Exam_2_Study_Guide - Study Guide for Exam 2 AHRM 2304...

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Study Guide for Exam 2 AHRM 2304: Family Financial Management Chapter 5: Cash Management What are the unique features of the different cash management “tools,” or accounts available? For example: Which accounts offer state, federal or both income tax advantages? Credit Unions, US Treasury Bills (state and local income tax exempt), US series EE Bonds (state and local income tax exempt) Which accounts offer more access to your money? Less access to your money? Checking accounts, savings accounts, Brokerage Asset management accounts, MMDA and MMMF offer you more access to your money while CD, Treasury bills, and US EE series bonds offer you little access to your money. With which account are you likely to experience a reduction in interest and a penalty if you make an early withdrawal? Certificates of Deposits, US EE series Bonds, US treasury bills Which accounts offer check writing privileges? Which do not? Savings accounts, checking accounts, have check writing privileges offer check writing and are not limited. Money market deposit accounts and money market mutual funds offer check writing privileges, but they are limited. CD’s, US Treasury Bills, and US series EE bonds do not offer check writing How do earnings or interest rate compare across the accounts? CHECKING ACCOUNTS – demand deposits are non-interest bearing and NOW accounts are interest bearing SAVINGS ACCOUNTS – low returns/earnings MMDA – can sometimes have high rates of interest, but sometimes can be variable CD – fixed rate of interest for a fixed amount of time MMMF – return rates from 2% - 17%, but interest rates change daily TREASURY BILLS – no periodic interest payments, but they mature to the full face value US EE BONDS – interest rates vary with the market rate, interest occurs until it reaches full face value What is a NOW account? – Negotiable Order of Withdrawal accounts. They are interest bearing accounts. Assuming you can meet the minimum account requirement, what account might be the best alternative for an emergency fund? Can you suggest another good alternative? Give an example of account that would be inappropriate? Why? A savings account would be a good choice, but a MMDA would be better. A CD would not be a good emergency fund. Your sibling is a college freshman and earned $6,000 last summer. She only anticipates needing $2,000 for expenses during this academic year. What account(s) would you recommend? A Money Market Deposit Account would be the best. 1
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What requirements were included in the Truth in Savings Act of 1993? What is the APY? How is it interpreted? It established uniformity in the disclosure of terms and conditions regarding interest and fees when giving out information on or opening a new savings account. The APY (annual percentage yield) is the standard measure of interest.
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This test prep was uploaded on 04/09/2008 for the course AAEC 2104 taught by Professor Rhlytton during the Fall '06 term at Virginia Tech.

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Exam_2_Study_Guide - Study Guide for Exam 2 AHRM 2304...

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