2. Liquidity Consider the relative liquidity of the following assets: Assets 1. The funds in a savings account 2. A bond issued by a publicly traded company 3. A $5 bill 4. Your house Select the assets in order of their liquidity, from most liquid to least liquid. Asset Most Liquid Second-Most Liquid Third-Most Liquid Least Liquid

The answer is,

Asset

Most Liquid : $5 bill

Second-Most Liquid : The funds in a savings account

Third-Most Liquid : A bond issued by a publicly traded company

Least Liquid : Your house

The liquidity simply measures the ability to turn in to cash in a relatively short period of time. Cash at hand is the most liquid while property and other movable and immovable assets tends to be a bit difficult to be turned into cash quickly.