A Firm That Wishes to Minimize Risk When Investing Idle

question 124

Multiple Choice

A firm that wishes to minimize risk when investing idle cash would be least likely to buy

• A) commercial paper.
• B) long-term corporate bonds.
• C) negotiable certificates of deposit.
• D) Treasury bills of the U.S. government.

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Definitions:

Federal Funds

Reserve balances that commercial banks hold at the Federal Reserve, which can be lent to other banks overnight to meet reserve requirements, influencing the federal funds rate.

Short-Term Basis

A period or timeframe that typically covers the near future, often less than a year, used for planning and decision making.

Banks

Financial institutions that accept deposits from the public, create credit, and provide loans, among other financial services.

Lender Of Last Resort

The role typically assumed by a central bank to provide funds to financial institutions in distress, to prevent systemic failures.