You have $10,000 to invest for short-term liquidity needs in a declining interest rate period. Pick the best investment.

Question

Quizplus · Accepted Answer

In a declining interest rate period, it's better to purchase a bond at a discount so that the principal investment yields a higher return. Option B is a 365-day T-bill that can be purchased at a discount for $9250, which is a yield of approximately 7.45%. This provides a much higher return than the other options, making it the best choice for short-term liquidity needs. The other options provide lower returns ranging from 3.95% to 6.49%.

You Have $10,000 to Invest for Short-Term Liquidity Needs in a Declining