Question

The graph shows examples of investments with high and low liquidity.

A graph shows examples of investments with high and low liquidity. At the top is retirement accounts, then houses and property, then stocks, mutual funds, bonds, C Ds, and at the bottom is savings and checking accounts. The investments have less liquidity at the top, and more liquidity at the bottom.

An investment with more liquidity would be ideal for someone who

knows they will need cash in the near future.
knows they will need cash years from now.
wants to have a guaranteed source of income.
wants to have higher returns on their investment

Answer 1

Answer: knows they will need cash in the near future.

Reason: Liquidity means how quickly and easily an investment can be converted to cash without big loss. If you need cash soon, you want highly liquid investments (e.g., checking/savings). Needing cash years from now, seeking guaranteed income, or seeking higher returns are not reasons to prefer more liquidity.