Property developer Lendlease issues 90 day bank bills that have a yield-to-maturity (YTM) of 3% p.a. that you as a potential buyer value at a price of $95,000.

The latest analyst report comes out showing a growing shortfall in working capital for the remainder of the year. This is due to the inability of lendlease to collect on accounts receivable due to customers inability to pay in the COVID economy.

Which of the following best describes how you would revalue the investment?

Select one:

a. Improving collections on customer debts causes a fall in liquidity risk, which increases the YTM, increasing the value of the bill where you would pay a price lower than $95,000.

b. Rising earnings causes a fall in credit risk, which reduces the YTM, increasing the value of the bill where you would pay a price higher than $95,000.

c. Falling earnings causes a increase in interest rate risk, which increases the YTM, increasing the value of the bill where you would pay a price higher than $95,000.

d. Falling credit risk causes a rise in earnings, which increases the YTM, reducing the value of the bill where you would pay a price lower than $95,000.

e. Falling collections on customer debt causes an increase in liquidity risk, which increases the YTM, reducing the value of the bill where you would pay a price lower than $95,000.