Which of the following statements is true?
A)Liquid assets pay high interest rates.
B)Liquid assets bear low default risk.
C)Holding a high proportion of funds in liquid assets will result in increased profitability.
D)All of the listed options are correct.

Question

Quizplus · Accepted Answer

Liquid assets, such as cash and short-term securities, typically have low default risk as they are highly liquid and have a low chance of losing value. However, they generally offer lower interest rates compared to long-term investments such as bonds or stocks. Holding a high proportion of funds in liquid assets may increase liquidity and reduce risk, but it may also lead to lower profitability as the returns on these investments are relatively low. Option A is incorrect as liquid assets generally offer lower interest rates. Option C is also incorrect as holding too much in liquid assets may reduce profitability. Option D is not the best answer as it includes option A, which is incorrect.

Which of the Following Statements Is True