Which of the Following Statement Completions Is CORRECT? If the Yield

question 38

Multiple Choice

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

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

---

Definitions:

Residual Value

The estimated value that an asset will realize upon its sale at the end of its useful life, important in calculating depreciation.

Depreciation Expense

The distribution of a tangible asset's cost over its lifespan, treating it as an expenditure.

Double Declining-balance

A method of accelerated depreciation that doubles the straight-line depreciation rate.

Depreciation Expense

This refers to the allocation of the cost of a tangible asset over its useful life, representing how much of the asset's value has been used up during a fiscal period.