Which one of the following statements is correct? Multiple Choice Short-term investments tend to have high levels of default risk. The rate of return earned on short-term securities tends to exceed...

Extracted text: Which one of the following statements is correct? Multiple Choice Short-term investments tend to have high levels of default risk. The rate of return earned on short-term securities tends to exceed that earned on long-term securities. Treasury bills are well suited for short-term investments. Short-term securities are more interest rate sensitive than long-term securities. The income earned on Treasury bills is exempt from all taxation.


Extracted text: Regarding a motive for maintaining liquidity, which of the following is true? Multiple Choice Firms need to hold cash as a buffer between inflowing and outflowing transactions. Firms should maintain compensating balances just in case they encounter an emergency situation. The increasing use of electronic funds transfers is increasing the transactional motive to hold cash. International firms have a transactional motive to hold cash in case favorable exchange rates become available. Firms need to hold cash for precautionary motives especially since money market accounts are not very liquid.