A cash equivalent is an investment that:
A) Is readily convertible to a known amount of cash.
B) Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes.
C) Generally is within 3 months of its maturity date.
D) Is highly liquid.
E) All of these.

Question

Quizplus · Accepted Answer

All of the choices mentioned are characteristics of a cash equivalent. A cash equivalent must be readily convertible to a known amount of cash, have a maturity date close enough that its market value is not affected by interest rate changes, and be highly liquid. Therefore, the best choice is E, which includes all of these characteristics.

A Cash Equivalent Is an Investment That