Question

In general, securities with ____ credit risk and _______ liquidity will offer higher yields. a. lower; lower b. higher; lower c. higher; higher. d. lower; higher

Answer 1

b. higher; lower

Step-by-step explanation:

Yield on securities is decided on the basis of risk level and the period to maturity. High risk high return concept is applicable here with an investment for long time. Liquidity is defined as the conversion of investment into cash. So, it you invest in short term security you will have higher liquidity because you can convert your investment in cash in short time and vice versa.