Suppose that a small, rural city in the countryside of North Dakota plans to issue $150,000 worth of 10-year bonds. Which one of the following components of the bond's yield will be affected by the fact that no active secondary market is expected for these bonds?
A. Real rate
B. Liquidity premium
C. Interest rate risk premium
D. Inflation premium
E. Taxability premium
Ans: B. Liquidity premium
Business
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