Answer-first summary for fast verification
Answer: 16.00
## Explanation Liquidity duration measures how long it would take to liquidate a position given trading constraints. The formula for liquidity duration is: \[\text{Liquidity Duration} = \frac{\text{Position Size}}{\text{Daily Trading Limit}}\] Given: - Position size = 8,000 shares - Daily trading volume = 2,000 shares - Trading limit = 25% of daily volume = 0.25 × 2,000 = 500 shares per day \[\text{Liquidity Duration} = \frac{8,000}{500} = 16\text{ days}\] Therefore, the liquidity duration is 16 days, which corresponds to option D. This means it would take approximately 16 days to fully liquidate the position while adhering to the trading constraint of not exceeding 25% of the daily trading volume.
Author: LeetQuiz .
Ultimate access to all questions.
A portfolio manager currently holds 8,000 shares of GF Inc. in a particular portfolio. The daily volume of GF shares traded on the stock exchange is 2,000 shares. Additionally, on any given day, the portfolio manager wishes to trade no more than 25% of the daily trading volume of GF. Which of the following amounts is closest to the liquidity duration of GF in this portfolio?
A
0.06
B
0.40
C
6.50
D
16.00
No comments yet.