answer A - E

How Should the Johnsons Manage Their Cash? In January, Harry and Belinda Johnson had $10,660 in monetary assets (see page 109): $1,100 in cash on hand; $1,200 in a statement savings account at First Credit Union earning 1.0 percent interest; $4,000 in a state- ment savings account at the Far West Savings Bank earn- ing 1.1 percent interest; $2,260 in Homestead Credit Union earning a dividend of 1.3 percent; and $2,100 in their regular checking account at First Credit Union earning 1 percent. (a) What specific recommendations would you give the Johnsons for selecting checking and sav- ings accounts that will enable them to effectively use the first and second tools of monetary asset management? (b) Their annual budget, cash-flow calendar, and revolving savings fund (see Tables 3-6, 3-7, and 3-8 on pages 97, 98 and 99) indicate that the Johnsons will have additional amounts to deposit in the coming year. What are your recommenda- tions for the Johnsons regarding use of a money market account? Why? (c) What savings instrument would you recommend for their savings, given their objective of saving enough to purchase a new home? Support your answer. (d) If the Johnsons could put most of their monetary assets ($10,660) into a money market account earning 1.4 percent, how much would they have in the account after one year? (e) Recall from Chapter 3 that Harry and Belinda had some disagreements regarding their anniversary dinner and holiday gift spending and ended up not having a balanced budget for the year. Provide some advice for the couple about how to resolve or, better, prevent such disagreements in the future