The Use of Treasury Bills to Set the Riskfree Rate

question 9

Multiple Choice

The use of Treasury Bills to set the riskfree rate tends to

• A) set a large riskfree rate.
• B) favor aggressive portfolios.
• C) set return benchmarks for margin portfolios that are too high.
• D) assume too large a borrowing rate.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often with predetermined dividend payments.

Cash

Money in the form of bills or coins, available for transactions or banking.

Nonparticipating

A term typically used in insurance, referring to policies that do not entitle the policyholder to share in the insurer's surplus or profits.

Cumulative

A term referring to an attribute of financial items (like dividends) that accumulate over time until they are paid or settled.