If a Security Can Easily Be Converted to Cash Without

question 33

Multiple Choice

If a security can easily be converted to cash without a loss in value, it

• A)is liquid.
• B)has a high after-tax yield.
• C)has high credit risk.
• D)is illiquid.

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Definitions:

NPV Projects

Net Present Value Projects; a method used to evaluate the profitability of an investment or project by calculating the present value of all cash flows associated with it.

Residual Policy

A dividend policy where dividends are paid out from residual or leftover earnings after all productive investment opportunities are funded.

Compromise Policy

A policy approach that aims to find a middle ground or agreement between differing parties, especially in legislative or corporate settings.

Cash Dividend

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.