Question 1

Which of the following items will usually give you the highest return?

Accepted Answer

A)   One year CD
B)   Savings account
C)   NOW account
D)   Checking accountE) None of the above
F) B) and C)

Question 2

When purchasing a certificate of deposit (CD) ,

Accepted Answer

A)   you are always better off to buy the longer-term CDs.
B)   you will earn more interest percentage-wise on the lower dollar CDs.
C)   the amount you invest is at risk, so choose carefully.
D)   it is wise to shop around as rates vary among financial institutions.E) C) and D)
F) A) and C)

Question 3

Financial advisors often advise having 4-6 months of income in "near cash" for rainy day funds.Which of these investments do not provide the necessary liquidity to meet this need?

Accepted Answer

A)   Bank money market fund
B)   Stock market listed money market fund
C)   High dividend paying blue chip stock
D)   B and C do not provide the necessary liquidityE) B) and C)
F) A) and D)

Question 4

Describe the type of checking account you have or plan to have.List the advantages and disadvantages of your choice.

Accepted Answer

Advantages can include a debit card,mobi...

Question 5

In comparing an MMDA to a NOW account,the MMDA does all of the following except

Accepted Answer

A)   the MMDA pays a higher interest rate.
B)   the MMDA has a maturity date whereas a NOW account does not.
C)   the MMDA provides more limited checking services.
D)   the MMDA is less liquid.E) A) and C)
F) C) and D)

Question 6

Treasury bills (T-bills)may be purchased by individuals,and require a minimum investment of $100 par value.

Accepted Answer

A) True 
 B)False

Question 7

Your ability to cover any short-term cash deficiencies is called

Accepted Answer

A)   solvency.
B)   wealth.
C)   liquidity.
D)   cash planning.E) A) and B)
F) B) and D)

Question 8

________ risk is the potential loss from converting an investment into cash.

Accepted Answer

A)   Credit
B)   Interest rate
C)   Liquidity
D)   AssetE) All of the above
F) None of the above

Question 9

A money market deposit account (MMDA)requires a minimum balance,pays interest,and allows a limited number of checks to be written each month.

Accepted Answer

A) True 
 B)False

Question 10

Money market funds (MMFs)that invest in commercial paper are insured by the FDIC.

Accepted Answer

A) True 
 B)False

Question 11

The secondary market for T-bills means that

Accepted Answer

A)   they cannot be sold before their maturity date with the help of a brokerage firm.
B)   an individual may purchase T-bills that were owned by some other investor rather than from the government.
C)   T-bills are less liquid than CDs.
D)   All of the above.E) A) and D)
F) B) and C)

Question 12

Checking accounts may offer all of the following except

Accepted Answer

A)   account balance insurance in excess of $250,000.
B)   stop payment services.
C)   overdraft protection.
D)   ATM privileges.E) A) and C)
F) B) and D)

Question 13

If you buy a $10,000 par value,three-month T-bill priced at $9,800,what will your return (not annualized) on investment be?

Accepted Answer

A)   8.2%
B)   6.5%
C)   2.04%
D)   4.08%E) A) and B)
F) A) and C)

Question 14

On April 1,Alex deposited $2,000 in an MMDA that pays 3% interest.On July 1,Alex invested $3,000 in a six-month CD that pays 6% interest.How much total interest will Alex have earned by December 31?

Accepted Answer

A)   $90.00
B)   $45.00
C)   $135.00
D)   $240.00E) B) and D)
F) A) and D)

Question 15

________ risk is the risk that an investment could decline as a result of a change in interest rates.

Accepted Answer

A)   Credit
B)   Interest rate
C)   Liquidity
D)   AssetE) B) and C)
F) A) and C)

Question 16

Some investments are subject to credit risk.This means that the borrowers may not repay on a timely basis.

Accepted Answer

A) True 
 B)False

Question 17

Money management has no relationship to the personal cash flow statement.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not true regarding a savings account?

Accepted Answer

A)   It does not provide checking services.
B)   It is less liquid than a checking account.
C)   It pays lower interest than a checking account.
D)   It is less convenient than a checking account.E) C) and D)
F) B) and C)

Question 19

What would be the annualized return to an investor who purchases a one-year $10,000 T-bill for $9,600 and sells it on the secondary market 90 days after the purchase for $9,750?

Accepted Answer

A)   3.5%
B)   6.34%
C)   10.14%
D)   16.22%E) A) and B)
F) A) and C)

Question 20

Kayla deposits $1,500 into a NOW account that requires a minimum balance of $500 and offers an interest rate of 2.4%.How much interest will she earn in one year in the NOW account?

Accepted Answer

A)   $360
B)   $24
C)   $12
D)   $36E) B) and C)
F) A) and B)

Exam 6: Managing Your Money

________ risk is the potential loss from converting an investment into cash.

Correct AnswerverifiedShow Answer

If you buy a $10,000 par value,three-month T-bill priced at $9,800,what will your return (not annualized) on investment be?

Correct AnswerverifiedShow Answer

What would be the annualized return to an investor who purchases a one-year $10,000 T-bill for $9,600 and sells it on the secondary market 90 days after the purchase for $9,750?

Correct AnswerverifiedShow Answer

In comparing an MMDA to a NOW account,the MMDA does all of the following except

Correct AnswerverifiedShow Answer

When purchasing a certificate of deposit (CD) ,

Correct AnswerverifiedShow Answer

Describe the type of checking account you have or plan to have.List the advantages and disadvantages of your choice.

Correct AnswerverifiedAdvantages can include a debit card,mobi...View AnswerShow Answer

Which of the following items will usually give you the highest return?

Correct AnswerverifiedShow Answer

Which of the following is not true regarding a savings account?

Correct AnswerverifiedShow Answer

Some investments are subject to credit risk.This means that the borrowers may not repay on a timely basis.

Correct AnswerverifiedShow Answer

Kayla deposits $1,500 into a NOW account that requires a minimum balance of $500 and offers an interest rate of 2.4%.How much interest will she earn in one year in the NOW account?

Correct AnswerverifiedShow Answer

The secondary market for T-bills means that

Correct AnswerverifiedShow Answer

Your ability to cover any short-term cash deficiencies is called

Correct AnswerverifiedShow Answer

A money market deposit account (MMDA)requires a minimum balance,pays interest,and allows a limited number of checks to be written each month.

Correct AnswerverifiedShow Answer

On April 1,Alex deposited $2,000 in an MMDA that pays 3% interest.On July 1,Alex invested $3,000 in a six-month CD that pays 6% interest.How much total interest will Alex have earned by December 31?

Correct AnswerverifiedShow Answer

Treasury bills (T-bills)may be purchased by individuals,and require a minimum investment of $100 par value.

Correct AnswerverifiedShow Answer

Checking accounts may offer all of the following except

Correct AnswerverifiedShow Answer

Money market funds (MMFs)that invest in commercial paper are insured by the FDIC.

Correct AnswerverifiedShow Answer

Financial advisors often advise having 4-6 months of income in "near cash" for rainy day funds.Which of these investments do not provide the necessary liquidity to meet this need?

Correct AnswerverifiedShow Answer

Money management has no relationship to the personal cash flow statement.

Correct AnswerverifiedShow Answer

________ risk is the risk that an investment could decline as a result of a change in interest rates.

Correct AnswerverifiedShow Answer

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