What are three advantages of using a credit card? Can you think of any disadvantages?
> What is monetary policy? What organization controls monetary policy in the United States?
> What is the term structure of interest rates? Why is this concept important to an investor?
> In considering investments with different degrees of risk, what two factors will influence an investor’s decision? What is an appropriate investment for an individual who needs funds in a short period of time for necessities?
> What effect would a general change in current interest rates have on you as a depositor or borrower?
> Where do financial institutions obtain funds for making loans? How are the interest rates for loans determined? Are the interest rates the same for all borrowers? Why or why not?
> List and describe the four main types of nondepository financial institutions.
> What is a risk premium? Who might take advantage of it?
> What is a risk-free rate? Give an example of an investment with a risk-free rate. Why is there no risk?
> Mike, a recent college graduate, opened a checking account with a local bank. He asked numerous questions before deciding on this bank, including inquiring about checking account fees and annual credit card fees. When Mike returns from his first internat
> Casey has $1,000 to invest in a certificate of deposit. Her local bank offers her 2.5% on a 12-month FDIC-insured CD. A nonfinancial institution offers her 5.2% on a 12-month CD. What is the risk premium? What else must Casey consider in choosing betwee
> Name some special services that banks provide. How might you make use of them?
> Paul has an account at St. Jerome Bank. He does not track his checking account balance in a checkbook register. Yesterday evening, he placed two checks in the mail for $156.66 and $238.94. Paul accesses his account online and finds that his balance is $5
> Randy, a student, has $500 to deposit in a new checking account, but Randy knows he will not be able to maintain a minimum balance. He will not use an ATM card, but will write a large number of checks. Randy is trying to choose between the unlimited chec
> Veronica plans to open a checking account with her $1,200 tax refund check. She believes she can maintain a $500 minimum balance. Also, she estimates that she will write 10 checks per month and will use other banks’ ATMs as many as 15 t
> Julie wants to open a bank account with $75. Julie estimates that she will write 20 checks per month and use her ATM card at the home bank. She will maintain a $200 balance. Which bank should Julie choose? South Sun Hillsboro First Trust Coast Bank
> Jason wants to open a checking account with a $100 deposit. Jason believes he will write 15 checks per month and use other banks’ ATMs 8 times a month. He will not be able to maintain a minimum balance. Which bank should Jason choose?
> Brenda purchased a $30,000, 90-day T-bill for $29,550. What will Brenda’s return be when the T-bill matures? What will her annualized rate be?
> Lauren purchased a $40,000 T-bill for $38,400. A few months later, Lauren sold the T-bill for $39,000. What was Lauren’s return on the T-bill?
> Dave has $20,000 excess cash to invest. He can purchase a $20,000 T-bill for $19,400 or two $10,000 T-bills for $9,600 each. Which will give him the better return?
> Claire has invested $10,000 in an 18-month CD that pays 6.25%. How much interest will Claire receive at maturity?
> What credit restrictions apply to persons under age 21?
> List some typical incentives credit cards issuers offer to encourage you to use their card.
> What is a prepaid credit card? How does it differ from a secured credit card?
> Propose possible solutions to reduce an excessive credit card balance.
> Discuss some ways that charging large amounts on your credit cards might affect your overall financial planning.
> What credit management decisions should be included in your financial plan?
> Should you view credit cards as a source of funds? Why or why not? Why should you self-impose a tight credit limit?
> When is a finance charge applied to credit purchases? What is the common range of interest rates on credit cards?
> How might you eliminate the annual fees that are charged by some credit cards?
> What is a credit limit? How can you increase your credit limit?
> Why should you review your credit card statement before paying the bill? What steps should you take if you discover an error?
> Explain why getting a cash advance on your credit card is a costly source of funds.
> Explain how the Credit CARD Act changed the way credit card issuers assess late fees.
> What is overlimit protection? Explain why consumers should use this feature sparingly.
> How does a secured credit card differ from a standard credit card? Under what circumstances would you need a secured credit card?
> Describe the role of the Consumer Financial Protection Bureau.
> Describe some of the key provisions of the Credit CARD Act.
> Explain how you can impose your own limits on credit card spending.
> What are the three methods used by financial institutions to calculate finance charges on outstanding credit card balances? Briefly describe how interest is computed under each method.
> Why is paying your credit card balance in full so important? What should you do if you can’t avoid credit card debt? Explain.
> List five tips for using credit cards wisely.
> What should you consider when comparing credit cards?
> List some items that appear on the credit card statement. What accounts for the difference between your previous balance and your new balance?
> How does the interest rate affect your credit payments? What is meant by simple interest? What is the annual percentage rate (APR), and when is it used?
> What is a cash advance? How are they commonly obtained? Discuss interest rates and grace periods with regard to cash advances.
> What is a grace period? How can you use it to your advantage?
> Discuss how credit cards offer incentives to use the cards. How else might credit card companies reward cardholders with excellent credit ratings?
