Which investment objective refers to the ease with which an investment can be converted into cash or a cash equivalent?

Which investment objective refers to the ease with which an investment can be converted into cash or a cash equivalent?

• A. safety
• B. liquidity
• C. yield
• D. treasury bills

Answer: (B)

Liquidity is the ability to convert an investment into cash or a cash equivalent quickly and with little or no loss in value. In investing, this objective matters because it determines how readily you can access funds for expenses, emergencies, or new opportunities. Assets that are highly liquid, like cash or short-term instruments, can be sold or redeemed fast without a big drop in price. Safety focuses on protecting capital and minimizing risk, not how fast you can access cash. Yield is about the income generated by an investment, not its convertibility. Treasury bills are specific instruments and, while they are highly liquid, they’re examples of assets rather than the objective describing ease of conversion.

Liquidity is the ability to convert an investment into cash or a cash equivalent quickly and with little or no loss in value. In investing, this objective matters because it determines how readily you can access funds for expenses, emergencies, or new opportunities. Assets that are highly liquid, like cash or short-term instruments, can be sold or redeemed fast without a big drop in price. Safety focuses on protecting capital and minimizing risk, not how fast you can access cash. Yield is about the income generated by an investment, not its convertibility. Treasury bills are specific instruments and, while they are highly liquid, they’re examples of assets rather than the objective describing ease of conversion.