13 Which type of bond has the lowest liquidity premium Selec

13 Which type of bond has the lowest liquidity premium? Select one: a. Mortgage Backed Bond b. Municipal Bond c. Treasury Bond d. Corporate Bond

Liquidity Premium:

It it the premium demanded by investor when any security can not be easily converted in to cash for its fair market value.

so when liquidity is high then liquidity premium is low and when liquidity is less then liquidity premium is high.

Liquidity simply means the ability to convert the security in to cash.

Bond with the lowest liquidity premium:

C. Treasury Bond