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Exam 5: Cash or Liquid Asset Management

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Question 21

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You are considering an MMMF.The fund is taxable and pays 8.5% interest.If your top federal tax bracket is 25% and you live in a state that doesn't impose income taxes,what after-tax return would you realize from this investment?

A) 6.38%
B) 2.13%
C) 7.44%
D) 8.25%

E) A) and B)
F) A) and C)

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Question 22

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Briefly describe each of the cash management alternatives discussed in this chapter.

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a.Demand deposit - a type of checking ac...

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Question 23

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Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day-to-day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. -Christopher has not received an Income Tax refund in 4 years.Is there anything you could recommend to him?

Is EFT always a good thing? List some potential problems with EFT.

You are examining two different MMMFs.Fund A is tax-exempt and pays 5%.Fund B is taxable and pays 6%.You live in a state that imposes no income taxes and are in a 28% federal tax bracket.At what tax rate would the two funds have identical yields?

Two advantages of carrying cash are that it's easy to spend and many times you can even recall where you spent it.

You are considering the purchase of one of two different investments.Investment A is tax exempt and pays 6%.Investment B is taxable and pays 8.33%.You live in a state that imposes no income taxes and are in a 28% federal tax bracket and want to earn the highest after tax return possible.Which of the following is true? (round to two decimal places)

What are the four questions you should answer when looking for a financial institution?

If you only use your debit card and ATM card and rarely write paper checks,overdraft protection is still a good thing to have.

It is wise to wait until you are earning a substantial amount of money before you establish a disciplined financial plan for your future.

What are short-term notes of debt issued by the federal government commonly called?

List two ways to pay yourself first.

Cash and investments that can be easily converted into cash are termed

Which of the following is an advantage of online and mobile banking?

Brick-and-mortar banks typically offer superior interest rates for borrowers and savers.

Credit unions and Internet-only banks typically offer

What are some tips to help you start managing your cash and achieving financial control?

Which of the following characteristics apply to liquid assets?

Explain the advantages of credit unions.Are there any disadvantages to them?

Describe the advantages of online and mobile banking.