A firm expects to have funds of $150,000 idle for 60 days. If the firm could purchase marketable securities yielding 2 percent annually and pay brokerage fees of $1,500, the firm A) should make the investment since interest earned exceeds brokerage fees B) should not make the investment because its return is less than its cost C) should leave the $150,000 in cash D) should invest the funds for more than 60 days due to the favorable rate

A firm expects to have funds of $150,000 idle for 60 days. If the firm could purchase marketable securities yielding 2 percent annually and pay brokerage fees of $1,500, the firm A) should make the investment since interest earned exceeds brokerage fees B) should not make the investment because its return is less than its cost C) should leave the $150,000 in cash D) should invest the funds for more than 60 days due to the favorable rate

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter23: Other Topics In Working Capital Management

Section: Chapter Questions

Problem 11MC

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Question

A firm expects to have funds of $150,000 idle for 60 days. If the firm could purchase marketable securities yielding 2 percent annually and pay brokerage fees of $1,500, the firm

A) should make the investment since interest earned exceeds brokerage fees

B) should not make the investment because its return is less than its cost

C) should leave the $150,000 in cash

D) should invest the funds for more than 60 days due to the favorable rate

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