Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following types of securities are most likely to have higher yields?

Investment-grade municipal bonds

Corporate bonds rated below investment grade

U.S. Treasury bills

Certificates of deposit from major banks

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Verified step by step guidance

Understand the concept of yield: Yield refers to the return an investor earns on a security, typically expressed as a percentage of the investment's cost. Higher yields are often associated with higher risk.

Analyze the risk-return relationship: Securities with higher risk generally offer higher yields to compensate investors for taking on additional risk. Conversely, lower-risk securities tend to have lower yields.

Evaluate each security type: Investment-grade municipal bonds are considered low-risk and typically have lower yields. U.S. Treasury bills are backed by the government and are among the safest investments, so they also have low yields. Certificates of deposit (CDs) from major banks are relatively safe and offer moderate yields.

Focus on corporate bonds rated below investment grade: These are often referred to as 'junk bonds.' They carry higher risk due to the lower creditworthiness of the issuer, but they offer higher yields to attract investors willing to take on that risk.

Conclude that corporate bonds rated below investment grade are most likely to have higher yields, as they compensate investors for the increased risk associated with the issuer's lower credit rating.