What is the liquidity trade-off?
A)Determining the best liquid assets
B)Having enough liquid assets to cover cash deficiencies one year in advance
C)Maintaining adequate liquidity to avoid borrowing every time you need money
D)Maintaining enough liquid assets to meet obligations and earning a higher return on other assets

Question

Quizplus · Accepted Answer

The liquidity trade-off refers to the balance between maintaining enough liquid assets to meet obligations while also earning a higher return on other assets. It is important to ensure that enough liquid assets are available to avoid having to borrow frequently, but also to invest in other assets that can generate higher returns. Therefore, option D is the best choice.

What Is the Liquidity Trade-Off