Homework Answers
24. Correct answer is B.
High yield or investment return.
Short term securities will provide lower investment return as these are held for shorter time and these securities have lower interest rate risk and have greater liquidity. Hence, these are issued at lower rate and provide low yield.
--> The maturity risk of short term securities are lower as these are held for a shorter time. Hence the risk of holding for long time is low. So they are issued at lower interest rate.
--> Shorter the period lower the chances of default. Short term securities have lower default rate.
--> Short term securities are converted into cash within a year. these securities have high marketability and can be converted into cash easily.
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