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Part 1

Management of cash balancePersonal finance ProblemAlexis Morris, an assistant manager at a local department store, gets paid every 2 weeks by direct deposit into her checking account. This account pays no interest and has no minimum balance requirement. Her monthly income is

$4,170.

Alexis has a "target" cash balance of around

$1,210,

and whenever it exceeds that amount she transfers the excess into her savings account, which currently pays

2.3%

annual interest. Her current savings balance is

$15,300,

and Alexis estimates she transfers about

$20

per month from her checking account into her savings account. Alexis doesn't waste any time in paying her bills, and her monthly bills average about

$2,100.

Her monthly cash outlay for food, gas, and other sundry items totals about

$880.

Reviewing her payment habits indicates that on average she pays her bills

10

days early. At this time, most marketable securities are yielding about

4.74%

annual interest. Show how Alexis can better manage her cash balance:

a.What can Alexis do regarding the handling of her current balances?

b.What do you suggest that she do with her monthly surpluses?

c.What do you suggest Alexis do about the manner in which she pays her bills?

d.Can Alexis grow her investment income by better managing her cash balances?

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Part 1

a. What can Alexis do regarding the handling of her current balances?(Select the best answer below.)

A.

Alexis should transfer her current savings account balances into the liquid marketable security.

B.Alexis should look for a checking account that pays at least

2.3%.

C.Alexis should increase her "target" cash balance to around

$1,573.

D.Alexis should lower her "target" cash balance to around

$847.

Part 2

b. What do you suggest that she do with her monthly surpluses?(Select the best answer below.)

A.Alexis should transfer monthly the

$20

from her checking account to her savings account.

B.Alexis should transfer monthly the

$880

from her checking account to her savings account.

C.Alexis should transfer monthly the

$20

from her checking account to the liquid marketable security.

D.Alexis should transfer monthly the

$880

from her checking account to the liquid marketable security.

Part 3

c. What do you suggest Alexis do about the manner in which she pays her bills?(Select the best answer below.)

A.

Alexis should slow down payments of her bills until they are due.

B.

Alexis should try to spend less for food, gas, and other sundry items.

C.

Alexis should keep paying her bills as in the past.

D.

Alexis should pay her bills late every other month to increase her cash flow.

Part 4

d. Can Alexis grow her investment income by better managing her cash balances?(Select from the drop-down menu.)

Alexis' annual earnings

would not

would

grow by following the above recommendations.

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