Liquidity embodies several characteristics, such as
A) trading costs.
B) ease of sale.
C) market depth.
D) necessary price concessions to effect a quick transaction.
E) All of the options are correct.

Question

Quizplus · Accepted Answer

Liquidity refers to how quickly and easily an asset can be sold without significantly affecting its price. This encompasses trading costs (since high costs can deter liquidity), ease of sale (a direct measure of liquidity), market depth (indicating the capacity to absorb large orders without major price changes), and the necessary price concessions to effect a quick transaction (since a highly liquid market would require minimal price concessions). Therefore, all the options correctly describe characteristics of liquidity.

Liquidity Embodies Several Characteristics, Such as