A firm's marketable securities account has both 270-day corporate commercial paper and three-month Treasury bills. If the firm chooses to shift its policy and invest 100% in commercial paper, it would likely increase the interest rate risk of its marketable securities portfolio.

Question

Quizplus · Accepted Answer

Commercial paper typically carries a higher interest rate risk compared to Treasury bills due to the higher default risk associated with corporate issuers versus the virtually risk-free nature of securities issued by the U.S. government.

A Firm's Marketable Securities Account Has Both 270-Day Corporate Commercial