightly higher return than Treasury bills.

Accepted Answer

A) True 
 B)False  True

Question 3

Good cash management requires some liquidity,but excessive liquidity has an opportunity cost.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following items will give you the greatest liquidity?

Accepted Answer

A)  One year CD 
B)  Savings account 
C)  Checking account 
D)  NOW account 
A)  One year CD 
B)  Savings account 
C)  Checking account 
D)  NOW account

Question 5

The $500 minimum balance you are required to keep in your NOW checking account represents an opportunity cost.

Accepted Answer

A) True 
 B)False

Question 6

Money market funds (MMF)have all of the following characteristics except

Accepted Answer

A)  money provided by investors is pooled for investment. 
B)  unlimited check writing. 
C)  investment in securities with short-term maturities. 
D)  a low risk of default. 
A)  money provided by investors is pooled for investment. 
B)  unlimited check writing. 
C)  investment in securities with short-term maturities. 
D)  a low risk of default.

Question 7

Maurice purchased a $10,000,90-day CD that pays 8 percent.How much will Maurice receive when the CD matures? (Round answer to the nearest dollar.)

Accepted Answer

A)  $10,800 
B)  $10,197 
C)  $10,200 
D)  $10,267 
A)  $10,800 
B)  $10,197 
C)  $10,200 
D)  $10,267

Question 8

)If a $10,000 T-bill is purchased for $9,600 and matures in 270 days,what will be the annualized return? (Round to the nearest hundredth of a percent.)

Accepted Answer

A)  4.01% 
B)  4.17% 
C)  5.63% 
D)  2.85 
A)  4.01% 
B)  4.17% 
C)  5.63% 
D)  2.85

Question 9

All of the following are true of Treasury securities except they

Accepted Answer

A)  are a means by which the U.S. government lends money. 
B)  have a maturity range up to 30 years. 
C)  have a minimum par value of $100. 
D)  can be bought and sold on the secondary market. 
A)  are a means by which the U.S. government lends money. 
B)  have a maturity range up to 30 years. 
C)  have a minimum par value of $100. 
D)  can be bought and sold on the secondary market.

Question 10

You buy a T-bill,which has a par value of $10,000 for $9,600 and the T-bill has a one-year maturity.What will be your return?

Accepted Answer

A)  2.5% 
B)  4.2% 
C)  4.8% 
D)  6.0% 
A)  2.5% 
B)  4.2% 
C)  4.8% 
D)  6.0%

Question 11

Your ability to cover short-term cash deficiencies is a measure of your ________.

Accepted Answer

The answer of Your ability to cover short-term cash deficiencies...

Question 12

Because of the active secondary market for bonds,one risk that a corporate bond is less likely to expose you to is

Accepted Answer

A)  liquidity risk. 
B)  credit risk. 
C)  default risk. 
D)  interest rate risk. 
A)  liquidity risk. 
B)  credit risk. 
C)  default risk. 
D)  interest rate risk.

Question 13

Which of the following is not true about certificates of deposit (CDs)?

Accepted Answer

A)  They pay higher interest than a saving account. 
B)  They are only offered in denominations of $100,000 or more. 
C)  They are not as liquid as a savings account. 
D)  Funds are locked in for specific periods of time. 
A)  They pay higher interest than a saving account. 
B)  They are only offered in denominations of $100,000 or more. 
C)  They are not as liquid as a savings account. 
D)  Funds are locked in for specific periods of time.

Question 14

Lucky Louie is considering a NOW account that requires a $1500 minimum balance and pays .5% interest.What would be the opportunity cost if Louie needs to withdraw the required minimum balance from a savings account paying 2% interest? Compute the opportunity cost for one year.

Accepted Answer

A)  $10 
B)  $22.50 
C)  $25 
D)  $35 
A)  $10 
B)  $22.50 
C)  $25 
D)  $35

Question 15

Developing a monthly budget as part of your annual financial plan to determine excess cash or cash deficiencies,and then developing a plan to invest (or fund)the excess (deficient)cash position is a process called

Accepted Answer

A)  personal financial accountability. 
B)  money management. 
C)  liquidity management. 
D)  budgeting. 
A)  personal financial accountability. 
B)  money management. 
C)  liquidity management. 
D)  budgeting.

