Question

4) Which of the following is most liquid? a. a dollar bill b. a government bond c. a corporate bond d. a mutual fund share

Answer 1

Since the most liquid means any financial instruments which can be converted into cash.

Since government bonds, corporate bonds and mutual fund share are those financial instruments which cannot be converted into the cash immediately because it takes time to convert into the cash form. Hence these are not most liquid and these are not accepted by everyone.

On the other hand, a dollar bill is a denomination of United States currency. Hence this is most liquid and everyone is ready to accept it.

Hence it can be said that a dollar bill is most liquid.

Hence option a is the correct answer.