To Achieve Both Liquidity and an Adequate Return, You Should

question 33

Multiple Choice

To achieve both liquidity and an adequate return, you should consider investing in

• A) only one money market investment with a high return and low liquidity.
• B) only one money market investment with low return and high liquidity.
• C) money market investments plus other investments with varied returns and levels of liquidity.
• D) multiple money market investments with high returns and high liquidity.

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Definitions:

Payback Period

The amount of time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.

Incremental After-Tax Income

The additional net income that results from implementing a new project or decision, after accounting for taxes.

Present Value Factors

Factors used to calculate the present value of a future amount of money or stream of cash flows, considering the time value of money.

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, reflecting the risk associated with the investment.