A liquidity-risk premium is the additional return required by investors for securities that cannot quickly be converted into cash at a reasonably predictable price.

Question

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A liquidity-risk premium is indeed the additional return required by investors for securities that cannot quickly be converted into cash at a reasonably predictable price. This is because investors demand compensation for taking on the risk of potentially not being able to sell the security easily or at a fair price in the future.

A Liquidity-Risk Premium Is the Additional Return Required by Investors