If a Checking Account Has an Interest Rate of 1

question 8

Multiple Choice

If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 3%, the opportunity cost of holding cash in a checking account is:

• A) zero.
• B) 0.02%.
• C) 1%.
• D) 2%.

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Definitions:

Notification of Dishonor

A formal notice given to the parties involved in a negotiable instrument (like a check or promissory note) indicating that payment has failed or been refused.

Drawer Secondarily Liable

The obligation of the drawer of a negotiable instrument, such as a check, to pay if the primary party fails to do so.

Fraudulent Alteration

Altering a document without permission with the goal of misleading or committing fraud.

Promissory Note

A promissory note is a financial instrument in which one party promises in writing to pay a determinate sum of money to another, either at a fixed or determinable future time.