Exam 6: Managing Your Money

Describe your short-term investments and how they affect your personal budget, income statement, and balance sheet in terms of return and liquidity.

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?

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

Which of the following is not a money market investment?

The secondary market for T-bills means that

Overdraft protection for a checking account is a low-cost short-term loan.

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

Use the following two columns of items to answer the matching questions below: -cash deficiency A)ability to cover cash deficiencies B)a series of decisions made over a short-term period regarding cash inflows and outflows C)cash outflows are more than inflows

CDs that have small denominations (such as $10,000 or less) are sometimes referred to as retail CDs because they are more attractive to individuals than to firms.

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?

If you lose your checkbook, the bank will usually not charge you for stopping payment on any unused blank checks.

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?

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

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

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

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

Since CDs are insured by the FDIC, the rates are usually the same from one institution to another.

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: -stop payment A)a financial institution's notice that it will not honor a check B)an account that combines deposit accounts and a brokerage account C)the risk that the borrower may not repay on a timely basis D)a market where existing securities are bought and sold E)a short-term loan from the bank to cover a cash deficiency in a checking account F)a type of deposit that provides checking services and pays interest G)Treasury securities with maturities of one year or less

For relatively safe investments such as savings accounts, CDs, MMDAs, and T-bills, liquidity is rarely a concern.