The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets. Introduction: The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

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Answer 1

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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2. Construct profit diagrams or profit tables on expiration to show what position in AMZN puts, calls and/or underlying stock best expresses the investor’s objectives described below. Assume AMZN currently sells for $150 so that profit diagrams/ tables between $100 and $200 (in $10 increments) are appropriate. Also assume that “at the money” puts and calls cost $15 each. (As usual, the profit calculations ignore dividends and interest.) 1 (a) An investor wants upside potential if AMZN increases but wants (net) losses no greater than $15 if prices decline. (b) An investor wants to capture profits if AMZN declines in price but wants a guaranteed limited loss if prices increase. (c) An investor wants to capture profits if AMZN declines in price and is ready to accept unlimited losses if prices increase. Further, the investor wants to break even if the stock price does not change between now and the maturity of the options. (d) An investor wants to profit if AMZN’s upcoming earnings…

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Answer 2

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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Answer 3

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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Answer 4

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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Answer 5

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

Answer 6

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

Answer 7

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Answer 8

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.