An asset is considered liquid if it:
A) is indexed to the rate of inflation.
B) acts as a medium of exchange.
C) can be exchanged for money at little cost.
D) can be used as a store of value.
E) has a guaranteed rate of return.

Question

Quizplus · Accepted Answer

A liquid asset is one that can easily be converted into cash without significant loss in value. The ability to exchange the asset for money at little cost makes it a liquid asset. Medium of exchange (B) refers to something that is universally accepted in exchange for goods and services, while store of value (D) refers to an asset that can be saved and used to retain its value over time. Indexed to the rate of inflation (A) and guaranteed rate of return (E) do not necessarily indicate liquidity.

An Asset Is Considered Liquid If It