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The correct option that defines the most liquid asset.
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Answer to Problem 6MCQ
Option e is correct.
Explanation of Solution
Explanation for the correct option:
e.
Cash is the most liquid asset that a company or an organization may have as it can be used immediately for purchasing any item or for making payments in cash. Therefore, option e is correct.
Explanation for incorrect options:
a.
Stock is one of the liquid assets as it can be converted into cash but cash is the most liquid asset as no conversion is required. Therefore, option a is incorrect.
b.
Bonds are generally issued for fixed tenure which means if it is converted into cash, the loss in value would be considerable. Therefore, option b is incorrect.
c.
Loans are long-term financial instruments that cannot be easily converted into cash. Therefore, option c is incorrect.
d.
Mutual funds if converted into cash at an early stage will result in a greater loss of its value. Therefore, option d is incorrect.
Financial system: Financial system refers to the system that facilitates the borrower to borrow capital and the investors to invest their savings in the financial market.
Liquid asset: An asset can be referred to as a liquid asset if it can be converted into cash easily without any loss in its value.
Chapter 5R Solutions
Krugman's Economics For The Ap® Course
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