The diagram shows a spectrum of assets ranked by liquidity. Cash is the most liquid asset. A fixed-term savings bond is considered less liquid than a curren...
Question 1 Report
The diagram shows a spectrum of assets ranked by liquidity. Cash is the most liquid asset. A fixed-term savings bond is considered less liquid than a current account deposit because
Answer Details
Liquidity refers to how quickly and easily an asset can be converted into cash without losing value. A fixed-term savings bond locks money away for a set period, and early withdrawal typically incurs a penalty. A current account deposit can be accessed immediately. Earning a higher interest rate explains why people hold bonds but not why they are less liquid. Neither savings bonds nor current account deposits are used directly in shops.
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