Compensation for those financial debt instruments that cannot be easily converted to cash at prices close to estimated fair market values is termed:
A)liquidity premium
B)market risk premium
C)maturity premium
D)none of the above

Question

Quizplus · Accepted Answer

Compensation for financial debt instruments that cannot be easily converted to cash at prices close to estimated fair market values is referred to as liquidity premium. This premium is paid to investors who are willing to hold less liquid assets such as corporate bonds, which trade less frequently than other securities and have less liquidity.

Compensation for Those Financial Debt Instruments That Cannot Be Easily