Problem 1) If a security can easily be converted to cash without a loss in value, it
a. is liquid
b. has a high after tax yield
c. has high default risk
d. is illiquid
Problem 2) According to the segmented markets theory, if most investors suddenly preferred to invest in short term securities and most borrowers suddenly preferred to issue long term securities there would be
a upward pressure on the price of long term securities
b upward pressure on the price of short term securities
c downward pressure on the yield of long term securities.
d a and c