PFP 105 Exam 2 Review questions
well answered (latest update)
commercial banks - correct answer ✔✔accept deposits and use the funds to provide
commercial and personal loans
credit unions - correct answer ✔✔-nonprofit depository institutions that serve members who
have a common affiliation
-k-state credit union, farm-way credit union, navy federal
-they pay less in taxes
risk-free rate - correct answer ✔✔-a return on an investment that is guaranteed for a specified
period
-rate of return of an investment with zero risk
risk premium - correct answer ✔✔-an additional return beyond the risk-free rate that can be
earned from a deposit guaranteed by the government
-risk premium= return on "risky" deposit - risk-free rate
-RP=R-Rf
monetary policy - correct answer ✔✔-why interest rates change
-the actions taken by the federal reserve to control the money supply
-open market operations
-federal funds rate
, different types of accounts - correct answer ✔✔checking, savings, money market deposit
account (MMDA), certificate of deposit, money market mutual funds (MMFs), asset
management account
checking account - correct answer ✔✔advantages: liquid, safe, low minimum balance,
convenient
disadvantages: minimum balance required, monthly fee, opportunity cost
savings account - correct answer ✔✔advantages: liquid, safe (federally insured), earns higher
interest than a checking account
disadvantages: minimum holding time, charges/fees, low interest rate, inconvenient
money market deposit account (MMDA) - correct answer ✔✔advantages: safe, earn interest,
check writing privileges
disadvantages: high minimum balance/penalties, interest rates below alternatives
certificate of deposit - correct answer ✔✔advantages: safe, fixed interest rate, convenient
disadvantages: early withdrawal penalty, fixed interest rate, minimum deposit required
money market mutual funds (MMFs) - correct answer ✔✔advantages: higher interest rates,
check writing, limited risk, convenient
disadvantages: administrative fees, minimum initial investment, not insured, minimum checks
asset management account - correct answer ✔✔advantages: monthly statements, coordination
of money management, checks, high return, convenient
disadvantages: costly, minimum, initial investment, not insured
calculating the return on US treasury bills - correct answer ✔✔-also known as T-bills
well answered (latest update)
commercial banks - correct answer ✔✔accept deposits and use the funds to provide
commercial and personal loans
credit unions - correct answer ✔✔-nonprofit depository institutions that serve members who
have a common affiliation
-k-state credit union, farm-way credit union, navy federal
-they pay less in taxes
risk-free rate - correct answer ✔✔-a return on an investment that is guaranteed for a specified
period
-rate of return of an investment with zero risk
risk premium - correct answer ✔✔-an additional return beyond the risk-free rate that can be
earned from a deposit guaranteed by the government
-risk premium= return on "risky" deposit - risk-free rate
-RP=R-Rf
monetary policy - correct answer ✔✔-why interest rates change
-the actions taken by the federal reserve to control the money supply
-open market operations
-federal funds rate
, different types of accounts - correct answer ✔✔checking, savings, money market deposit
account (MMDA), certificate of deposit, money market mutual funds (MMFs), asset
management account
checking account - correct answer ✔✔advantages: liquid, safe, low minimum balance,
convenient
disadvantages: minimum balance required, monthly fee, opportunity cost
savings account - correct answer ✔✔advantages: liquid, safe (federally insured), earns higher
interest than a checking account
disadvantages: minimum holding time, charges/fees, low interest rate, inconvenient
money market deposit account (MMDA) - correct answer ✔✔advantages: safe, earn interest,
check writing privileges
disadvantages: high minimum balance/penalties, interest rates below alternatives
certificate of deposit - correct answer ✔✔advantages: safe, fixed interest rate, convenient
disadvantages: early withdrawal penalty, fixed interest rate, minimum deposit required
money market mutual funds (MMFs) - correct answer ✔✔advantages: higher interest rates,
check writing, limited risk, convenient
disadvantages: administrative fees, minimum initial investment, not insured, minimum checks
asset management account - correct answer ✔✔advantages: monthly statements, coordination
of money management, checks, high return, convenient
disadvantages: costly, minimum, initial investment, not insured
calculating the return on US treasury bills - correct answer ✔✔-also known as T-bills