Question 16

If a bank provides overdraft protection at a rate of 12% for each $100 (or portion of $100)borrowed when an overdraft occurs,what amount of interest would a customer pay for a $188 overdraft?

Accepted Answer

A)  $24.00 
B)  $22.56 
C)  $10.56 
D)  $12.00 
A)  $24.00 
B)  $22.56 
C)  $10.56 
D)  $12.00

Question 17

In general,the more liquid an asset,the higher its return.

Accepted Answer

A) True 
 B)False

Question 18

Stopping payment on a check

Accepted Answer

A)  is possible after the check clears in cases of disputes. 
B)  can only be used if the check has not cleared. 
C)  is free if your checkbook is lost or stolen. 
D)  is encouraged by most banks as a customer service. 
A)  is possible after the check clears in cases of disputes. 
B)  can only be used if the check has not cleared. 
C)  is free if your checkbook is lost or stolen. 
D)  is encouraged by most banks as a customer service.

Question 19

Which of the following is not a characteristic of money market funds (MMFs)?

Accepted Answer

A)  They pool money provided by individuals to invest. 
B)  They invest in securities with short-term maturities. 
C)  They are high-risk investments. 
D)  They allow limited check writing. 
A)  They pool money provided by individuals to invest. 
B)  They invest in securities with short-term maturities. 
C)  They are high-risk investments. 
D)  They allow limited check writing.

Question 20

Which of the following is not true about a certificate of deposit (CD)?

Accepted Answer

A)  They pay higher interest than T-bills. 
B)  They are long-term investments of two years or more. 
C)  Funds are locked in for specific periods of time. 
D)  A penalty is imposed for early withdrawal. 
A)  They pay higher interest than T-bills. 
B)  They are long-term investments of two years or more. 
C)  Funds are locked in for specific periods of time. 
D)  A penalty is imposed for early withdrawal.

Exam 6: Managing Your Money

All of the following are true of money market deposit accounts (MMDAs)except

Generally,short-term debt securities issued by large corporations,also known as commercial paper,offer a slightly higher return than Treasury bills.

Good cash management requires some liquidity,but excessive liquidity has an opportunity cost.

Which of the following items will give you the greatest liquidity?

The $500 minimum balance you are required to keep in your NOW checking account represents an opportunity cost.

Money market funds (MMF)have all of the following characteristics except

Maurice purchased a $10,000,90-day CD that pays 8 percent.How much will Maurice receive when the CD matures? (Round answer to the nearest dollar.)

)If a $10,000 T-bill is purchased for $9,600 and matures in 270 days,what will be the annualized return? (Round to the nearest hundredth of a percent.)

All of the following are true of Treasury securities except they

You buy a T-bill,which has a par value of $10,000 for $9,600 and the T-bill has a one-year maturity.What will be your return?

Your ability to cover short-term cash deficiencies is a measure of your ________.

Because of the active secondary market for bonds,one risk that a corporate bond is less likely to expose you to is

Which of the following is not true about certificates of deposit (CDs)?

Lucky Louie is considering a NOW account that requires a $1500 minimum balance and pays .5% interest.What would be the opportunity cost if Louie needs to withdraw the required minimum balance from a savings account paying 2% interest? Compute the opportunity cost for one year.

Developing a monthly budget as part of your annual financial plan to determine excess cash or cash deficiencies,and then developing a plan to invest (or fund)the excess (deficient)cash position is a process called

If a bank provides overdraft protection at a rate of 12% for each $100 (or portion of $100)borrowed when an overdraft occurs,what amount of interest would a customer pay for a $188 overdraft?

In general,the more liquid an asset,the higher its return.

Stopping payment on a check

Which of the following is not a characteristic of money market funds (MMFs)?

Which of the following is not true about a certificate of deposit (CD)?

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

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