Question18 Which of the following is considered the ultimate liquid asset? Select one alternative: a. Cash b. T-bills c. T-notes d. T-bonds e. Wholesale CDs ResetMaximum marks: 2 Flag question undefined

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BlackTom AI · Accepted Answer

The question asks which asset is considered the ultimate liquid asset among the given options. 
Option a: Cash. Cash is the most liquid form ofasset because it is immediately usable for transactions without any conversion or waiting period. There is no market risk or time to maturity, and it can be spent or used right away, which is why it is deemed the ultimate liquid asset.
Option b: T-bills. Treasury bills are highly liquid and tradable, typically with maturities under one year, and they can be quickly sold in the market. However, they still involve a short-term instrument and a potential small discount/price movement, so they are not as instantly usable as cash.
Option c: T-notes. Treasury notes have longer maturities (2 to 10 years) and are subject to interest rate and price risk. While they are liquid, they require selling or holding to maturity, which introduces a delay or potential transaction costs, making them less immediate than cash.
Option d: T-bonds. Treasury bonds have even longer maturities (more than 10 years) and carry more exposure to interest rate fluctuations. Their liquidity is good for fixed-income markets, but again they are not as instantly available as cash for immediate needs.
Option e: Wholesale CDs. Wholesale certificates of deposit are time deposits that may require notice, have penalties for early withdrawal, and are not as readily spendable as cash. Their liquidity is constrained by withdrawal terms and potential penalties, so they do not meet the definition of the ultimate liquid asset.
In summary, while all listed items can be liquid to varying degrees, cash is the only option that provides immediate spendability with no conversion or maturity considerations, making it the ultimate liquid asset.

Question18 Which of the following is considered the ultimate liquid asset? Select one alternative: a. Cash b. T-bills c. T-notes d. T-bonds e. Wholesale CDs ResetMaximum marks: 2 Flag question undefined

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