Resolved: Liquidity Premium
What does it mean by - "A less liquid security must compensate its owners with a higher interest rate?"
1 answers ( 0 marked as helpful)
Hello Indrajeet!
Thanks for reaching out!
I means that less liquid securities must compensate investors with a higher rate of return or yield. This is a compensation for the higher risk associated with investing in them. In other words, less liquid securities are typically more difficult to buy or sell quickly, which can make them riskier investments compared to more liquid securities that can be traded more easily.
Hope this helps!
Best,
The 365 Team
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