Question

1. Rank the following assets from the lowest level to the highest level of

(i) transaction costs,
(ii) risk,
(iii) liquidity.
Ties are acceptable for items that have indistinguishable rankings. at.
a. a bank deposit with a guaranteed interest rate
b. a share of a highly diversified mutual fund, which can be quickly sold
c. a share of the family business, which can be sold only if you find a buyer and all other family members agree to the sale

Answer 1

Explanation:

Of transaction cost

b. a share of a highly diversified mutual fund, which can be quickly sold

c. a share of the family business, which can be sold only if you find a buyer and all other family members agree to the sale

a. a bank deposit with a guaranteed interest rate

RISK

c. a share of the family business, which can be sold only if you find a buyer and all other family members agree to the sale

b. a share of a highly diversified mutual fund, which can be quickly sold

a. a bank deposit with a guaranteed interest rate

LIQUIDITY

a. a bank deposit with a guaranteed interest rate

b. a share of a highly diversified mutual fund, which can be quickly sold

c. a share of the family business, which can be sold only if you find a buyer and all other family members agree to the sale