The passage says loans are "typically" needed, not that everyone will need one. C. People who need a loan are able to borrow as much as they need, as long as they pay it back. Loans are typically needed to finance large expenditures, such as the payment of college tuition or the purchase of a car or a home. The amount of financing needed is the difference between the amount of the purchase and the amount of money you have available. Managing loans involves three decisions. The first is to determine how much you can afford to borrow. The other two decisions are deciding on the maturity (length of time) of the loan, and selecting a

1. Money Management
Practice Reading Review

2. Money Management
Every product or service you purchase each day requires sufficient funds to cover these
expenses. Expenses can range from your morning cup of coffee to major car repairs. You need to have
liquidity, or access to funds to cover any short-term cash needs. You can enhance your liquidity by using
money management and credit management.
Money management involves decisions regarding how much money to retain in a liquid form
and how to allocate the funds among short-term investments. If you do not have access to money to
cover cash needs, you may have insufficient liquidity. That is, you have the assets to cover your
expenses, but the money is not easily accessible. Finding an effective liquidity level involves deciding
how to invest your money so that you can earn a return, but also have easy access cash if needed. At
times, you may be unable to avoid cash shortages because of unanticipated expenses.
Credit management involves decisions about how much credit you need to support your
spending and which sources of credit to use. Credit is commonly used to cover both large and small
expenses when you are short on cash, so it enhances your liquidity. Credit should be used only when
necessary, however, as you will need to pay back borrowed funds with interest (and the interest
expenses may be very high).
Loans are typically needed to finance large expenditures, such as the payment of college
tuition or the purchase of a car or a home. The amount of financing needed is the difference between
the amount of the purchase and the amount of money you have available. Managing loans involves three
decisions. The first is to determine how much you can afford to borrow. The other two decisions are
deciding on the maturity (length of time) of the loan, and selecting a loan that charges a competitive
interest rate. (adapted from Madura, Jeff. Personal Finance, red. 5-6)

3. Money Management
Every product or service you purchase each day requires sufficient funds to cover these
expenses. Expenses can range from your morning cup of coffee to major car repairs. You need to have
liquidity, or access to funds to cover any short-term cash needs. You can enhance your liquidity by using
money management and credit management.
Money management involves decisions regarding how much money to retain in a liquid form
and how to allocate the funds among short-term investments. If you do not have access to money to
cover cash needs, you may have insufficient liquidity. That is, you have the assets to cover your
expenses, but the money is not easily accessible. Finding an effective liquidity level involves deciding
how to invest your money so that you can earn a return, but also have easy access cash if needed. At
times, you may be unable to avoid cash shortages because of unanticipated expenses.
Credit management involves decisions about how much credit you need to support your
spending and which sources of credit to use. Credit is commonly used to cover both large and small
expenses when you are short on cash, so it enhances your liquidity. Credit should be used only when
necessary, however, as you will need to pay back borrowed funds with interest (and the interest
expenses may be very high).
Loans are typically needed to finance large expenditures, such as the payment of college
tuition or the purchase of a car or a home. The amount of financing needed is the difference between
the amount of the purchase and the amount of money you have available. Managing loans involves three
decisions. The first is to determine how much you can afford to borrow. The other two decisions are
deciding on the maturity (length of time) of the loan, and selecting a loan that charges a competitive
interest rate. (adapted from Madura, Jeff. Personal Finance, red. 5-6)

4. So…what do we do?

5. One sentence summaries of
each paragraph

6. Paragraph 1
Every product or service you purchase
each day requires sufficient funds to cover
these expenses. Expenses can range from
your morning cup of coffee to major car
repairs. You need to have liquidity, or access
to funds to cover any short-term cash needs.
You can enhance your liquidity by using
money management and credit management.

7. Paragraph 1
Every product or service you purchase each
day requires sufficient funds to cover these
expenses. Expenses can range from your morning
cup of coffee to major car repairs. You need definition
to
have liquidity, or access to funds to cover any
short-term cash needs. (You can enhance your
liquidity by using money management and credit
management.) this seems like a main idea/central point
We need liquid funds to cover our expenses and liquidity comes
from careful money and credit management.

