What is typically a feature of high liquidity assets?

What is typically a feature of high liquidity assets?

• A. Higher risk compared to low liquidity assets
• B. Low transaction costs when sold
• C. Slow conversion into cash
• D. Decreasing value over time

Answer: (B)

High liquidity assets are characterized by the ease and speed with which they can be converted into cash without significantly impacting their value. One of the primary features of high liquidity assets is that they typically incur low transaction costs when sold. This is due to the widespread demand and stable market for such assets, allowing for quick sales at or near market value. Examples of high liquidity assets include cash itself, savings accounts, and certain investments like stocks of large companies. These assets can be sold swiftly, allowing the holder to access cash quickly while incurring minimal fees or costs. In contrast, options focused on risk, slow conversion, or value depreciation do not align with the characteristics of high liquidity assets, making low transaction costs when sold the defining feature.

High liquidity assets are characterized by the ease and speed with which they can be converted into cash without significantly impacting their value. One of the primary features of high liquidity assets is that they typically incur low transaction costs when sold. This is due to the widespread demand and stable market for such assets, allowing for quick sales at or near market value.

Examples of high liquidity assets include cash itself, savings accounts, and certain investments like stocks of large companies. These assets can be sold swiftly, allowing the holder to access cash quickly while incurring minimal fees or costs.

In contrast, options focused on risk, slow conversion, or value depreciation do not align with the characteristics of high liquidity assets, making low transaction costs when sold the defining feature.