Which of the Following Statement Completions Is Most Correct? If

question 14

Multiple Choice

Which of the following statement completions is most correct? If the yield curve is upward sloping, then a firm's marketable securities portfolio, assumed to be held for liquidity purposes, should be

• A) Weighted toward long-term securities because they pay higher rates.
• B) Weighted toward short-term securities because they pay higher rates.
• C) Weighted toward U.S. Treasury securities to avoid interest rate risk.
• D) Weighted toward short-term securities to avoid interest rate risk.
• E) Balanced between long- and short-term securities to minimize the effects of either an upward or a downward trend in interest rates.

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Definitions:

Marginal Revenue

The augmented income from the sale of one more unit of a good or service.

Pure Competition

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a homogeneous product, leading to price taking behavior.

Competitive Firm

A business that competes in a market where it has some influence on the prices of its products or services but faces competition from other firms.

Total Economic

A term likely intending to refer to 'total economic value,' which encompasses all direct and indirect values of a resource or entity.