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Willie gets paid $1000 every two weeks and follows the same spending and saving plan unless an emergency arises. The first thing willie does is to immediately put $250 in his savings account. Next, using online bill pay through his bank, willie spends about $300 on bills such as his cell phone, electricity, and rent. williewithdraws $150 in cash for daily expenses and leaves the remaining amount ($100) in his checking account. Based upon the information about willie's spending and saving habits, which statement is true?
1) willie's annual household income is approximately $55,000
2) willie's income is used exclusively as a medium of exchange for goods and services
3) willie operates on a 'cash only" basis, which is a very smart personal finance decision
4) willie allocates $250 every two weeks as a store of value in his savings account
ANSWER: Willie allocates $250 every two weeks as a store of value in his savings account.
EXPLANATION: A store of value is a reserved asset that can be converted to cash, anytime.
Since Willie decided to save $250 every two weeks, that means he is increasing his stored value by $250 every two weeks. This stored value can be converted to cash anytime Willie wants, by withdrawing the money from the account. Willie is not operating in a cash only basis because he does online payment, and online banking transfer, which are not done by cash payment, but rather online banking oayment.
