Question

Consider the relative liquidity of the following assets: Assets 1. A share in a publicly traded company 2. The funds in a savings account 3. A $10 bill 4. Your car Select the assets in order of their liquidity, from most liquid to least liquid. Asset Most Liquid Second-Most Liquid Third-Most Liquid Least Liquid

Answer 1

Assets in order of liquidity, from most liquid to least liquid are:

1. A $10 bill

2. The funds in a savings account

3. A share in a publicly traded company

4. Your car

Step-by-step explanation:

The $10 bill is the most liquid, representing cash in hand. It is followed by funds in a savings account, which can be withdrawn at short notice.

The share in a publicly traded company can also easily be turned into cash when the certificate is sold to another investor. It will take less time to do than turning a car into cash.

The car is therefore the least liquid because you will need to find a willing buyer who will likely inspect and test-drive the car. The buyer will also get it assessed by a technician.

Liquidity of an asset is based on the time it will take for an asset to be turned into cash. Surely, the car will take a longer time than any other stated asset above.

Answer 2

The answer is:

1. The $10 bill

2. funds in a savings account

3. Shares in a publicly traded company

4. Car

Step-by-step explanation:

Liquidity is a function of how fast or how quickly one can turn an instrument or assets into cash.

The most liquid asset is the $10 bill because it is a cash already

The Second-Most Liquid is the funds in a savings account. This can be turn into cash when one walks into the bank for withdrawal

The Third-Most Liquid is the share in a publicly traded company

And the Least Liquid is the car because looking for a buyer to buy car in exchange for cash might take a while