NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investment Landscape
Which of the following is a feature of an investment with high liquidity?
A highly liquid investment can be converted into cash quickly without a significant loss of value. Liquidity concerns ease and speed of encashment, not the level of return or absence of risk, and lock-ins reduce liquidity.
- AIt can be converted into cash quickly without significant loss of valueCorrect
- BIt always gives the highest return
- CIt carries no risk of any kind
- DIt cannot be sold before maturity
Explanation
Liquidity refers to how readily an asset can be turned into cash near its fair value. It says nothing about guaranteeing returns or eliminating risk, and a lock-in indicates low liquidity.
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