8. Paragraph 2
Money management involves decisions
regarding how much money to retain in a liquid form
and how to allocate the funds among short-term
investments. If you do not have access to money to
cover cash needs, you may have insufficient liquidity.
That is, you have the assets to cover your expenses,
but the money is not easily accessible. Finding an
effective liquidity level involves deciding how to
invest your money so that you can earn a return, but
also have easy access cash if needed. At times, you
may be unable to avoid cash shortages because of
unanticipated expenses.

9. Paragraph 2
Money management involves decisions
regarding how much money to retain in a liquid form
and how to allocate the funds among short-term
investments. If you do not have access to money to
cover cash needs, you may have insufficient liquidity.
That is, you have the assets to cover your expenses,
but the money is not easily accessible. Finding an
effective liquidity level involves deciding how to
invest your money so that you can earn a return, but
also have easy access cash if needed. At times, you
may be unable to avoid cash shortages because of
unanticipated expenses.
Maintaining liquidity through money management

10. Paragraph 3
Credit management involves decisions
about how much credit you need to support
your spending and which sources of credit to
use. Credit is commonly used to cover both
large and small expenses when you are short
on cash, so it enhances your liquidity. Credit
should be used only when necessary, however,
as you will need to pay back borrowed funds
with interest (and the interest expenses may
be very high).

11. Paragraph 3
Credit management involves decisions
about how much credit you need to support your
spending and which sources of credit to use.
Credit is commonly used to cover both large and
small expenses when you are short on cash, so it
enhances your liquidity. Credit should be used
only when necessary, however, as you will need
to pay back borrowed funds with interest (and
the interest expenses may be very high).
Credit management to maintain liquidity

12. Paragraph 4
Loans are typically needed to finance large
expenditures, such as the payment of college tuition
or the purchase of a car or a home. The amount of
financing needed is the difference between the
amount of the purchase and the amount of money
you have available. Managing loans involves three
decisions. The first is to determine how much you
can afford to borrow. The other two decisions are
deciding on the maturity (length of time) of the loan,
and selecting a loan that charges a competitive
interest rate.

13. Paragraph 4
Loans are typically needed to finance large
expenditures, such as the payment of college tuition or
the purchase of a car or a home. The amount of financing
needed is the difference between the amount of the
purchase and the amount of money you have available.
Managing loans involves three decisions. The first is to
determine how much you can afford to borrow. The other
two decisions are deciding on the maturity (length of
time) of the loan, and selecting a loan that charges a
competitive interest rate.
Loans can increase liquidity and managing these loans
involves three decisions.

14. Which sentence best states the
main idea of the passage?
A. Managing credit will depend upon spending habits
and sources of available
B. Money management involves decisions about the
liquidity of one's assets
C. Financing is often needed to pay for large
expenditures.
D. Liquidity of money can be improved through
money management and credit management.

15. Paragraph Summaries
1. We need liquid funds to cover our expenses and
liquidity comes from careful money and credit
management.
2. Maintaining liquidity through money management
3. Credit management to maintain liquidity
4. Loans can increase liquidity and managing these
loans involves three decisions.

16. Which sentence best states the
main idea of the passage?
A. Managing credit will depend upon spending habits
and sources of available
B. Money management involves decisions about the
liquidity of one's assets
C. Financing is often needed to pay for large
expenditures.
D. Liquidity of money can be improved through
money management and credit management.

17. The author's primary purpose is
to
A. discuss the dangers of not following a budget.
B. list the various decisions and issues for
managing liquidity.
C. explain the types of loans that are available.
D. describe the best way to invest extra money.
MI: Liquidity of money can be improved through
money management and credit management.

18. The author's primary purpose is
to
A. discuss the dangers of not following a budget.
B. list the various decisions and issues for
managing liquidity.
C. explain the types of loans that are available.
D. describe the best way to invest extra money.
MI: Liquidity of money can be improved through
money management and credit management.

