The cost of failure to find liquidity is a characteristic of: A) opportunity costs. B) market impact costs. C) trader timing costs.
B
A?
B? Don’t remember seeing trader timing costs in the curriculum and don’t think its opportunity cost
A Can you explain difference between liquidity and marketability? Thanks
a
B – available liquidity is a function of capital market factors Bannie, did you or anyone else reading this take the CFAI afternoon mock yet? If so, please see my thread titled “Accounting Income” below.
Your answer: B was incorrect. The correct answer was A) opportunity costs. The definition of opportunity cost is the cost of failing to find liquidity or failure to execute a trade. Non-execution may result in high costs since failure to fulfill the order can leave the portfolio manager without the security i haven’t taken that mock test yet but i want to say someone started a thread with that error already…
I don’t think it’s B. market impact costs are costs associated with price changes caused by your trade - i.e. your trading a huge block, or a thinly traded security. unless they are saying that failing to find liquidity means your able to sell a portion of your shares and the price moves do to that before you are able to sell the rest?
I always get this one wrong!
qbank is good for this sort of stuff- the stupid definition q’s that aren’t really hard but that are so easy to forget. trying to bang through q’s to keep it all fresh. so much to know!
where have you disappeared lately?
cfaboston28 Wrote: ------------------------------------------------------- > where have you disappeared lately? was wondering the same thing … thought she decided to look elsewhere.
lol no. mondays i play soccer, no study. tuesday i was lazy. wed had a work dinner thing so no study. thursday… back on the horse.
It’s great that you can afford to take time off from studying … it’s great for stress mgmt. Didn’t know you played soccer … I’ve given that up 'til June 6 (very painful) - hopefully my team will still need/want me.
wow. Your score in practice exams confirmed that you are locked for this year and you don’t have to study like us.