Shu Chang, $22,$ has just moved to Denver to begin her first professional job. She is concerned about her finances; specifically, she wants to save for $$a rainy day$$ and a new car purchase in $2$ years. Shu$$s new job pays $$30,500,$ of which she keeps $$24,000$ after taxes. Her monthly expenses total $$1,600.$ Shu$$s new employer offers a $401($k$)$ plan and matches employees$$ contributions up to $6$ percent of their salary. The employer also provides a credit union and a U$.$S$.$ Savings Bond purchase program. Shu also just inherited $$5,000.$Shu$$s older brother, Wen, has urged Shu to start saving from $$day one$$ on the job. Wen has lost a job twice in the last $5$ years through company downsizing and now keeps $$35,000$ in a $2$ percent money market mutual fund in case it happens again. Wen$$s annual take$-$home pay is $$48,000.$Shu has started shopping around for accounts to hold her liquid assets. She$$d like to earn the highest rate possible and avoid paying fees for falling below a specified minimum balance. She plans to open two accounts: one for paying monthly bills and another for short$-$term savings.

Questions:

$1.$ Comment on Wen$$s use of liquid assets. How is his savings philosophy both risky and conservative? What is the real after$-$tax rate of return, assuming a $2$ percent inflation rate and a $35$ percent marginal tax bracket?

$2.$ Shu has narrowed her $$savings$$ account choices to a standard checking account paying $0\mathrm{.}20$ percent, a money market deposit account paying $1\mathrm{.}5$ percent, and a money market mutual fund earning $2\mathrm{.}25$ percent. Which liquid asset vehicle would you recommend for paying monthly expenses, and which would you recommend for saving for the car down payment? Explain the advantages and disadvantages associated with each choice.

$3.$ Shu has heard that some local auto dealerships may require a cashier$$s check for the down payment. Why is a cashier$$s check preferable to a certified check?