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Explain Why Some Bond Investors Are Subject to Liquidity Risk

question 73

Essay

Explain why some bond investors are subject to liquidity risk and/or default risk. How does each of these risks affect the yield of a bond?


Definitions:

Motorcycle

A two-wheeled vehicle powered by an engine, designed for travel on public roads and often used for recreation or transportation.

Opportunity Cost

Represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Tractor

A powerful vehicle designed primarily for agricultural use, to pull farm machinery and plough agricultural land.

Motorcycle

A two-wheeled motorized vehicle, widely used for both transportation and recreation.

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