How does liquidity typically vary among asset classes?

Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. Different asset classes exhibit varying degrees of liquidity due to factors such as market depth, trading volume, and the nature of the assets themselves.

Cash and government bonds are generally considered highly liquid assets. Cash is the most liquid asset, as it can be readily used to transact without delay. Government bonds, especially those issued by stable governments, tend to have a robust market with significant trading volume, making it easy to buy and sell them without substantial price changes.

On the other hand, real estate is typically much less liquid. Selling property can take time due to the complexities involved in transactions, such as negotiations, inspections, and financing. This delay means that while real estate can eventually be sold, it usually cannot be done quickly or easily without potentially reducing the selling price.

The other options provide a more limited or incorrect view of liquidity. For instance, stating that all asset classes have the same liquidity disregards the particular characteristics of each type of asset. Claiming that only stocks are considered liquid is misleading, as many other asset classes like cash and government bonds also enjoy high liquidity. Finally, stating that all bonds are illiquid ignores the distinctions among various types