the ease with which an asset can be converted quickly into cash, with little or no loss of purchasing power, is called what?

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What is Liquidity? Definition of Liquidity, Liquidity Meaning

Liquidity definition - What is meant by the term Liquidity ? meaning of IPO, Definition of Liquidity on The Economic Times.

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What is 'Liquidity'

Definition: Liquidity means how quickly you can get your hands on your cash. In simpler terms, liquidity is to get your money whenever you need it.Description: Liquidity might be your emergency savings account or the cash lying with you that you can access in case of any unforeseen happening or any financial setback. Liquidity also plays an important role as it allows you to seize opportunities.

If you have cash and easy access to fund and a great deal comes along, then it's easier for you to cease that opportunity. Cash, savings account, checkable account are liquid assets because they can be easily converted into cash as and when required.

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PREV DEFINITION Liquid Asset

An asset is said to be liquid if it is easy to sell or convert into cash without any loss in its value.

Read More NEXT DEFINITION Liquidity Trap

Liquidity trap is a situation when expansionary monetary policy does not increase the interest rate, income and hence does not stimulate economic growth.

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Bank Rate

Bank rate is the rate charged by the central bank for lending funds to commercial banks. Description: Bank rates influence lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa. Also See: Base Rate, Call Money Rate

Base Rate

Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers. Description: Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. Loan pricing will be done by adding base rate and a suitable spread depending on the credit risk premium. Als

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Call Money Rate

Call money rate is the rate at which short term funds are borrowed and lent in the money market. Description: The duration of the call money loan is 1 day. Banks resort to these type of loans to fill the asset liability mismatch, comply with the statutory CRR and SLR requirements and to meet the sudden demand of funds. RBI, banks, primary dealers etc are the participants of the call money mar

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Source : economictimes.indiatimes.com

WK 4 Ch 34 money.docx

View WK 4 Ch 34 money.docx from ECO 372 372 at University of Phoenix. WK 4 Ch 34 money, banking, and financial An asset's _ is the ease with which it can be converted quickly into the most widely

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WK 4 Ch 34 money, banking, and financialAn asset's ______ is the ease with which it can be converted quickly into themost widely accepted and easily spent form of money, cash, with little or noloss of purchasing power.

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Money is a ______ of some item or group of items.

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What is the money in the form of currency and checkable deposits incommercial banks called?A second and broader definition of money includes which of the following?

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The money supply in the United States essentially is "backed" by whoseability to keep the value of money relatively stable?The ease with which an asset can be converted quickly into cash, with little

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or no loss of purchasing power, is called what?

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A "stock" of some item or group of items is called what?

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M1 is a component of the U.S. ______.

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True orfalse: Money supply M1 includes all components of M2.The supply of _________ in the United States essentially is "backed"(guaranteed) by the government's ability to keep its value relatively stable.

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The debts or liabilities of commercial banks and thrift institutions are knownasdeposits.

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Checkable deposits are the debts or liabilities of which of the following?

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Why are currency and checkable deposits money?

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The amount of goods and services a unit of money will buy is called ______.

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Illiquid Definition

Illiquid is the state of a security or other asset that cannot quickly and easily be sold or exchanged for cash without a substantial loss in value.

TRADING SKILLS TRADING BASIC EDUCATION

Illiquid

By CHRISTINA MAJASKI Updated December 31, 2021

Reviewed by CHARLES POTTERS

What Is Illiquid?

Illiquid refers to the state of a stock, bond, or other assets that cannot easily and readily be sold or exchanged for cash without a substantial loss in value. Illiquid assets may be hard to sell quickly because there is low trading activity or interest in the issue, indicated by a lack of ready and willing investors or speculators to purchase or sell the asset. As a result, illiquid assets tend to have lower trading volume, wider bid-ask spreads, and greater price volatility.

Illiquidity is the opposite of liquidity.

Illiquidity occurs when a security or other asset that cannot easily and quickly be sold or exchanged for cash without a substantial loss in value.

Illiquid assets may be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset, whereas actively traded securities will tend to be more liquid.

Illiquid assets tend to have wider bid-ask spreads, greater volatility and, as a result, higher risk for investors.

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Liquid & Illiquid Assets

Illiquidity Explained

Regarding illiquid assets, the lack of ready buyers also leads to larger discrepancies between the asking price, set by the seller, and the bid price, submitted by the buyer. This difference leads to much larger bid-ask spreads than would be found in an orderly market with daily trading activity. The lack of depth of the market (DOM), or ready buyers, can cause holders of illiquid assets to experience losses, especially when the investor is looking to sell quickly.

Illiquidity in the context of a business refers to a company that does not have the cash flows necessary to make its required debt payments, although it does not mean the company is without assets. Capital assets, including real estate and production equipment, often have value but are not easily sold when cash is required. The sale of illiquid assets is not a company’s core business. They generally include any property owned by the company that is outside of the products produced for sale. In times of crisis, a company may need to liquidate these assets to avoid bankruptcy, and if this happens quickly, it can dispose of assets at prices far below an orderly fair market price, sometimes known as a fire sale.

Additionally, a company may become illiquid if it is unable to obtain the cash necessary to meet debt obligations.

Examples of Illiquid and Liquid Assets

Some examples of inherently illiquid assets include houses and other real estate, cars, antiques, private company interests and some types of debt instruments. Certain collectibles and art pieces are often illiquid assets as well.

Stocks that trade on over-the-counter (OTC) markets are also often less liquid than those listed on robust exchanges. Though these assets may have inherent value, the marketplace in which they are sold often has few buyers in comparison to those interested in the purchase of more liquid assets.

On the other end of the spectrum, most listed securities traded at major exchanges, such as stocks, ETFs, mutual funds, bonds, and listed commodities, are very liquid and can be sold almost instantaneously during regular market hours at fair market price. Additionally, precious metals, such as gold and silver, are often fairly liquid. Trading after normal business hours can also result in illiquidity because many market participants are not active in the market at those times.

An asset's liquidity may change over time, depending on outside market influences. This change in price is especially true for collectibles, as an item's popularity in the consumer market may fluctuate dramatically, leading to highly volatile pricing.

Illiquidity and Increased Risk

Illiquid securities carry higher risks than liquid ones, known as liquidity risk, which becomes especially true during times of market turmoil when the ratio of buyers to sellers is thrown out of balance. During these times, holders of illiquid securities may find themselves unable to unload them at all, or unable to do so without losing money.

Illiquid securities also may demand a liquidity premium added to their price to compensate for the fact that they may difficult to dispose of later on. During times of financial panic, markets and credit facilities may seize up, causing a liquidity crisis, when sellers of even marketable securities find it challenging to find eager buyers at fair prices.

Real World Example

Illiquidity can leave both companies and individuals unable to generate enough cash to pay their debts. For example, The Economic Times reported that Jet Airways had delayed repayment of overseas debt for the fourth time “in recent months” due to a corporate illiquidity crisis that left the company struggling to access liquid funds. As a result, Jet Airways not only had to ground more than 80 planes, but it also put together a resolution plan that called for the resignation of its chair, Naresh Goyal, and the board voting to allow lenders to take control of the airline.1

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