The liquidity premium is the portion of a nominal interest rate that represents
Compensation for:
A) the lack of the ability to sell the bond at its fair value in a timely manner
B) the difference between short-term and long-term tax rates
C) the fluctuation in market prices throughout the trading day
D) the difference in the maturity term of a short-term versus a long-term bond
E) the changes in interest rates and the resulting changes in bond prices
Correct Answer:
Verified
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