Which one of the following is NOT a wise guideline for globally managing the marketable securities portfolio of a multinational corporation?
A)concentrate the instruments in the portfolio to one growth industry to maximize the yield for a given level of risk
B)review the portfolio daily to decide which securities should be sold
C)carefully consider opportunities for covered interest arbitrage
D)tailor the maturity of the investment to the firm's projected cash needs

Question

Quizplus · Accepted Answer

Concentrating the instruments in the portfolio to one growth industry is not a wise guideline as it increases the concentration risk and leaves the portfolio vulnerable to industry-specific shocks. Diversification across different industries and asset classes is a better approach to managing the marketable securities portfolio. The other options, reviewing the portfolio daily, considering opportunities for covered interest arbitrage, and tailoring the maturity of the investment to the firm's projected cash needs, are all wise guidelines for globally managing the marketable securities portfolio of a multinational corporation.

Which One of the Following Is NOT a Wise Guideline