> Describe the differences between a credit card like MasterCard or Visa and a retail (or proprietary) card. How do credit and retail cards generate revenue? What is the biggest disadvantage of a proprietary card?
> What information will you need to supply when applying for credit? What kinds of attributes are creditors looking for? Do you need to have all these attributes to get credit?
> The $2,000 credit card balance that the Sampsons are carrying, on which they are currently making the minimum payment due, has a credit limit of $10,000. The Sampsons have just received a letter from the credit card company offering to increase their cre
> The $2,000 credit card balance that the Sampsons are carrying, on which they are currently making the minimum payment due, has a credit limit of $10,000. The Sampsons have just received a letter from the credit card company offering to increase their cre
> How will the new EMV technology help reduce identify theft?
> Can identity theft occur through legitimate access to your personal information? Explain.
> Aside from the financial losses, what other negative impacts might a victim of identity theft encounter?
> Is identity theft only perpetrated to acquire money, goods, or services?
> What constitutes identity theft?
> How can you improve your credit score, and how long can it take to erase a poor credit history
> How does a Vantage Score differ from a FICO score?
> What factors determine your credit score, and how are these factors weighted by FICO?
> What are the six major areas of information that may be included on your credit report?
> Name the three major credit bureaus. How do they score your credit rating? Will all three major credit bureaus always produce the same credit score?
> How do utilities extend credit, and how can this credit help you establish a credit history?
> The Equal Credit Opportunity Act prohibits creditors from denying credit for what reasons? If you are denied credit, do you have the right to know the reason for the denial?
> What are some factors to consider when using social media with respect to identity theft?
> Explain the advantages and disadvantages of using a credit counseling organization.
> Explain how closing a credit card account can negatively impact your credit score.
> What is your credit history? How does it impact your ability to borrow money?
> How did the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 change credit card access to students under the age of 21? Why was this change deemed necessary?
> Theft. What steps should you take if you become a victim of identity theft?
> Discuss steps you can take to safeguard your personal information.
> Name and explain at least three tactics used by identity thieves to obtain information.
> How often should you review your credit report from each of the three major credit bureaus? Why is this review beneficial?
> Explain how a weak credit report can affect you.
> What are the advantages and disadvantages of using credit?
> Explain the three types of credit. Under what conditions might a consumer find each type useful?
> Rita is the office manager of a three-doctor practice. Her brother, Juan, a recent college graduate, recently started working for a large insurance company that specializes in health insurance. In attempting to build a client base, Juan asks Rita if she
> Recall from Chapter 2 that the Sampsons currently have about $300 in cash and $1,700 in their checking account. This amount should be enough to cover upcoming bills. The Sampsons have just started saving $800 per month. This money will be placed in CDs e
> Recall from Chapter 2 that the Sampsons currently have about $300 in cash and $1,700 in their checking account. This amount should be enough to cover upcoming bills. The Sampsons have just started saving $800 per month. This money will be placed in CDs e
> Define money management. How does it differ from long-term investment or long-term borrowing decisions?
> Explain why maintaining more liquidity during a weak economy is costly.
> Assume that your monthly expenses will not change over the next three years, but you expect that the economy will be much weaker in about a year. Explain why you may need more liquidity even if your expenses do not change.
> What is a disadvantage of maintaining a very high level of liquidity?
> Compare the interest rates offered on T-bills and CDs. Which type of investment is more liquid? Why?
> What is an automatic transfer? How can this tool help you save money?
> What is an asset management account? Discuss the advantages of such an account as well as its requirements.
> What are money market funds (MMFs)? What types of securities do they invest in? What is commercial paper? Are MMFs risky investments? Are MMFs liquid?
> Explain the risks of using a credit card for your liquidity needs.
> Explain why you should not invest in the stock market if you expect to need the funds in the near future. Are stocks liquid?
> How does your individual tolerance for risk impact money management?
> What are Treasury securities? What is a T-bill? How is it denominated? How do you earn a return on a T-bill? How is the return calculated?
> How will overdraft protection affect bounced checks? Should you take advantage of this feature if your bank offers overdraft protection?
> How does a debit card transaction differ from writing a check?
> Why do individuals use checking accounts? What is the disadvantage of having funds in a checking account? Explain overdraft protection and stop payment orders. Are all bank fee structures the same?
> What two factors affect the return on short-term investments? What investments should you consider to achieve liquidity and an adequate return?
> Name some ways an individual might handle a cash flow deficiency. Which way would be preferable? Why?
> Why is it important to have sufficient liquidity during a weak economy?
> What steps should you take to determine the best allocation of your money market investments? What factors should you consider in determining your allocation?
> Generally compare the money market investments described in this chapter in terms of their vulnerability to credit risk, interest rate risk, and liquidity risk. Provide some examples of specific securities. What is the risk-return trade-off for these inv
> What are the three types of risk that affect money market investments?
> Compare the return and liquidity of the various money market investments. Give specific examples.
