Holding everything else constant
A)if asset A's risk rises relative to that of alternative assets,the demand will increase for asset A.
B)the more liquid is asset A,relative to alternative assets,the greater will be the demand for asset A.
C)the lower the expected return to asset A relative to alternative assets,the greater will be the demand for asset A.
D)if wealth increases,demand for asset A increases and demand for alternative assets decreases.

Question

Quizplus · Accepted Answer

Holding everything else constant, the more liquid an asset is compared to alternative assets, the greater will be the demand for that asset. This is because investors prefer more liquid assets since they can easily buy and sell them without incurring high transaction costs or facing difficulty in finding a buyer or seller. Therefore, asset A's demand will increase if it is more liquid than alternative assets.

Holding Everything Else Constant