Following your successful implementation of a new lockbox system for Galaxy Aircraft Company, consider now how to invest the funds released by the transition to a faster collection system. In general, firms tend to want to invest these funds in marketable securities due to their relative high liquidity and lower risk levels.

Consider the following statement and determine which risk it describes.

This risk refers to the possibility that a security can be sold quickly only by incurring high transaction costs or by making a significant price concession.

This statement describes:

Marketability risk

Maturity risk

Default risk

Next, read the following statement and determine whether it is true or false:

A highly marketable or liquid security should be expected to exhibit a relatively high rate of return.

This statement is:

True

False

If Galaxy Aircraft Company wants to invest in a security that allows Galaxy to maintain deposits in banks outside the United States, which security should it purchase?

Municipal securities

Eurodollar deposits

Negotiable certificates of deposit