Question

Which statement is false about liquidity?
Both A and B
The more liquid an investment, the less return
The less liquid the investment, the less return
The more liquid an investment, the more return

Answer 1

Two statements are false:
- "The less liquid the investment, the less return" (false)
- "The more liquid an investment, the more return" (false)

Reason: More liquid investments typically offer lower returns because investors accept less compensation for liquidity; less liquid investments generally require a higher return (liquidity premium).