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All of the following are alternative marketable securities suitable for investment, except:
A. Convertible bonds.
B. Bankers' acceptances.
C. Eurodollars.
D. Commercial paper.
Answer: A
Explanation:
Choice "d" is correct. Convertible bonds. Temporarily idle cash should be inverted in very liquid, low risk
short-term investments only. U.S. T-bills are basically risk-free. Banker's acceptances and Eurodollars are
only slightly more risky. Commercial paper, the short-term unsecured notes of the most credit-worthy
large U.S. corporations is a little riskier, but still relatively low risk. However, convertible bonds are subject
to default risk, liquidity risk, and maturity (interest rate) risk, and as such are inappropriate securities for
short-term marketable security investment.
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