PFP 105 EXAM 2 REVIEW QUESTIONS
WITH 100% CORRECT ANSWERS
LATEST VERSION 2025/2026.
Commercial banks - ANS accept deposits and use the funds to provide commercial and
personal loans
credit unions - ANS -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 - ANS -a return on an investment that is guaranteed for a specified period
-rate of return of an investment with zero risk
risk premium - ANS -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 - ANS -why interest rates change
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, -the actions taken by the federal reserve to control the money supply
-open market operations
-federal funds rate
different types of accounts - ANS checking, savings, money market deposit account (MMDA),
certificate of deposit, money market mutual funds (MMFs), asset management account
checking account - ANS advantages: liquid, safe, low minimum balance, convenient
disadvantages: minimum balance required, monthly fee, opportunity cost
savings account - ANS 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) - ANS advantages: safe, earn interest, check writing
privileges
disadvantages: high minimum balance/penalties, interest rates below alternatives
certificate of deposit - ANS advantages: safe, fixed interest rate, convenient
disadvantages: early withdrawal penalty, fixed interest rate, minimum deposit required
money market mutual funds (MMFs) - ANS advantages: higher interest rates, check writing,
limited risk, convenient
disadvantages: administrative fees, minimum initial investment, not insured, minimum checks
asset management account - ANS advantages: monthly statements, coordination of money
management, checks, high return, convenient
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
WITH 100% CORRECT ANSWERS
LATEST VERSION 2025/2026.
Commercial banks - ANS accept deposits and use the funds to provide commercial and
personal loans
credit unions - ANS -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 - ANS -a return on an investment that is guaranteed for a specified period
-rate of return of an investment with zero risk
risk premium - ANS -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 - ANS -why interest rates change
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, -the actions taken by the federal reserve to control the money supply
-open market operations
-federal funds rate
different types of accounts - ANS checking, savings, money market deposit account (MMDA),
certificate of deposit, money market mutual funds (MMFs), asset management account
checking account - ANS advantages: liquid, safe, low minimum balance, convenient
disadvantages: minimum balance required, monthly fee, opportunity cost
savings account - ANS 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) - ANS advantages: safe, earn interest, check writing
privileges
disadvantages: high minimum balance/penalties, interest rates below alternatives
certificate of deposit - ANS advantages: safe, fixed interest rate, convenient
disadvantages: early withdrawal penalty, fixed interest rate, minimum deposit required
money market mutual funds (MMFs) - ANS advantages: higher interest rates, check writing,
limited risk, convenient
disadvantages: administrative fees, minimum initial investment, not insured, minimum checks
asset management account - ANS advantages: monthly statements, coordination of money
management, checks, high return, convenient
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
