What are cash instruments?

What are cash instruments?

• A. Items that cannot be easily converted to cash
• B. Cash, stocks, and bonds that can be quickly liquidated
• C. Real estate assets only
• D. Investment portfolios that require time to sell

Answer: (B)

Cash instruments refer to financial instruments that can be quickly and easily converted into cash or are already considered cash-equivalent. This includes items such as cash itself, stocks, and bonds that offer high liquidity and can be sold rapidly in the financial markets. The key characteristic of these instruments is their ability to be liquidated with minimal effort and usually at market value, making them essential for investors who need quick access to funds. On the other hand, options that mention items like real estate or investment portfolios that take time to sell do not fit the definition of cash instruments. These types of assets may require significant time and effort to liquidate, making them less accessible compared to cash instruments. Understanding the liquidity of different investment types is crucial for effective financial management.

Cash instruments refer to financial instruments that can be quickly and easily converted into cash or are already considered cash-equivalent. This includes items such as cash itself, stocks, and bonds that offer high liquidity and can be sold rapidly in the financial markets. The key characteristic of these instruments is their ability to be liquidated with minimal effort and usually at market value, making them essential for investors who need quick access to funds.

On the other hand, options that mention items like real estate or investment portfolios that take time to sell do not fit the definition of cash instruments. These types of assets may require significant time and effort to liquidate, making them less accessible compared to cash instruments. Understanding the liquidity of different investment types is crucial for effective financial management.