Busi 1307- Personal Finance Chapter 6 Quiz

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? a. 4.08% b. 2.04% c. 8.2% d. 6.5%

2.04%

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.) a. 4.17% b. 4.01% c. 5.63% d. 2.85%

5.63%

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? a. CD; 3.8% B. T-bill; 4.09% c. CD; 1.9% d. T-bills; 2.2%

T-bill; 4.09%

Which of the following does money management not involve? a. a long-term period b. cash inflows c. cash outflows d. a series of decisions

a long-term time period

All of the following are true of Treasury securities except they a. can be bought and sold on the secondary market b. have a maturity range up to 30 years c. are a means by the U.S. government lends money d. have a minimum per value of $100

are a means by which the U.S. government lends money

________ risk is the risk that a borrower may not repay on a timely basis. a. credit b. interest rate c. liquidity d. asset

credit

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.

false

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

false

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

false

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

false

Which of the following is not true regarding a savings account? a. it does not provide checking services b. it pays lower interest than a checking account c. it is less liquid than a checking account d. it is less convenient than a checking account

it pays lower interest than a checking account

Which of the following is true about a NOW account?

not as liquid as a traditional checking account

Which of the following items will usually give you the highest return? a. checking account b. now account c. one year CD d. savings account

one year CD

Money market funds (MMFs) offer all of the following except a. they provide limited checking writing privileges b. they invest in securities with short-term maturity c. they are safe investments with higher rates than T-bills d. they are insured savings

they are insured savings

Which of the following is not true about a certificate of deposit (CD)? a. a penalty is imposed for early withdrawal b. funds are locked in for specific periods of time c. they are long-term investments of two years or more d. they pay higher interest than T-bills

they are long-term investments of two years or more

Because most regular checking accounts do not pay interest, you should keep only enough funds in your account to cover anticipated expenses with a small reserve for unanticipated expenses.

true

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.

true

Liquidity is necessary because there are times during the year when your cash inflows are not adequate to cover your cash outflows.

true

Maintaining liquid assets that you can easily access when you need funds allows you to avoid using credit and paying finance charges.

true

Treasury bills are more liquid than CDs because there is a secondary market for T-bills.

true