Difference between revisions of "Liquidity premium"
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According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | ||
:[[Liquidity premium]] (LP). A liquidity premium is added to the real risk-free rate of interest, in addition to other premiums, if a security is not liquid. liquidity ratio A ratio that shows the relationship of a firm's cash and other current assets to its current liabilities. | :[[Liquidity premium]] (LP). A liquidity premium is added to the real risk-free rate of interest, in addition to other premiums, if a security is not liquid. liquidity ratio A ratio that shows the relationship of a firm's cash and other current assets to its current liabilities. | ||
| + | According to [[Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition)]], | ||
| + | :[[Liquidity premium]] ([[LP]]). A premium added to the equilibrium interest rate on a security if that security cannot be converted to cash on short notice and at close to its “fair market value. | ||
==Related concepts== | ==Related concepts== | ||
Latest revision as of 22:44, 1 November 2019
Liquidity premium (also known by its acronym, LP) is a premium that is added to the real risk-free rate of interest, in addition to other premiums, if a security is not liquid. liquidity ratio A ratio that shows the relationship of a firm's cash and other current assets to its current liabilities.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Liquidity premium (LP). A liquidity premium is added to the real risk-free rate of interest, in addition to other premiums, if a security is not liquid. liquidity ratio A ratio that shows the relationship of a firm's cash and other current assets to its current liabilities.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Liquidity premium (LP). A premium added to the equilibrium interest rate on a security if that security cannot be converted to cash on short notice and at close to its “fair market value.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
