Certificates of Deposit

Archive for April, 2007

Question: Would someone please answer these questions for me. Thanks it will be greatly appreciated?

(1) An inventory pricing procedure in which the oldest costs incurred
rarely have an effect on the ending inventory valuation is
a. FIFO.
b. LIFO.
c. base stock.
d. weighted-average
(2)Which of the following is considered cash?
a. Certificates of Deposit (CDs)
b. Money market checking accounts
c. Money market savings certificates
d. Postdated checks
(3)Information is neutral if it
a. provides benefits which are at least equal to the costs of its
preparation.
b. can be compared with similar information about an enterprise at
other points in time.
c. would have no impact on a decision maker.
d. is free from bias toward a predetermined result.

Answer: (1) a. FIFO

FIFO (first in, first out) means that the oldest costs would be applied to sales first, and therefore would not be part of the ending inventory after these sales.

(2) b. Money market checking accounts

these can be used as payment for current transactions, the others on the list cannot.

(3) I’m not sure what the term “neutral information” refers to. I don’t remember it being part of my studies, I’ve never used it in my career, and I checked an old textbook that I have lying around, it’s not mentioned. It must mean one of two things: either it means that the information was obtained from a neutral source (which would make d. the correct answer) or it means that the results have a neutral effect (which would make c. the correct answer). I can’t see any possibility for either a or b to be correct.

Certificates of Deposit Best Rates Comparison

The following chart below compares rates on Certificates of Deposit between national Certificates of Deposit and traditional Certificates of Deposit nationwide. This Certificate Of Deposit Best Rates comparison chart serves as a comparison and for illustration purposes only. The CD rates below are not current Certificates of Deposit rates. 

Longer maturity of Certificates of Deposit means higher CD rates

The chart of Certificates of Deposit rates below shows that the longer the maturity of Certificates of Deposit, the higher the CD rates. Naturally, a 1 month certificate of deposit rate is lower than a 5 year CD rate. 

National CD rates index is typically lower than traditional CD rates

The national index of CD rates for each maturity shows that most people just buy Certificates of Deposit from their local banks without truly shopping CD rates thoroughly. That is why, with a bit of research on Certificates of Deposit rates, you will most likely beat the national index of CD rates.

	National Index*	Traditional CD nationwide	You Gain
1 month	5.26%	6.30%	1.04%
6 month	6.20%	6.55%	0.35%
1 year	6.51%	6.55%	0.04%
2 year	6.63%	6.70%	0.07%
5 year	6.55%	6.80%	0.25%
All yields are annual percentage yields (APYs) as of 9/22/2000.  *The National Index is the average rate paid by the 100 largest-asset banks and thrifts in the top 10 metropolitan areas.