An investor faces two possible investments. One option is to purchase a financial asset that typically sells within days, while the other is to deposit funds into an interest-bearing account for one month before funds can be withdrawn. If both options feature similar risk, the deposit is likely to offer(1 point)

Question

Responses

the same liquidity as the financial asset.
the same liquidity as the financial asset.

lower return than the financial asset.
lower return than the financial asset.

greater liquidity than the financial asset.
greater liquidity than the financial asset.

greater return than the financial asset.

Answer 1

If both options feature similar risk, the deposit is likely to offer lower return than the financial asset.

Typically, financial assets that are more liquid (like those that sell quickly) tend to offer higher potential returns compared to less liquid investments such as a deposit account with a waiting period.