If the yield curve is upward sloping,then which type of marketable securities,assumed to be held for emergencies,should be held in a firm's portfolio?
A)They should consist mainly of long-term securities because those pay higher rates.
B)They should consist mainly of short-term securities because those pay higher rates.
C)They should consist mainly of government securities to minimize interest rate risk.
D)They should consist mainly of short-term securities to minimize interest rate risk.

Question

Quizplus · Accepted Answer

When the yield curve is upward sloping, short-term securities pay higher rates than long-term securities. Holding short-term securities helps to minimize interest rate risk, as their values are less sensitive to changes in interest rates compared to long-term securities. Therefore, option D is the best choice.

If the Yield Curve Is Upward Sloping,then Which Type of Marketable