Apple Inc. (AAPL)’s Cash: A Full Breakdown

The problem with these maneuvers is that investors are exposed to new risks that they may not have considered.

Interest Rate Risk: With interest rates so low, a small increase in yields could send bond prices plunging. Today, the yield on a 10- year U.S. Treasury note is 1.65%. If rates rise only 1%, bond prices would fall nearly 10%. If rates rise 2%, bond prices would fall nearly 20%.

Credit Risk: With corporate treasuries venturing into junk bonds and leveraged-loans, they’re exposed to defaults if borrowers fail to repay their debts.

Foolish bottom line

The most troubling aspect of this for investors isn’t the low returns but transparency. We really don’t know how these corporations are investing their cash holdings and what kinds of risks they’re exposing investors to. With cash balances growing, in some cases exceeding 20% of corporate market caps, it’s time investors took note.

The article What Is Apple Doing With its Cash? originally appeared on is written by Robert Baillieul.

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