A cash equivalent is:
A) Another name for cash.
B) Generally within 12 months of its maturity date.
C) An investment readily convertible to a known amount of cash.
D) Is not considered highly liquid.
E) Close to its maturity date but its market value may still be affected by interest rate changes.

Question

Quizplus · Accepted Answer

A cash equivalent is an investment that can be readily converted into a known amount of cash, typically within three months of its acquisition. Examples include short-term treasury bills, commercial paper, and money market instruments. It is highly liquid and easily tradable, making it an ideal choice for short-term investments. Options A, B, D, and E are incorrect as they do not accurately describe a cash equivalent.

A Cash Equivalent Is