Question at position 1 Of the following, the most liquid asset istime deposits (CDs)demand depositsmutual fundssavings depositscurrency

Question

Question at position 1 Of the following, the most liquid asset istime deposits (CDs)demand depositsmutual fundssavings depositscurrency

BlackTom AI · Accepted Answer

Currency is the most liquid asset because it can be used immediately as a medium of exchange with no conversion, delay, or transaction cost.

Relevant concepts:
- Liquidity measures how quickly and easily an asset can be converted into cash for transactions at full value.
- Money in the narrow sense (M1) typically includes currency and demand deposits; other assets are progressively less liquid.

Step-by-step reasoning and ranking:
1. Currency (paper bills and coins) is ready-for-use cash. No conversion, no withdrawal, no settlement time — immediate purchasing power.
2. Demand deposits (checking accounts) provide near-immediate access to funds via checks, debit cards, or ATMs. They are extremely liquid but require a bank transaction or device access to convert into physical cash or to make payments, so they are a hair less immediate than currency.
3. Savings deposits are accessible but often have transfer or withdrawal limits (and may require a trip to the bank or delay), making them less liquid than demand deposits.
4. Mutual funds represent pooled investments in securities. To use them for purchases you must sell shares, which takes time (trade execution and settlement) and may incur fees or price risk, so they are less liquid than bank deposits.
5. Time deposits (CDs) lock funds for a fixed term and typically impose penalties for early withdrawal; they are the least liquid of the options.

Why the correct answer is correct:
- Currency requires no conversion and can be spent instantly, meeting the definition of maximum liquidity. That is why it outranks demand deposits, which although very liquid, still require a banking transaction for many payments.

Why other options are incorrect (brief):
- Time deposits: funds are locked and incur penalties for early access.
- Demand deposits: highly liquid but not as instant as physical currency.
- Mutual funds: require selling and settlement; possible fees and market risk.
- Savings deposits: limited withdrawal frequency and potential delays.

Conclusion: therefore the most liquid asset among the options is currency, which matches the provided answer.

Question at position 1 Of the following, the most liquid asset istime deposits (CDs)demand depositsmutual fundssavings depositscurrency单项选择题

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