Tutorial_L03_A - CC3152 Principles of Financial Planning...

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CC3152 Principles of Financial Planning Tutorial 3 – Suggested Answers ASSETS MANAGEMENT 1 Discussion Questions 1. Cash management is an activity that involves the day-to-day administration of cash and near-cash liquid resources by an individual or family. The major functions of cash management are: (1) making sure that adequate funds are available to meet both planned and unplanned expenditures and (2) establishing an ongoing savings program that cushions against financial emergencies and accumulates funds to meet financial goals. 2. Liquid assets are held for two broad reasons: (1) to meet known, near-term spending needs and (2) to meet unplanned future needs. The amount of liquid reserves you have on hand will depend on your personal circumstances but in general should range from three to six months of after-tax income. 3. Use the formula FV = PV x (1 + i) t , Bank A Bank B FV =5000 x (1+0.1) 1 =5000 x 1.1 =$5,500 =5000 x (1+0.05/4) 4 =5000 x 1.0509 =$5,255 Effective Rate =500 / 5,000
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Tutorial_L03_A - CC3152 Principles of Financial Planning...

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