All other characteristics being equal, securities with ____ liquidity would have to offer a ____ yield to be preferred.
A) lower; higher
B) higher; higher
C) lower; lower
D) none of the above

Question

Quizplus · Accepted Answer

Securities with lower liquidity would be less desirable for investors, hence they would need to offer a higher yield to attract investors. On the other hand, securities with higher liquidity would already be in demand, so they could offer a lower yield and still be preferred by investors.

All Other Characteristics Being Equal, Securities with ____ Liquidity Would