The Problem in Stretching Out the Maturity of Marketable Securities

question 38

Multiple Choice

The problem in stretching out the maturity of marketable securities is that

• A) you are legally locked in until the maturity date.
• B) longer term securities are often not available.
• C) there is greater possibility of loss.
• D) interest rates are generally lower.

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Definitions:

Percent Equivalent

A value that represents a part of a whole expressed as a percentage.

Compound Interest

A way of determining interest that takes into account the original principal and adds the interest that has been accrued from previous periods.

Compound Interest

Calculation of interest on both the principal amount initially provided or borrowed, plus the interest that has accumulated over earlier periods.

Compound Interest

The addition of interest to the principal sum of a loan or deposit, where the interest that has been added also earns interest from that point on.