Question 1

Risk management of money market investments involves all of the following except

Accepted Answer

A)  credit risk. 
B)  interest rate risk. 
C)  potential for default when backed by the federal government. 
D)  liquidity risk. 
A)  credit risk. 
B)  interest rate risk. 
C)  potential for default when backed by the federal government. 
D)  liquidity risk.

Question 2

If you purchase a bond that matures in 5 years but you may have to cash it in before that time,you are exposed to

Accepted Answer

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

Question 3

Kelly deposits $1,000 in her savings account earning 4% per year.How much interest would she earn in a year?

Accepted Answer

A)  $4 
B)  $40 
C)  $44 
D)  $400 
A)  $4 
B)  $40 
C)  $44 
D)  $400

Question 4

Generally,savings account yields are ________ than yields on certificates of deposit that are exposed to ________ liquidity risk.

Accepted Answer

A)  lower; more 
B)  higher; less 
C)  higher; more 
D)  lower; less 
A)  lower; more 
B)  higher; less 
C)  higher; more 
D)  lower; less

Question 5

Use the following two columns of items to answer the matching questions below:
-cash deficiency

Accepted Answer

A) a series of decisions made over a short-term period regarding cash inflows and outflows 
B) ability to cover cash deficiencies 
C) cash outflows are more than inflows 
A) a series of decisions made over a short-term period regarding cash inflows and outflows 
B) ability to cover cash deficiencies 
C) cash outflows are more than inflows

Question 6

An asset management account does all of the following except

Accepted Answer

A)  combines deposit accounts with a brokerage account that is used to buy or sell stocks. 
B)  provides a single consolidated statement showing the ending balance and activity of all accounts. 
C)  requires a small initial investment to start. 
D)  sweeps any unused balance in the brokerage account into a money market account at the end of the day. 
A)  combines deposit accounts with a brokerage account that is used to buy or sell stocks. 
B)  provides a single consolidated statement showing the ending balance and activity of all accounts. 
C)  requires a small initial investment to start. 
D)  sweeps any unused balance in the brokerage account into a money market account at the end of the day.

Question 7

If you buy a $10,000 par value T-bill with a 180-day maturity date for $9,750,what will be your annualized return?

Accepted Answer

A)  2.5% 
B)  3.06% 
C)  4.5% 
D)  5.2% 
A)  2.5% 
B)  3.06% 
C)  4.5% 
D)  5.2%

Question 8

An asset management account combines

Accepted Answer

A)  assets and expenses. 
B)  deposit accounts with a brokerage account. 
C)  a savings account with a brokerage account. 
D)  a savings account with long-term investments. 
A)  assets and expenses. 
B)  deposit accounts with a brokerage account. 
C)  a savings account with a brokerage account. 
D)  a savings account with long-term investments.

Question 9

A one-year CD has a ________ return and ________ liquidity than a checking account.

Accepted Answer

A)  lower; lower 
B)  higher; higher 
C)  higher; lower 
D)  lower; higher 
A)  lower; lower 
B)  higher; higher 
C)  higher; lower 
D)  lower; higher

Question 10

The market where investors can sell T-bills that they own is called the

Accepted Answer

A)  primary market. 
B)  secondary market. 
C)  stock market. 
D)  T-bill market. 
A)  primary market. 
B)  secondary market. 
C)  stock market. 
D)  T-bill market.

Question 11

A disadvantage of using credit as a source of liquidity is the

Accepted Answer

A)  inconvenience of using credit. 
B)  potential cost of finance charges. 
C)  acceptability of credit by creditors. 
D)  poor records available after credit use. 
A)  inconvenience of using credit. 
B)  potential cost of finance charges. 
C)  acceptability of credit by creditors. 
D)  poor records available after credit use.

Question 12

You have $3,000 that you may need to use to replace the furnace in your home.If you need the funds,it would be on no less than a week's notice.Into which type of account would it be best for you to deposit the $3,000?

Accepted Answer

A)  Checking account 
B)  Savings account 
C)  NOW account 
D)  All of the above would be equally acceptable. 
A)  Checking account 
B)  Savings account 
C)  NOW account 
D)  All of the above would be equally acceptable.

Question 13

Certificates of deposit are highly liquid and pay the highest investment returns.

Accepted Answer

A) True 
 B)False

Question 14

In general,the more liquid an investment is,the ________ the return you will receive.

Accepted Answer

A)  lower 
B)  higher 
C)  less predictable 
D)  There is no relationship between liquidity and return. 
A)  lower 
B)  higher 
C)  less predictable 
D)  There is no relationship between liquidity and return.

Question 15

Liquidity refers to your ability to cover any long-term cash deficiencies.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following does money management not involve?

Accepted Answer

A)  A series of decisions 
B)  A long-term time period 
C)  Cash inflows 
D)  Cash outflows 
A)  A series of decisions 
B)  A long-term time period 
C)  Cash inflows 
D)  Cash outflows

Question 17

Which of the following is not a good,short-term money market investment?

Accepted Answer

A)  NOW account 
B)  Savings account 
C)  AT&T common stock 
D)  Treasury bills 
A)  NOW account 
B)  Savings account 
C)  AT&T common stock 
D)  Treasury bills

Question 18

Maintaining liquid assets that you can easily access when you need funds allows you to avoid using credit and paying finance charges.

Accepted Answer

A) True 
 B)False

Question 19

A 180-day CD offers an annualized interest rate of 1.10% and requires a minimum deposit of $25,000.The amount of interest that will be earned on this investment is

Accepted Answer

A)  $135.62. 
B)  $275.00. 
C)  $137.50. 
D)  $2,750.00. 
A)  $135.62. 
B)  $275.00. 
C)  $137.50. 
D)  $2,750.00.

Question 20

The purchase and sale of Treasury bills before their maturity takes place in the ________ with the assistance of a brokerage firm.

Accepted Answer

The answer of The purchase and sale of Treasury bills...

Exam 6: Managing Your Money

Risk management of money market investments involves all of the following except

If you purchase a bond that matures in 5 years but you may have to cash it in before that time,you are exposed to

Kelly deposits $1,000 in her savings account earning 4% per year.How much interest would she earn in a year?

Generally,savings account yields are ________ than yields on certificates of deposit that are exposed to ________ liquidity risk.

Use the following two columns of items to answer the matching questions below: -cash deficiency

An asset management account does all of the following except

If you buy a $10,000 par value T-bill with a 180-day maturity date for $9,750,what will be your annualized return?

An asset management account combines

A one-year CD has a ________ return and ________ liquidity than a checking account.

The market where investors can sell T-bills that they own is called the

A disadvantage of using credit as a source of liquidity is the

You have $3,000 that you may need to use to replace the furnace in your home.If you need the funds,it would be on no less than a week's notice.Into which type of account would it be best for you to deposit the $3,000?

Certificates of deposit are highly liquid and pay the highest investment returns.

In general,the more liquid an investment is,the ________ the return you will receive.

Liquidity refers to your ability to cover any long-term cash deficiencies.

Which of the following does money management not involve?

Which of the following is not a good,short-term money market investment?

Maintaining liquid assets that you can easily access when you need funds allows you to avoid using credit and paying finance charges.

A 180-day CD offers an annualized interest rate of 1.10% and requires a minimum deposit of $25,000.The amount of interest that will be earned on this investment is

The purchase and sale of Treasury bills before their maturity takes place in the ________ with the assistance of a brokerage firm.

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

Filters

Generally,savings account yields are than yields on certificates of deposit that are exposed to liquidity risk.

A one-year CD has a return and liquidity than a checking account.