A:

a. discount rate.



b. 90-day Treasury bill rate.



c. five-year Treasury note rate.



d. federal funds rate.




Answers: b



The 90-day Treasury bill rate is used because there is no credit risk, and the maturity is so short that there is no liquidity or market risk. The five-year Treasury also has no credit risk, but if interest rates rise, the market value could decline.



RELATED FAQS

  1. How often should a small business owner go through a bank reconciliation process?

    Learn about the bank reconciliation process, its purpose and how often it is recommended that small businesses perform a ...
  2. How can a company reduce the unsystematic risk of its own security issues?

    Understand the basic concepts of systematic and unsystematic risk, and learn steps a company can take to reduce its level ...
  3. Why is a company's Cash Flow from Financing (CFF) important to both investors and ...

    Find out about the cash flow from investing activities. Understand why a company's CFF is important to both investors and ...
  4. What are the best free online calculators for calculating my taxable income?

    Find out where to locate the best online calculators to determine your taxable income and why it is important to know this ...
RELATED TERMS
  1. Furriers’ Customers Policy

    An inland marine insurance policy that provides coverage against ...
  2. Furriers’ Block Policy

    An inland marine insurance policy that provides coverage against ...
  3. Runoff Insurance

    An insurance policy provision that provides liability coverage ...
  4. Experience Refund

    The portion of an insurance company’s premiums or profits that ...
  5. Excess Judgment Loss

    The amount of additional loss that an insurer is required to ...
  6. Ex Gratia Payment

    A payment made to an individual by an organization, government, ...

You May Also Like

Related Articles
  1. Fundamental Analysis

    American Express Returns Vs. DJ Industrial ...

  2. Fundamental Analysis

    20-Year Treasury Bond ETF Trading Strategies

  3. Mutual Funds & ETFs

    ETF Analysis: iShares FTSE/Xinhua China ...

  4. Technical Indicators

    How To Interpret The Volume Zone Oscillator

  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Germany

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!