Which of the following statements are true?
A)A liquid asset is one that can be quickly and cheaply converted into cash.
B)The demand for a bond declines when it becomes less liquid,decreasing the interest rate spread between it and relatively more liquid bonds.
C)The differences in bond interest rates reflect differences in default risk only.
D)The corporate bond market is the most liquid bond market.

Question

Quizplus · Accepted Answer

A liquid asset is one that can be quickly and cheaply converted into cash.

Answer: B
 The demand for a bond declines when it becomes less liquid, decreasing the interest rate spread between it and relatively more liquid bonds.

Answer: False 
 The differences in bond interest rates reflect not only differences in default risk but also differences in maturity, tax treatment, and other factors.

Answer: False 
 The U.S. Treasury bond market is the most liquid bond market, followed by the market for mortgage-backed securities. The corporate bond market is less liquid than these markets.

Which of the Following Statements Are True