Answered: Keeping your funds in liquid assets is…

Keeping your funds in liquid assets is riskier than keeping them in liquid assets and therefore investors require a higher expected rate of return on liquid assets.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter1: Multinational Financial Management: An Overview

Section: Chapter Questions

Problem 2ST

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Concept explainers

Liquidity Risk Exposure

Answer: c

Question

Keeping your funds in liquid assets is riskier than keeping them in liquid assets and therefore investors require a higher expected rate of return on liquid assets.

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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