Answer:
The one-year liquidity index for these securities is 0.862
Explanation:
For computing the liquidity index, we have to use the formula which is shown below:
= (IBM stock face value ÷ total amount of face value) × (IBM current liquidation value ÷ IBM one year liquidation value) + (GE stock face value ÷ total amount of face value) × (GE current liquidation value ÷ GE one year liquidation value) + (Treasury securities stock face value ÷ total amount of face value) × (Treasury securities current liquidation value ÷ Treasury securities one year liquidation value)
where,
total amount of face value = IBM stock face value + GE stock face value + Treasury securities face value
= $15,000 + $6,000 + $20,000
= $41,000
Now put these values to the above formula
= ($15,000 ÷ $41,000) × ($14,900 ÷ $15,500) + ($6,000 ÷ $41,000) × ($3,000 ÷ $3,400) + ($20,000 ÷ $41,000) × ($15,000 ÷ $19,000)
= 0.365 × 0.961 + 0.146 × 0.882 + 0.487 × 0.789
= 0.350 + 0.128 + 0.384
= 0.862
Hence, the one-year liquidity index for these securities is 0.862
