Which of the following must be true for an asset to be considered liquid?

Question

Quizplus · Accepted Answer

A liquid asset is one that can be easily bought and sold at a price that is close to its fair market value. This means that the market for the asset is deep, with many buyers and sellers, and there is low friction in buying or selling the asset. The fact that an asset pays dividends (choice D) is not necessarily an indicator of liquidity; some illiquid assets, such as real estate, can also generate periodic cash flows. The fact that an asset is offered for sale on both primary and secondary markets (choice B) can be an indicator of liquidity, but it is not a sufficient condition on its own. Finally, while an organised stock market (choice A) can provide the liquidity conditions described above, not all liquid assets are traded on such markets - for example, foreign exchange is highly liquid but does not trade on an organised exchange.

Which of the Following Must Be True for an Asset