Which of the Following Is the Least Desirable Business Reason

question 89

Multiple Choice

Which of the following is the least desirable business reason for a company to invest in debt or equity securities?

• A) to generate investment income
• B) to invest short-term, excess cash
• C) to pursue certain business strategies
• D) to weaken the relationship between the investing company and a key vendor.

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Definitions:

Interest Rates

The expense incurred when taking out a loan, usually shown as a percent of the total amount loaned.

Federal Funds Market

A U.S. financial market allowing banks to borrow and lend excess reserves to each other, usually overnight, at an interest rate called the federal funds rate.

Discount Window

The discount window is a central banking facility that allows financial institutions to borrow reserves, usually short-term, at a predetermined interest rate, to maintain liquidity.

Negative Excess Reserves

Refers to a situation where a bank's actual reserves fall short of the required reserves; although not typical, it would indicate financial stress or unusual circumstances.