What is the RBC factor for Cash, net cash equivalents, other short-term investments?

• A. 0.15
• B. 0.05
• C. 0.1
• D. 0.003

Answer: (D)

RBC uses asset risk factors to convert the amount held in each asset category into a capital charge. Cash and near-cash holdings are the least risky, so they get the smallest factor. The RBC factor for cash, net cash equivalents, and other short-term investments is 0.003. That tiny multiplier reflects the minimal credit risk and very high liquidity of these assets, meaning they contribute almost nothing to the asset risk component. Higher factors apply to investments with greater credit or market risk, such as more volatile or longer-duration assets.