Stocks and bonds are more liquid than saving deposits True False
The correct answer and explanation is:
The correct answer is False.
Savings deposits are generally more liquid than stocks and bonds. Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its price. A savings deposit is a highly liquid asset because the money can be withdrawn at any time from a bank without penalties or significant delay. It is often the most liquid form of asset available to individuals, as it can be accessed immediately or within a very short period.
On the other hand, stocks and bonds are less liquid in comparison. While they can be sold in financial markets, the process of converting them into cash can take time and may be subject to market conditions. Stocks are dependent on the availability of buyers in the market, and the price at which they can be sold fluctuates. Bonds also face similar challenges, as their liquidity can be influenced by factors such as interest rates, market conditions, and the bond’s maturity. In some cases, selling stocks or bonds may result in a price that is lower than expected, especially if the market is volatile.
Additionally, stocks and bonds may require intermediaries like brokers or exchanges for transactions, which can add time and cost. Savings deposits, in contrast, are direct and can be accessed with minimal friction. Therefore, while stocks and bonds are valuable investment vehicles, they do not provide the same level of immediate access to cash as savings deposits. This makes savings deposits a more liquid asset.