Mr. Delwar purchased a 10-year bond a year ago. He expected an annual return of 5.25% on it. Last month, he had an unexpected need for money and had to cash in his bond. He received a low price for it. This scenario describes _____ risk.

Question

Quizplus · Accepted Answer

Liquidity risk refers to the possibility of not being able to sell an investment quickly or at a fair price. In this scenario, Mr. Delwar had to sell his bond unexpectedly and received a low price for it, indicating that the bond was not very liquid.

Mr Delwar Purchased a 10-Year Bond a Year Ago