Compare and contrast what is meant by "liquidity" when referring to a CD and a mutual fund. (50 points!)

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22-09-2022
Business

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Compare and contrast what is meant by "liquidity" when referring to a CD and a mutual fund. (50 points!)

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Tundexi Tundexi · Answer 1 · 2022-09-23T11:19:29-04:00

A liquidity of certificate of deposit means the ease of investors to making a withdrawals without incurring a penalty on the account while the liquidity of mutual fund means the ease of investors to making a withdrawals of the funds

What is known as Liquidity?

In finance, the term "Liquidity" means the ease with which an asset or security can be converted into ready cash without affecting its market price. As it explains the ease of converting into ready cash without affecting its market price, the most liquid asset of all is the cash itself.

That said, the cash is the most liquid of assets while the tangible items are less liquid. The main types of liquidity include the market liquidity and accounting liquidity.

In conclusion, the liquidity of certificate of deposit and mutual funds means the ease of investors to making a withdrawals without incurring a penalty on the account and this is an important attribute of these securities as it measures the fund's ability to meet near-term shareholder redemption.