The Ease with Which an Investment Can Be Converted into Cash

question 56

Multiple Choice

The ease with which an investment can be converted into cash is called

• A) profitability.
• B) convertibility.
• C) cashibility.
• D) redemption value.
• E) liquidity.

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Definitions:

Nominal Rate

The interest rate before adjustments for inflation; essentially, the face value rate of interest.

Inflation

How fast the general price index for merchandise and services escalates, corroding the purchasing strength.

Spot Rate

The current market price of a currency, security, or commodity available for immediate delivery.

Interest Rate Parity

A theory asserting that the difference between the interest rates of two countries is equal to the difference between the forward exchange rate and spot exchange rate.