Explanation:
Funding liquidity and market liquidity are two distinct concepts in finance. Funding liquidity refers to the ease with which investors can obtain funding from financiers by using purchased assets as collateral. This essentially means how easily an investor can borrow money against their assets. On the other hand, market liquidity refers to the ease with which investors can raise money by selling their assets. This means how quickly and easily an asset can be sold without significantly affecting its price.
B, C, and D are incorrect as per the explanation above.
Things to Remember
Ultimate access to all questions.
Q.419 In finance, liquidity is a critical concept that pertains to the ease with which an asset can be converted into cash without affecting its market price. Two key types of liquidity that are often discussed in this context are funding liquidity and market liquidity. These terms, while related, refer to different aspects of financial liquidity:
A
Funding liquidity describes the ease with which expert investors can obtain funding from financiers by using purchased assets as collateral, whereas market liquidity describes the ease with which investors can raise money by selling their assets.
B
Funding liquidity refers to the total value of an investor's assets that can be quickly converted into cash, while market liquidity refers to the overall ability of the market to absorb the sale of large assets without significant price fluctuations.
C
Funding liquidity refers to the ability of an investor to raise funds for in-house operations while market liquidity refers to the ability to raise funds for the specific investment projects themselves.
D
Funding liquidity describes the ability of an investor to raise short-term debt while market liquidity is the ability to raise long term capital.
No comments yet.