Author Question: Explain risk and liquidity of assets. What will be an ideal ... (Read 98 times)

laurencescou · **on:** Jun 30, 2018

Explain risk and liquidity of assets.

What will be an ideal response?

Question 2

Working conditions for clothing workers in Bangladesh are very poor. If countries refuse to buy clothing from Bangladesh in order to encourage change, the effect is likely to be that

A) firms will be forced to comply and workers will be better off.
B) firms will refuse to comply, but workers will be better off.
C) firms will try to comply and workers will be worse off.
D) firms will try to comply and workers will be better off.
E) regardless of how firms respond, workers will be better off.

tuwy · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Risk is the variability an asset contributes to a savers' wealth. An asset's real return can be unpredictable and savers dislike this uncertainty if the return fluctuates widely. Liquidity refers to the ease with which an asset can be sold or exchanged for goods. Cash is the most liquid of assets because it is always acceptable at face value as payment for goods or other assets. Thus, savers consider an asset's liquidity and its expected return and risk in deciding how much of it to hold.

Answer to Question 2

C