liquid and illiquid

I just want you to type your own opinions on your own words without sources, its a discussion. Answer these two related questions in different word files, 2 word files in total about 2-3 paragraphs each one. READ the discussions carefully and type your thoughts and opinions on your own words carefully:

Topics:

1- Discuss why you would expect a difference in the correlation of returns portfolio risk. Specifically, why would you expect low correlation in the rates of return of domestic and foreign securities?

2- Define liquidity and discuss the factors that contribute to it. Give examples of a liquid asset and an illiquid asset, and discuss why they are considered liquid and illiquid.

*note* this is a finance class.

Answer preview

Illiquid assets refer to assets that cannot be easily converted into cash without losing their immediate value. This can be due to the lack of many buyers who have the willingness to purchase the asset. The illiquidity of an asset is also caused by discrepancies between the price that is set by the seller and the bid price that the willing buyer submits. Examples of illiquid assets include capital assets, such as production equipment, vehicles, and real estate, which have a value that makes them difficult to sell when the firm needs cash. The benefit of the liquidity of an asset is that liquidity enables optionality and flexibility, giving the investor the ability to easily convert liquid assets into cash in time of crisis. A key difference between liquid and illiquid assets is that liquid assets can be easily purchased by most investors, regardless of their net worth.

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liquid and illiquid