In the Absence of a Liquidated Damages Clause and in the Absence

question 5

Multiple Choice

In the absence of a liquidated damages clause and in the absence of proof of greater damages,the seller's damages are computed as

• A) 25% of the purchase price or $500,whichever is less.
• B) 25% of the purchase price or $500,whichever is greater.
• C) 20% of the purchase price or $500,whichever is greater.
• D) 20% of the purchase price or $500,whichever is less.

---

Definitions:

Transaction Motive

The need to hold cash to satisfy normal disbursement and collection activities associated with a firm’s ongoing operations.

Liquidity

Measures the ease with which an asset can be converted into cash without significantly affecting its price.

Speculative Motive

The need to hold cash to take advantage of additional investment opportunities, such as bargain purchases.

Liquidity

The ability of an asset to be converted into cash quickly and without any significant loss in value.