Share
Explore BrainMass

Liquidity, segmented markets theory

1) If a security can easily be converted to cash without a loss in value, it
a. is liquid
b. has a high after tax yield
c. has high default risk
d. is illiquid

2) According to the segmented markets theory, if most investors suddenly preferred to invest in short term securities and most borrowers suddenly preferred to issue long term securities there would be
a upward pressure on the price of long term securities
b upward pressure on the price of short term securities
c downward pressure on the yield of long term securities.
d a and c

Solution Preview

1) If a security can easily be converted to cash without a loss in value, it
a. is liquid
b. has a high after tax yield
c. has high default risk
d. is illiquid

Answer: a. is liquid

A security can easily be converted to cash without a loss in value is defined as a liquid security
A highly liquid security will attract a number of investors and therefore its price will go up and yield come down.
A security with a ...

Solution Summary

Answers MCQs on Liquidity, segmented markets theory.

$2.19