Exam 6: Managing Your Money

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

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.)

Which of the following is true about a NOW account?

Describe three types of risk associated with various money market instruments.

To achieve both liquidity and an adequate return, you should consider investing in only one money market investment with a fixed interest rate and a long maturity date.

Use the following two columns of items to answer the matching questions below: -NOW account 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

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

Use the following two columns of items to answer the matching questions below: -credit risk 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

Stopping payment on a check

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

A money market account combines deposit accounts with a brokerage account, provides a single consolidated statement, and "sweeps" the unused balance from the checking account to a savings account daily.

Stopping payment on a check should be used if you paid to have your bathroom remodeled and the job was not completed.

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

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

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.)

Use the following two columns of items to answer the matching questions below: -Treasury bills 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

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?

Which of the following does money management not involve?

Which of the following is not an advantage of a checking account?

Which of the following is not true of a NOW account?