n NISM Certifications
XXI NISM Series XXI-A
Medium

Which of the following best describes "Liquidity Preference"?

Practice question from NISM XXI A for PMS - Mock Test 1 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. Investors prefer to hold liquid assets during uncertain times

    Correct answer

  2. B

    Companies prefer to invest in long-term assets only

  3. C

    Investors prefer illiquid assets for higher returns

  4. D

    Central banks prefer to hold foreign reserves

Why this is the answer

Liquidity preference reflects investors’ desire for liquidity to manage risks.

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