Which of the following is an example of a cash instrument?

Which of the following is an example of a cash instrument?

• A. Real estate
• B. Government bonds
• C. Art collections
• D. Intellectual property

Answer: (B)

A cash instrument refers to a financial asset that can be readily converted into cash or is cash-like in nature. Government bonds fit this definition as they are debt securities issued by a government to support government spending. They have a defined maturity date and pay periodic interest, making them reliable and predictable sources of cash flow for investors when they reach maturity or can be sold in the market. In contrast, real estate, art collections, and intellectual property do not offer the same level of liquidity. Real estate transactions can take time to close, and the valuation can vary significantly. Art collections may not have a ready market, and their worth can be subjective, leading to potential delays in cash conversion. Intellectual property might require legal processes for valuation and sale, thus complicating immediate access to cash. Thus, government bonds serve as the best example of a cash instrument among the provided options.

A cash instrument refers to a financial asset that can be readily converted into cash or is cash-like in nature. Government bonds fit this definition as they are debt securities issued by a government to support government spending. They have a defined maturity date and pay periodic interest, making them reliable and predictable sources of cash flow for investors when they reach maturity or can be sold in the market.

In contrast, real estate, art collections, and intellectual property do not offer the same level of liquidity. Real estate transactions can take time to close, and the valuation can vary significantly. Art collections may not have a ready market, and their worth can be subjective, leading to potential delays in cash conversion. Intellectual property might require legal processes for valuation and sale, thus complicating immediate access to cash. Thus, government bonds serve as the best example of a cash instrument among the provided options.