Question

Rank the following asserts of a commercial Bank in order of decreasing liquidity. (a) market loans. (b) Reserves with the bank of Ghana. (c) cash. (d) personal loans. (e) sales and repurchase agreements (repos). (f) mortgages. (g) Government bonds (of from one to five years to motuity)​

Answer 1

The rankings are as follows;

1. Cash.
2. Ghana bank.
3. Personal loan.
4. Market loan.
5. Sales and repurchase agreements.
6. Mortgage.
7. Government bonds.

We want to help the user to understand the term liquidity before giving the explanation with respect to ranking the following terms:

Liquidity means an asset or security that should be converted into cash without impacting the market price.

Here the most liquids are the ones that could be converted into cash in an easy manner but we have to rank in order of reducing the liquidity.

1. Cash = more liquid.
2. Ghana bank along with reserves = less than liquid as cash.
3. Personal loan = less liquid.
4. Market loan = less liquid.
5. Sale & repurchase agreements = less liquid.
6. Mortgage = reduce liquidity.
7. Government bonds.

We ranked according to high to low liquidity.

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