What Is the Liquidity Trade-Off

question 61

Multiple Choice

What is the liquidity trade-off?

• A)Determining the best liquid assets
• B)Having enough liquid assets to cover cash deficiencies one year in advance
• C)Maintaining adequate liquidity to avoid borrowing every time you need money
• D)Maintaining enough liquid assets to meet obligations and earning a higher return on other assets

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Definitions:

Stock Dividends

Financial shares of a company's profit distributed to its shareholders typically issued in proportion to the number of shares held.

Current Account

A component of a country's balance of payments that measures the trade of goods and services, investment income, and direct transfers with foreign entities.

Goods Exports

The act of selling and shipping goods from one country to another country.

Net Investment Income

The total income received from investment assets, after deducting all related expenses.