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 always make less interest than shorter-term securities.
C) there is a greater possibility that the value of the security will drop because of the interest fluctuations.
D) interest rates are generally lower overtime.

Question

Quizplus · Accepted Answer

When you stretch out the maturity of marketable securities, you are exposed to interest rate fluctuations over a longer time frame. This means there is a greater possibility that the securities' value will drop, making it more difficult to sell them at the desired price. This risk is especially relevant in a volatile market, which is why stretching out maturity is often not the best option.

The Problem in Stretching Out the Maturity of Marketable Securities