19. "Credit should be used only
when necessary.”
This part of the sentence from paragraph
three is a statement of
A. fact
B. opinion

20. "Credit should be used only
when necessary.”
This part of the sentence from paragraph
three is a statement of
A. fact
B. opinion

21. The reader can infer from this
article that
A. Most people are poor managers of money.
B. Buying a house is an example of a short-term cash
need.
C. Most people should hire a financial consultant to
help them become better managers of their
money because the issues involved are very
complicated.
D. Surplus money is best invested in order to grow,
but everyone should plan for unanticipated
expenses and have available liquid assets to
handle them.

22. The reader can infer from this
article that
A. Most people are poor managers of money.
 The author does not lead us to this inference with
any statements or judgements concerning how well
people manage their money. The passage is
concerned with information on how to manage
liquidity.

23. The reader can infer from this
article that
B. Buying a house is an example of a short-term cash
need.
 Paragraph one states, “You need to have liquidity,
or access to funds to cover any short-term cash
needs.”
 Paragraph four states, “Loans are typically needed
to finance large expenditures, such as the payment
of college tuition or the purchase of a car or a
home.”
 A house is not a small purchase or a short term
cash need. One would not pay cash for a home.

24. The reader can infer from this
article that
C. Most people should hire a financial consultant to
help them become better managers of their
money because the issues involved are very
complicated.
 There is no reference to hiring a financial
consultant nor to the issues being very complicated

25. The reader can infer from this
article that
D. Surplus money is best invested in order to grow,
but everyone should plan for unanticipated expenses
and have available liquid assets to handle them.
Paragraph 2 states, “Finding an effective liquidity
level involves deciding how to invest your money so
that you can earn a return, but also have easy access
cash if needed.” This indicates investing money for
growth (interest) is best but that we should maintain
liquid assets for expenses.

26. The reader can infer from this
article that
A. Most people are poor managers of money.
B. Buying a house is an example of a short-term cash
need.
C. Most people should hire a financial consultant to
help them become better managers of their
money because the issues involved are very
complicated.
D. Surplus money is best invested in order to grow,
but everyone should plan for unanticipated
expenses and have available liquid assets to
handle them.

27. Liquidity, as first mentioned in
line 3, most nearly means
A. money available for spending
B. amount of a loan
C. amount of large expenditures
D. one's credit rating

28. Liquidity, as first mentioned in
line 3, most nearly means
“You need to have liquidity, or access to
funds to cover any short-term cash needs.”
A. money available for spending
B. amount of a loan
C. amount of large expenditures
D. one's credit rating

29. Throughout the passage, overall,
which type of support is offered
to describe the various issues
involved in managing money or
credit?
A. Emotional
B. Objective

30. Throughout the passage, overall,
which type of support is offered
to describe the various issues
involved in managing money or
credit?
A. Emotional
B. Objective

31. Identify the relationship among these
sentences from paragraph four.
"Managing loans involves three decisions. The first
is to determine how much you can afford to
borrow. The other two decisions are deciding on
the maturity (length of time) of the loan, and
selecting a loan that charges a competitive interest
rate.
A. definition and example
B. comparison/contrast
C. listing
D. cause and effect

32. Identify the relationship among these
sentences from paragraph four.
"Managing loans involves three decisions. The first
is to determine how much you can afford to
borrow. The other two decisions are deciding on
the maturity (length of time) of the loan, and
selecting a loan that charges a competitive interest
rate.
A. definition and example
B. comparison/contrast
C. listing
D. cause and effect

33. As used in line 10, the phrase
"money is not easily accessible"
means
A. the purchaser does not have the money now, but
has the means to earn it.
B. the purchaser has money, but it is being used for
investments.
C. the purchaser cannot get to the bank quickly or
easily.
D. the purchaser does not have the money to buy an
item.

