Question

An important attribute to keep in mind when comparing cash-management options is liquidity. In general, the __________ the liquidity of a cash management option is the____________the interest rate will be for that option. Group of answer choices

Answer 1

No options were given, but I believe that the correct answers would be:

In general, the HIGHER the liquidity of a cash management option is the LOWER the interest rate will be for that option.

Step-by-step explanation:

The most liquid asset is cash, and holding cash in a checking account generally yields no interest or an extremely low interest (e.g. 0.2 - 0.75% per year). If you hold cash in a savings account you will get a slightly higher rate, between 1-2% per year.

On the other hand, if you invest in long term corporate bonds, the interest rate is between 6-7%.

The more liquid the investment, the lower the interest rate.