Exam 6: Managing Your Money

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

Generally, yields are ________ for securities that are exposed to ________ liquidity risk.

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

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

Use the following two columns of items to answer the matching questions below: -secondary market 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

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

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

An arrangement that protects a customer who writes a check or uses a debit card for an amount that exceeds the checking account balance is called

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

You have a choice between investing $10,000 in a CD that in six months will pay you $10,190 or investing $9,800 in a T-bill that in 182 days will return $10,000. Ignoring any opportunity cost between the two investments, which will give you the higher annualized return and what will the annualized return be?

Describe the relationship between return and liquidity using a one-year CD and a checking account to illustrate.

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.

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

Which of the following affords you access to a "sweep account"?

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

Debt securities issued by the U.S. Treasury that are due in one year or less are called ________.

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

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

________ management is a series of decisions made over a short-term period regarding cash inflows and outflows.

All of the following are true of Treasury securities, except they