34. Look back in the paragraph…
“If you do not have access to money to cover cash
needs, you may have insufficient liquidity. That is,
you have the assets to cover your expenses, but the
money is not easily accessible.”
This means you do not have cash
or liquid funds

35. As used in line 10, the phrase
"money is not easily accessible"
means
A. the purchaser does not have the money now, but
has the means to earn it.
B. the purchaser has money, but it is being used for
investments.
C. the purchaser cannot get to the bank quickly or
easily.
D. the purchaser does not have the money to buy an
item.

36. Identify the relationship of the
parts within the following
sentence:
"At times you may be unable to avoid cash
shortages because of unanticipated expenses.”
A. Cause and effect
B. Classification
C. Comparison
D. Addition

37. So, what about my trick?
 Uh oh! No punctuation mark to separate
the sentence parts!!
 Where is the transition?
"At times you may be unable to avoid cash
shortages because of unanticipated
expenses.”
Because of = cause and effect

38. Identify the relationship of the
parts within the following
sentence:
"At times you may be unable to avoid cash
shortages because of unanticipated expenses.”
A. Cause and effect
B. Classification
C. Comparison
D. Addition

39. One reasonable conclusion that
can be drawn from the last
paragraph is
A. Wise money managers borrow as much money as
possible in order to have more liquidity.
B. Everyone will need a loan to finance a house or a
college education.
C. People who need a loan are able to borrow as
much as they need, as long as they pay it back.
D. Loan rates will vary depending upon the loan
amount, maturity length, and the loan company.

40. A. Wise money managers borrow as much
money as possible in order to have more
liquidity.
Loans are typically needed to finance large
expenditures, such as the payment of college tuition
or the purchase of a car or a home. The amount of
financing needed is the difference between the
amount of the purchase and the amount of money
you have available. Managing loans involves three
decisions. The first is to determine how much you
can afford to borrow. The other two decisions are
deciding on the maturity (length of time) of the loan,
and selecting a loan that charges a competitive
interest rate.

41. B. Everyone will need a loan to finance
a house or a college education.
Loans are typically needed to finance large
expenditures, such as the payment of college tuition
or the purchase of a car or a home. The amount of
financing needed is the difference between the
amount of the purchase and the amount of money
you have available. Managing loans involves three
decisions. The first is to determine how much you
can afford to borrow. The other two decisions are
deciding on the maturity (length of time) of the loan,
and selecting a loan that charges a competitive
interest rate.

42. C. People who need a loan are able to borrow
as much as they need, as long as they pay it
back.
Loans are typically needed to finance large
expenditures, such as the payment of college tuition or
the purchase of a car or a home. The amount of financing
needed is the difference between the amount of the
purchase and the amount of money you have available.
Managing loans involves three decisions. The first is to
determine how much you can afford to borrow. The other
two decisions are deciding on the maturity (length of
time) of the loan, and selecting a loan that charges a
competitive interest rate.
We really aren’t given any information about how much
they are able to borrow only how to figure out how much
is needed.

43. D. Loan rates will vary depending upon
the loan amount, maturity length, and
the loan company.
Loans are typically needed to finance large
expenditures, such as the payment of college tuition
or the purchase of a car or a home. The amount of
financing needed is the difference between the
amount of the purchase and the amount of money
you have available. Managing loans involves three
decisions. The first is to determine how much you
can afford to borrow. The other two decisions are
deciding on the maturity (length of time) of the loan,
and selecting a loan that charges a competitive
interest rate.

44. One reasonable conclusion that
can be drawn from the last
paragraph is
A. Wise money managers borrow as much money as
possible in order to have more liquidity.
B. Everyone will need a loan to finance a house or a
college education.
C. People who need a loan are able to borrow as
much as they need, as long as they pay it back.
D. Loan rates will vary depending upon the loan
amount, maturity length, and the loan company.

45. What is the overall tone of this
passage?
A. reflective
B. neutral
C. persuasive
D. informative

46. What is the overall tone of this
passage?
A. reflective
B. neutral
C. persuasive
D. informative