For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and which of the following is correct?
A) It must be identiﬁed as a cash equivalent on the statement of earnings.
B) It must mature within 4 months.
C) The investment must have a known foreign exchange rate.
D) Must be suﬃciently close to its maturity date so that its market value is relatively insensitive to interest rate changes.

Question

Quizplus · Accepted Answer

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Option D accurately describes this characteristic.

For an Investment to Qualify as a Cash Equivalent, It